Financial Crime: Ethical Implications of Tax Avoidance

This presentation critically examines the ethical implications of aggressive corporate tax avoidance within the realm of financial crime. It begins by defining corporate tax and tax planning, differentiating it from aggressive tax avoidance. The presentation explores the grey area between legal tax planning and potentially unethical tax avoidance practices, emphasizing the social responsibility of corporations and the impact of tax avoidance on society. It delves into the concept of tax as a social responsibility and analyzes how aggressive tax avoidance can negatively affect a company's reputation. The presentation further discusses the role of governments in ensuring corporate returns and the importance of certainty in tax regulations. Case studies, such as those involving Amazon and Starbucks, are used to illustrate the real-world consequences of tax avoidance. The presentation concludes by emphasizing the negative societal impacts of tax avoidance, including the shifting of funds away from public goods and the weakening of economic stability. References from academic journals support the arguments presented.

Financial Crime
Aggressive corporate tax avoidance is
considered legal but can it ever be
ethical? Critically discuss the
question, using case studies to
support your arguments

What is corporate Tax?
• Corporate tax or corporation Tax is a
direct tax, levied on net income or
the profit that a corporation makes
from their business activities
(Dowling, 2014).

Taxable profits for the corporate
tax include the money that an
organisation earns from:
• Doing business (trading profit)
• Selling assets (chargeable gain)
• Investment

What do you mean by “tax planning”?
• Tax planning is: an arrangement of financial
affairs of an organisation in such a manner, that
the organisation can get advantage of all
exemptions, deduction, rebates without
violating legal provision of an act (Lanis and
Richardson, 2015).
An analysis of financial situation of an
organisation from the perspective of taxation
As a part of good governance, now every
business organisation tries to minimise the
burden of tax through proper taxation planning
process (Greenwood and Freeman, 2018)

The company has the tendency to
make “tax planning” by using tools
and mechanisms, which the
government makes available to the
organisation for the purpose of:
• Allowances
• Deduction
• Rebates
• Exemption

Main objective of tax planning:
• Increase the disposable
income
• Avoid inequalities in tax
burden
• Curb on tax evasion
• Avoidance of excessive
tax burden or shield
against high taxation
(Payne,
• and Raiborn, C.A., 2018)
• Avoidance of litigation

• So, Tax planning is nothing but a tax-
compliant approach by using which
an organisation can reduce the tax
burden, but....
“There is a grey area between Tax
planning and Tax avoidance”

What do you mean by “ Aggressive
Tax avoidance”?
• Tax avoidance is the most important
ethical issue for business- avoiding tax
means to avoid social obligation.
• According to financial law: reducing tax
bill through proper planning and
governmental policies is legal and ethical-
and in some cases, it is encouraged by
government (Dowling, 2014)
• But….

• Reduction of tax liabilities is
considered to be problematic, while
tax is avoided aggressively through
some schemes, which are neither
authorized by government nor by
state
• Avoiding tax and bending the rules
related with the tax is not at all
illegal, unlike of the tax evasion
(Barrera and Bustamante,2018)

Therefore, question arises that
business should comply with the
law- but is it ethical?

Tax considered as social responsibility:
• Paying of taxes is considered as a social
responsibility
• Avoiding corporate taxes can prove to
be aggressive
• Negatively impact the organizational
reputation (Lanis and Richardson, 2015)
• Amazon and Starbucks had to face bad
times for their tax policies supporting
tax avoidance

Paying of fair share:
• The payment of corporate taxes depends on making
profits
• If a company does not make profit then it need not
to pay corporate tax
• In UK most of the MNCs pay no corporation tax at all
• Taxpaying depends on which method the profits are
getting estimated (Payne and Raiborn, 2018)
• Rules for safeguarding the taxpayers from unfair
burden of taxes are present
• No proper definition of what is fair way of carrying
out tax avoidance