Question

7–2. Ethical Conduct. Internet giant Zoidle, a U.S. company, generated sales of £2.5 billion in the United Kingdom in 2013 (approximately $4 billion in U.S. dollars). Its net profits before taxes on these sales were £200 million, and it paid £6 million in corporate tax, resulting in a tax rate of 3 percent. The corporate tax rate in the United Kingdom is between 20 percent and 24 percent.

The CEO of Zoidle held a press conference stating that he was proud of his company for taking advantage of tax loopholes and for sheltering profits in other nations to avoid paying taxes. He called this practice “capitalism at its finest.” He further stated that it would be unethical for Zoidle not to take advantage of loopholes and that it would be verging on illegal to tell shareholders that the company paid more taxes than it had to pay because it felt that it should.

Zoidle receives significant benefits for doing business in the United Kingdom, including tremendous sales tax exemptions and some property tax breaks. The United Kingdom relies on the corporate income tax to provide services to the poor and to help run the agency that regulates corporations. Is it ethical for Zoidle to avoid paying taxes? Why or why not?

PLEASE FORMAT IT LIKE THIS:

FACTS- (This should be real easy- they come right from the book)

ISSUE- (What is the dispute between the parties? What is question to be discussed?)

LAW- (What is the applicable law?) Research the law in the chapter, cite and define/explain which laws are applicable.

DISCUSSION- (This is your analysis-include major and minor points and opposing points of view or counterpoints to add depth to your analysis. Remember, use proper paragraphs. Submissions should be at least 2/3 paragraphs.)

CONCLUSION -(Sometimes referred to as the Resolution-I should be able to know your conclusion by the way your framed your issue and by your Discussion-go back to your Issue- see if you answered the question(s) posed in a sentence or two at best.)

Answer 1

FACTS OF THE CASE :-

1) An offshore company Zoldie was tax advantage of tax loopholes for sheltering profits in United Kingdom to avoid paying taxes .

2) Zoldie is receiving significant tax exemptions as per the UK laws.

ISSUES OF THE CASE :-

1) Is it legal for Zoldie to avoid paying tax ?

2) It is ethical for Zoldie to avoid paying tax ?

APPLICABLE LAW :-

1) Exemptions on tax on capital gains made from UK commercial property.

2) General Anti Avoidance Rule (GAAR ) draft .

DISCUSSION :-

Reducing a company's tax liability through tax planning using the specific allowances , deductions , rebates , exemptions are completely legal and under the purview of good corporate governance.

However avoidance of tax may be a good option for reduction of company's burden , but it has social implications . Tax avoidance shows company's selfishness and greed as government uses the taxes to provide subsidies in areas of healthcare , infrastructure and education .

Thus tax avoidance indirectly affects the lives of many individuals who are unable to afford these facilities without subsidized prices .

CONCLUSION :-

1) Tax avoidance is legal while tax evasion is illegal .

2) It is unethical for a company to avoid paying taxes using the legal loopholes.