An Ethical Framework for Tax Decision Making by Corporations in Australia

This article discusses ethical decision making in the management of large corporations in Australia whereby companies evade taxes due to the current culture and structure of tax collection. It as well outlines why manager’s moral standards are also of significance in the management of corporates as well as the companies themselves embracing the need to have core values incorporated in the company’s code of conduct.

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Business Ethics and Social Responsibility
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Outline
1. Introduction.
2. Summary Of The Issues Raised From An Ethical Perspective.
3. How Individual Ethical Judgements Are Made And How They May Vary.
4. References
5. Appendix

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Introduction
The title of the article is “An Ethical Framework for Tax Decision Making by
Corporations in Australia”. According to Appendix A, Catriona Lavermicocca and Michael
Quilter published the article on 12th of April 2018. The article talks about ethical decision
making in the management of large corporations in Australia whereby companies evade taxes
due to the current culture and structure of tax collection. The article articulates how this kind of
practices shows the lack of ethical decision making in the leadership of these companies
(Appendix A). It as well outlines why manager’s moral standards are also of significance in the
management of corporates as well as the companies themselves embracing the need to have core
values incorporated in the company’s code of conduct. The article finally illustrates how a
company with good values cannot benefit from a manager who does not have high standards of
ethics and professionalism.
Summary of the issues raised from an ethical perspective.
From the article, several issues are raised. First, how companies that have a substantial
presence in Australia should be ethical when it comes to tax payment and compliance. The
companies either pay little tax or evade tax altogether. Therefore, this means that the government
has to come up with complex tax structures and systems to keep up with the tax evaders, which
comes at a cost regarding acquiring and administration (Appendix A). Therefore, the whole issue
of tax evasion and non-compliance places an ethical obligation on the corporate’s leadership and
decision makers. The article goes on to suggest that nowadays most companies operate with the
conservative approach to corporate ethics whereby the companies are based on profit and
revenue generation, and no much concern is placed on their social responsibility and obligations

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in which the society demands them to be held accountable. This tax avoidance when viewed in a
social responsibility perspective, transfers the tax burden to other people in the community.
Therefore, the article suggests that there should be an ethical framework for tax risk management
that guides the decision making in the corporate world which can be embedded in the company’s
code of ethics (Appendix A). This framework will help the companies eliminate the uncertainties
and complexities that arise in law application, therefore, dictating where the company sits
regarding the acceptable level of tax risks.
Key Ethical Issues Raised in the Article
Registered companies in Australia are supposed to act responsibly and ethically
according to the principles as well as recommendations of the corporate governance council. For
instance, the third principle outlines that just being ethical and responsible in meeting tax
obligations is not enough; it also includes being an exemplary corporate citizen (Szerletics,
2015). It again adds that registered company’s core values must be included in the code of
conduct utilised in company’s decision making. Therefore, the company’s decision makers
require proper governing principles and values that instils principled reasoning in that legal and
ethical principles are established at the board level and demonstrated through the organisational
structure (SHAH, 2014).
On the other hand, it is quite a difficult task doing away with the current ethical culture
and introducing a new one more particularly in connection with tax non-compliance and
decision-making. In most large Australian companies, tax managers and chief financial officers
are the ones responsible with decision making on matters concerning task risk therefore apart
from the company’s ethics, principles and code of conduct, individual ethics are also of utmost
importance (In Nucci, In Narváez, & In Krettenauer, 2014). Generally, most if not all chief

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financial officers have membership in professional accounting entities which obligates them to
operate with high ethical standards in their line of duty. From a survey, chief financial officers’
perspective on the ethics likely affects their decision-making and most probably, those who have
a negative attitude towards ethics or assume the importance of ethical and responsible conduct,
often get involved in corporate tax evasion and non-compliance schemes. Therefore, personal
attitudes of managers towards ethical behaviour will most likely affect the process of decision
making in a company presenting a risk to the company regarding the corporate position on ethics
(Newton, 2013). The company has to, therefore, work to reduce effects of personal ethical
preferences from their managers if their objectives encompass ethical conduct regarding tax
compliance.
Just like the Australian government is trying to come up with aggressive structures and
systems to deal with tax evasion, in another similar comparison is the ethical decision of the
Malaysian government sidelining officials accused of ignoring corruption (Appendix B).
How Individual Ethical Judgements are Made and How They May Vary
Ethical judgements are not only concerned about what happened but also if what
happened is right or wrong. Thus, personal moral judgements are about the effects of the actions
or decisions people make whether they should have been done. Individual ethical judgements can
be made through the following five steps;
Gathering of facts
When creating a moral judgement, you must first gather all the facts about the subject you want
to judge. During this process, an individual should neutral as possible, avoid distorting the facts
for your benefits and do not overlook other facts. All facts must be brought on the table of

