Ethics and Governance: Tax Avoidance and its Impact on Governments and Society

Running head: ETHICS AND GOVERNANCE
Ethics and governance
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1ETHICS AND GOVERNANCE
Introduction
Gathering tax is one of the key means by which governments can address destitution.
Large corporations are indulging in the practice of tax avoidance which in turn is depriving the
governments of the funds it requires to develop infrastructure and address the needs of the
people. (Armstrong et al. 2015). The full rundown of the world's most exceedingly terrible tax
havens are: Bermuda,Netherlands, Switzerland, the Cayman Islands, Ireland, the British Virgin
Islands, Switzerland, Luxembourg, Singapore,Curaçao, Hong Kong, Cyprus, Barbados,
Bahamas, Jersey, and Mauritius (Garside 2018) . The UK does not include on the rundown, but
rather four domains that the United Kingdom is eventually in charge of do show up: the Cayman
Islands, the British Virgin Islands, Jersey and Bermuda,. Many other nations have been enlisted
in the list of tax havens. For instance, Ireland hit the headlines over a tax dealing with Apple that
empowered the worldwide tech goliath to pay a 0.005 percent corporate expense rate in the
nation. The British Virgin Islands is home to the greater part of the 200,000 seaward
organizations set up by Mossack Fonseca - the law office at the core of the Panama Papers
outrage.
Discussion
It is to be mentioned that companies all over the world irrespective of their size generally
tend to minimize their liability to pay taxes by the process of tax planning. It is to be said that tax
planning involves the usage of the tools and mechanisms which the government specifically has
designed for the purpose. Allowances, exemptions, rebates and deductions are provided to the
companies for the purpose of reducing the burden of taxation (Braithwaite 2017). However, it

2ETHICS AND GOVERNANCE
can be said that tax planning can be defined as tax compliant behavior. However a grey area
exists between tax planning and tax avoidance.
It is to be mentioned that that Tax avoidance although is legitimate, however can be
considered to be illegitimate when such tax avoidance involves the usage of all those financial
arrangements and instruments which are not intended or anticipated to be used for the same
purpose by the governments. The most appropriate example of tax avoidance is the use of tax
havens to store the wealth of companies which would be exempted from taxes (McGuire, Wang
and Wilson 2014). It is to be mentioned that the act of stacking wealth in tax havens in abroad
nations is not prima facie illegal as it cannot be called tax evasion, however such practice is
unethical. Such practice is although not in violation of the law literally but violation of it in
spirit.
It is to be stated that the governments of countries impose tax burdens on the residents of
the countries in order to for a reserve which is expected to have real impacts on the lives of
people therefore the exempting multinational companies from paying taxes can be considered to
be unethical (Contractor 2016). Tax avoiding is basically getting away from a social
commitment. Tax evasion can make a business organization helpless against accusations of
covetousness and narrow-mindedness, harming its notoriety and devastating people in general's
trust. Multinational companies like Amazon and Starbucks have been boycotted and vilified by
the public for their policies of tax avoidance (the Guardian 2018).
It is to be further mentioned according to the result of the IBE survey conducted in 2012
by IpsosMori that the practice of tax evasion has been perceived as the ethical issue of utmost
importance that business and companies need to directly address. Paying taxes in countries in