Introduction.
The future of human-kind depends on state’s capacities rights. If this argument is anything to go by then states must focus on the contributions of the corporate businesses and private sectors, and how such interface with public expectations and values. This interface describes how billions of people dependent upon the state must service both in dignity and in an economical perspective. For the last few years corporations operating both domestically and internationally shield their profits from taxation troubling tax payers and governments alike. There has, however, been a limited effort to associate such tax evasion to corporate responsibility in advancing critical expectations from societies. Instead, much of the debate has been centered on fair and efficient taxation on corporate incomes.
The linkage between corporate social responsibility and tax evasion remains unclear despite the necessity to bridge the gap. With tax evasion corporate businesses fails to reveal their identity or break the taxation law by failing to submit their tax returns. Auditors lack controls and security in revealing such information that is considered confidential to these tax evaders. This is not only a break of the law, but also unethical.
The current state of globalization makes it impossible if not difficult for many governments to establish corporations or collect fair taxes. Some corporations end up evading some taxes while others avoid part of their taxes by providing manipulated financial information. Many multinationals companies structure their affairs in a design intended to evade taxes or avoid a percentage of their taxes in almost all jurisdictions of operation. This may demonstrate an innate skill or superior efficiency of such companies. However, the issue of aggressive tax evasion manifests itself in systematic failures of local and international tax policies leading to market distortions, slow rate of economic growth, economic free-riding and wide economic disparities amongst developing and developing economies (Kirchler, 2007). There lacks political will and authority to solve these failures undermining the integrity of taxation systems an regimes leading to open loopholes used by businesses to evade taxes, and competing unethically.
High ethical perspectives demand that corporations must arise above minimal compliance to tax requirements despite their profit maximization motives, and directly tie their wealth to the society and government (Cobham, 2005). Any corporate executive pronouncing legitimacy and law adherence must not be blind on the issues affecting the dignity an livelihoods of people.
What makes tax evasion unethical?
Evading taxes bends the rules of taxation thereby not legal. Most businesses evade taxes with an aim of maximizing their returns, and generating other investments from the incomes supposedly to be taxes. Every economy has set taxation rules, and how corporate should comply by paying taxes under the law. Most corporate evading taxes provide that this provision is a coercion of their rights, and that tax returns should be submitted philanthropically. The issue falls on ethics realm as businesses have choices on their law interpretation on tax submissions (Cobham, 2005). Whilst remaining legal, businesses should establish an ethical boarder regarding how to interpret tax laws, and formulate affairs subject to discretion. If this is not adhered, corporate act against the law, and this is unethical.
However, it is difficult for tax evaders to protest that despite the evasion they pay fair share of taxes. The fact that they lie shows that they know that their taxes should be higher that what they disclose in their statements. Tax avoidance may not require deceit on financial information as avoiders make disclosures of all facts in relation to impugned arrangements. An illustration for such an arrangement as was on the case of Westpac Banking Corporation where a binding ruling on a an arranged finance transaction was found to be a tax avoidance scheme. The justification in most corporations remains to be as a secret of their success thereby not a deceit.
Tax and social responsibility.
Paying taxes is the most honorable and responsible thing that corporate should do. Social responsibility refers to involvement in activities such as education, public investments, and health care, among others for social welfare. At such a time when many cuts on government expenditure create a significant impact on the lives of citizens, it is morally indefensible for corporate to be avoiding their fair share towards the government. Avoiding taxes is avoiding social obligations, which relates to selfishness, reed, and reputation damaging, and destroying public trust (Kirchler, 2007). Arguing that keeping tax costs within the provisions of law, while avoiding some amounts, is unlawful and morally wrong.
As the proportion of people and economy controlled by states continue to grow so will tax rates continue to increase. Corporate and businesses may not grow at this rate thereby the question on the need to pay taxes to cater for economical development. This may be answered from a three dimensional model; the total amount of taxes to be collected, the legitimacy of tax objectives, and the conduct of individuals and corporations in paying the taxes.
The three views of tax evasion.