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judgement. If the facts are tempered with in the first place, then the decision will not be
considered as ethical (Dobrin, 2012). But at the same time, it is challenging to know all the facts
about a subject you want to judge. Therefore, at this stage, you have to rely on reasonable
assumptions to help in the judgement. After that, you have to interpret the facts and the logical
assumptions about your values and what they mean to other parties involved.
Predicting the future
The prediction made is based on the facts gathered. By doing this, chances of getting the desired
outcomes are increased. Of course, it is difficult to predict the future, but it is common sense that
some items are more certain than others are. For instance, when you slap someone, you are more
likely to be also hit than get a smile thus an individual is supposed to select something that they
think they should avoid or proceed with an action that is more likely to cause good (Dobrin,
2012).
Feelings of identification
This is called intuition or conscience. By identifying one’s beliefs, one can verify if their
judgement is rational or not. Conscious and sensible feelings always highlight what has been
overlooked in the process of making an ethical decision.
Consider your character and integrity
In this step, individuals ask themselves if they will be comfortable with the judgement and if
they would be willing to let others know about that judgement. Whether they will get ashamed or
feel guilty about the judgment, whether they would approve others judging the way they did and
whether they will be proud of their views.
 Willingness to explain to others own reasons for the judgement and being ready to
engage in honest conversations with others.

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A person would be able to test his/her judgement whether it is ethical or not by
submitting it to others for scrutiny.
Other important factors also considered in the making of individual ethical judgements
include; identifying consequences, considering personal integrity and character, thinking
creatively about possible actions and deciding on the best moral action and being prepared to
deal with the scrutiny.
Ethical individual judgement can as well vary in some ways. Some judgements may be
positive while others negative and others may be directly implied. From the article, personal
ethical judgement depends on the person’s attitude towards a moral code of conduct. If a
manager’s attitude towards ethics marries with those of the company then, they will be able to
make rational judgements on matters tax risk management. But if the manager’s attitude towards
ethical conduct is wrong, then their decisions will not be moral hence will most likely get
involved in tax evading scandals.
Relevant Ethical Moral Philosophies
Moral philosophy deals with examining the nature of morality, the concept of right and
wrong and how people should morally coexist with others. The moral philosophies that exist are
teleology, egoism, utilitarianism, deontology, relativist, virtue ethics and justice. Teleology
specifies that morally acceptable actions base on some desired outcomes. Egoism stipulates that
morally right actions are those that satisfy a particular person’s self-interest as determined by the
individual. In utilitarianism, acceptable actions are those that satisfy the cumulative interests of
many people as defined by those individuals. Moreover, deontology focuses on the intentions
related to a specific behavior rather than the consequences. It mainly focuses on personal rights
preservation. In relativist, ethicalness is subjectively evaluated according to individual and group

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experiences. Virtue ethics stipulates that whatever is morally acceptable in a certain situation is
not only what standard morality demands but also the individual moral character of a person in
that situation. Lastly, justice assesses ethicalness based on fairness.
Therefore, from the article, the moral theory that relevantly applies is virtue ethics theory
that focusses on conventional morality as well as individual morality (Oxley, 2014). This means
that in any given situation what is moral is not only what the conventional morality approves but
also what a moral individual would view as right and acceptable. Therefore, from the case study,
what the conventional morality requires is that companies should comply with tax payments, but
for this to happen the individual moral standards of the managers of these companies should be
high. This implies that if the chief financial officers are morally upright then they will comply
with tax obligations but if their moral standards are pathetic, then it does not matter what the
conventional morality requires.
In conclusion, it is prudent for companies to have core values that define them as well as
their management. The company’s core values in the code of conduct must marry with the
manager’s ethical standards for it to have an ethical decision-making process. Therefore, moral
responsibility in the management of the corporate world begins with personal ethical standards
of the managers and goes upwards to the company’s core values formulated by the board.

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References
Dobrin, A. D. (2012). Steps in Ethical Decision Making. Psychology Today.
doi:10.1002/9781118001875.ch11
Klikauer, T. (2012). Seven Moral Philosophies of Management. Seven Management Moralities,
44-65. doi:10.1057/9781137032218_3
Ladd, G. T. (n.d.). Universality of moral principles. Philosophy of conduct: A treatise of the
facts, principles, and ideals of ethics, 389-414. doi:10.1037/13713-016
Lavermicocca, C., & Quilter, M. (2018). An ethical framework for tax decision making by
corporations in Australia [Online]. Available at http://www.austaxpolicy.com/ethical-
framework-tax-decision-making-corporations-australia/[accessed on 26 May 2018]
SHAH, S. H. (2014). Soulful corporations: A values-based perspective on corporate social
responsibility. Heidelberg: Springer.
In Nucci, L. P., In Narváez, D., & In Krettenauer, T. (2014). Handbook of moral and character
education.
Newton, L. H. (2013). Ethical decision-making: Introduction to cases and concepts in ethics.
Cham: Springer.
Oxley, J. (2014). Moral dimensions of empathy: Limits and applications in ethical theory and
practice. Place of publication not identified: Palgrave Macmillan.
Szerletics, A. (2015). Paternalism: Moral theory and legal practice. Frankfurt am Main
[Germany: Peter Lang Edition.
Appendix A

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Figure 1: selected article
Appendix B

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