Question

Prior to the passing of the Tax Cuts and Jobs Act (2017) some of America’s largest corporations were able to apply questionable, yet legal, schemes to book profits in offshore accounts to avoid (not evade) higher levels of tax expense. These tax savings were substantial, it is estimated multinational corporations had been able to avoid an estimated $90 billion in federal income taxes each year.

Scenario: The Board of Directors, shareholders, and stakeholders are just now learning that the corporation employed offshore banking transactions to minimize tax burdens.

Checklist: As the Chief Financial Officer (CFO) address the following items:

• Explain to what extent the corporation’s shareholders might feel the corporation breached any measures of an entity of the highest ethical standards.
• Explain to what extent the corporation’s Board of Directors might ever feel that you as CFO breached any measures of an entity of the highest ethical standards.
• Use at least two of the ethical viewpoints as presented in “ethical approaches” to provide the ethical reasoning you would use to address your company’s offshore profits issue (also specify the approaches you use).

Submit a 2–3 page paper with an additional title page in APA format.

Answer 1

The board of directors would be of the opinion that they should have been kept aware with regard to the taxation policies employed by the company, and as a CFO I should have informed them of the legal and ethical implications of using offshore transactions to minimize the taxation burden. They would agree that it was not proper on my part to not have informed them of such an impactful policy which could have a strong impact on the reputation of the company.

The shareholders would be concerned with the ethical implications of following such a policy regarding taxation. It would negatively impact the reputation of the entity and could have a ripple effect on growth and therefore future value of the company. For shareholders, non-disclosure of such a policy would a clear violation of ethics with regards to the principle of transparency in business practices.

Using the ethical viewpoint of consequentialism, I should have forseen the consequences of using questionable tactics in order to avoid higher levels of taxation which could have negative effects on the reputation of the firm. Due to the decision to book profit offshore, the corporation has let down it's stakeholders.

Under the viewpoint of virtue ethics I should have considered using normal practices for booking profit regardless of the fact that it would have resulted in a higher tax outflow. This would have enabled the company to maintain it's credibility and reputation as an ethical firm.