There is an underlying rationale to the belief that tax evasion is an unethical corporate act. Individuals have an obligation to raise or pay what the government demands. This view is prevalent in democracies where individuals must conform to the majority rule. Breaking the rule, therefore, is considered immoral and unethical. It is also considered an ethical duty to oblige to tax requirements as corporations owe members of society (Alm, and Torgler, 2011). This element holds that citizens should not be ‘freeloaders’ in taking advantage of stet services while not contributing to the payment of the services. Most of the projects run by the government originate from taxes paid, and aim to benefit all citizens including those who pay taxes and those who evade.
It is, therefore, unethical to enjoy the services provided by the government yet evading to pay the taxes. For example, businesses benefit from infrastructure made from national income. They should, therefore, be responsible or be part of that development by paying their taxes. A corollary argument of this belief is that tax evaders contribute to high tax rates to obliging corporations in attempts to bridge national income gaps (Alm, and Torgler, 2011). From a deontological approach, individuals and corporations owe a duty to the Sovereign Being to pay taxes, or in a different approach God commands everyone to pay taxes. This view may, however only hold water among some religious circles (McGee,and Cohn, 2008).
The second view on the unethical element of tax evasion is the anarchist view that argues that there exist no duties to pay taxes as states are illegitimate. The argument is that states use power to coerce corporations to pay taxes, and this in itself is a moral act. Anarchists argue that states are forms of mafia that set taxation rules with expectations that corporations must oblige. They define such coercions as immoral acts, and adherence to the rules as contributions to immorality and lack of ethics. From this dimension there is no such a thing as tax evasion as corporations have no duty to comply but do so from political authorities imposed from the government (Kirchler, Maciejovsky, and Schneider, 2003). Using the term tax evasion on such corporations, therefore, becomes unethical.
The third view of ethics of tax evasion holds that tax evasion has an ethical and unethical perspective given different circumstances. This view prevails in ethical literature, and from different surveys on ethics of tax evasion and avoidance. If taxes are paid under an invisible hand perspective whereby paying the taxes is considered as law adherence, then such may not be considered as ethical. When the concept of willingness is overlooked so that corporations pay taxes to be considered as ethical then this undermines the theory of taxation. As much as paying taxes is not completely philanthropic, there must be willingness to pay those taxes (Cobham, 2005). However, some corporations hide under the ethical veil of lack of willingness to pay taxes, which cannot be considered as ethical.
Conclusion.
Being labeled as a tax avoider generates feelings that courts have repeatedly attempted to neutralize by indicating that avoidance does not carry any immorality implication. It may be that some corporations use such judicial pronouncements to evade taxes. However, such pronunciations should not determine what should be considered as law of tax evasion. In other words, immorality should not be treated as evasion but evasion as immorality.
Need for certainty.
There is need for governments to provide clarity on the issue of tax evasion and avoidance, and tax acceptability. Some corporations justify their unethical conduct of tax evasion by virtue of high levels of taxes relative to their income, lack of affordability, and the argument that other corporations pay taxes on their behalf. There is need to establish levels of taxes that above such levels may be considered abusive to corporations (Cobham, 2005). Legislation should provide reasonable tax levels but this remains a challenge as it may be subjective and difficult to establish. What many corporations need is certainty on the amount of taxes they should pay so that they incorporate such expenditure in their forecasts.
REFERENCE.
Alm, J., & Torgler, B. (2011). Do ethics matter? Tax compliance and morality. Journal of Business Ethics, 101(4), 635-651.
Cobham, A. (2005). Tax evasion, tax avoidance and development finance. Queen Elizabeth House, Série documents de travail, 129.
Kirchler, E. (2007). The economic psychology of tax behaviour. Cambridge University Press.
Kirchler, E., Maciejovsky, B., & Schneider, F. (2003). Everyday representations of tax avoidance, tax evasion, and tax flight: Do legal differences matter?. Journal of Economic Psychology, 24(4), 535-553.
McGee, R. W., & Cohn, G. M. (2008). Jewish perspectives on the ethics of tax evasion. Journal of Legal, Ethical and Regulatory Issues, 11(2), 1-32.
Wenzel, M. (2007). The multiplicity of taxpayer identities and their implications for tax ethics. Law & Policy, 29(1), 31-50.
