Assessment Case Studies Sample
January 3, 2022
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Corporate governance and social responsibility Sample
Tax strategies used by Google, Microsoft, and Apple in Australia
Tax control is one of the toughest jobs that governments have to do along with their other work. Tax can be defined as the general revenue that is paid to the government of a particular country that is mainly invested in the welfare work of the country and its citizens. Hence, it becomes very important for the government to take care of the taxes received. One of the major concerns for governments nowadays is tax evasion. Not only do citizens practice this unfair means, but corporate businesses also try to evade taxpaying. Global corporations have the same approach towards paying their taxes to the government. It has been seen most of the companies are too reluctant to pay a major part of their profit to the government and are often seen clashing with each other forming a barrier for their business market (Dowling et al. 2014). Hence, this study becomes very important as we are going to discuss a similar case happening with the Australian government where they are toiling to protect their tax revenue from multinational giants like Apple Inc., Microsoft Corp., and Google. The government of Australia has launched several tax protection operations targeting rich individuals and has been able to salvage something out of it and successful to some extent. The government must target is very important that the government targets the bigger areas so that the depth of the problem can be judged. So far the Australian government has been able to get hold of robbers, pickpockets, and petty thieves but the problem is bigger and needs much better attention.
Large organizations like Apple Inc and Google are disgraced with allegations of tax evasion in Australia (Graetz et al. 2015). It is said that for tax avoidance these bigger organizations are shifting their earnings from Australia to other places that will help them avoid payment of tax. The issue of tax avoidance has become a serious issue in Australia as the government says these companies are not paying corporate tax and the country is missing out on huge amounts of money as tax revenue that they can use for the betterment of services and welfare of the country. It is found that these companies are very tactfully handling tax issues and doing business in countries where tax is not a huge factor and realizing their income doing the transactions from these countries. Speculations say that companies like Apple and Microsoft are doing transactions in such a way that a minute income is shown in the government record, but originally the way they have structured the format effectively helps them (Hoi et al. 2013). These companies have consistently been able to avoid tax working with countries like Ireland and Cayman Island, which are considered to be Tax Haven. Though these inferences are completely conjectural and in case any information is found out regarding its validity it is probably kept under wraps. It is important that we evaluate the ethical practices and corporate social responsibilities of these organizations so that it is easy for us to conclude the tax behaviour of these companies in Australia. Hence, the subject of this essay is important to be discussed as it will be of immense help for future research on this topic.
Ethical practices by MNCs in Australia
Though it says that MNCs like Apple, Microsoft, and Google are companies working ethically all over the world. But official information says something else (Huseynov et al. 2012). Apple Inc was accused of tax avoidance, and Microsoft has officially confirmed that there have been audit raids by the Australian tax authority in Microsoft headquarters in Australia. It can be said that these companies have not been perfectly ethical with their tax payment practices. Information says that just a couple of years back both Apple and Microsoft were summoned by the It pricing inquiry to investigate their tax practices. The companies were not able to explain anything in detail, and the companies had to fly their top bosses in for the explanation. The firms went on to provide evidence regarding their contribution financially and also pleaded to evaluate the overall contribution that these firms made to the country. Google also placed its points effectively saying that its main contribution is the intellectual capital that makes a huge contribution to the overall development of the country by employing to amount engineers (Jenkins et al. 2013). On the other hand, these companies continued to evade tax through different ways that made the situation serious and asks for immediate treatment.
Apple and Google have tried to move their revenue from countries like Thailand and Singapore where the tax rates are low. Apple has been in an altercation several times so far regarding tax avoidance cases which naturally reflects that there still lies the scope for ethical practice regarding tax payment in Australia. One of the research highlighted that Apple stands to be the biggest tax avoider in Australia followed by Microsoft and Google, which has come under the scrutiny of Australian Tax authorities. MNCs like the ones discussed above have hit developing countries like Australia and have made them fall under a severe fiscal crisis that is mostly due to tax evasion by these companies and rich individuals. We can conclude that Multinational behemoths like Apple, Microsoft, and Google avoiding have brought serious fiscal concerns to the Australian government (Karnani et al. 2010). Countries with low tax rates and easy fiscal policies are gaining popularity and earning huge amounts in this kind of situation. These companies voice their views on ethics and ethical practices, but their pragmatic approach forms a paradox with their theoretical views. Even after all these issues companies cannot be criticized for their tax evasion practices as it is perfectly legal and that’s where lies the importance of the change in rules and regulations and an overall revamp of the tax system in Australia. The formation of tax strategies by these companies becomes a paradox in itself as most of the companies are on for social responsibilities but when it comes to them following the same it creates a problem. It cannot be said that the tax strategies of companies like Apple, Microsoft, and Google are unethical but not ethical even, and this becomes a contradiction (Lanis et al. 2012). Since it is debatable it is important that we speak about a part of this subject. Tax evasion is something that is an illegal and criminal act and most companies should stop evading tax since it doesn’t help the welfare of a particular country also it is a direct betrayal of trust and legal contracts. It is very tough to consider it ethical but from the companies’ point of view, it can be treated as a fair activity as why would someone give away their hard-earned money?
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From the political parlance, it could be said that it is something that should be effectively studied and should come up with effective ideas related to it. In a recent study, it was found that Apple earned a total revenue of $ 6 billion and a profit of $ 250 million but only paid $ 80 million in tax. This information shows that there is a serious need to evaluate the tax system that will only help Australia to rectify these problems and block these loopholes (Pha et al. 2014). The mechanism that Apple followed is quite interesting and will reflect the ethical practices of the company in Australia. In the paper, it is shown that Apple Australia is a subsidiary of Apple Ireland it is shown just to minimize ten tax rates and will ease the problems of Apple as it will show Apple Australia get the products from Ireland which has a comparatively low tax policy. The Tech giants Microsoft and Google follow the same principles and work with Singapore where the tax rate is extremely low as compared to Australia, and that’s where Australia is losing the tax. It can be said that these three companies aren’t that ethical with their tax strategies as the evading of tax is something that is not expected from global giants like them. Not only these companies but other companies are also culpable of unnatural tax behaviour that the Australian government should look after. Although what these companies are doing could be legal from their point of view, this asks for better framing of law from the tax protection parlance (Preuss et al. 2010).
Corporate Social Responsibility
Corporate social responsibility is something that most Multinational organizations are very interested in. Multinational companies indulge themselves in social works which helps them to come closer to their audience. They use it as an effective tool to sink into the mind of their consumers which in turn makes them popular among the consumers. Nowadays it is given top priority by the companies like Apple Inc., which plays an active role in the CSR activities like going with the green earth program, Reduce Recycle Reuse programs, doing charity programs et cetera. Google and Microsoft also take a special interest in it. With the development of technology, people have become more conscious about their purchases that have given these companies an upper hand. These multinational companies working all over the world have got added advantages as they can tamper the amount of tax payable to any government (Watson et al. 2011). Now Tax is also considered to be a CSR activity that most organizations are very reluctant to fulfil. In the past few years, the above multinational companies have evaded a lump sum amount of tax in Australia, which is very harmful to the country’s economic position. It is surprising to see after all these cases leaking out tax avoidance is excluded from the CSR policies. The time is changing and like the labour conditions and work environment problems similarly, Tax avoidance is about to be included in the CSR policies that will develop the scenario to some extent and to be on the good books of the consumer’s companies will tend to pay more and more tax (Zemzem et al. 2013).
It can be said that tax revenue is one of the most prominent ways in which a government earns and tax payment makes the company come closer to its audience. Paying taxes and fulfilling corporate social responsibility is the best way a company can come closer to society. The main problem with tax avoidance and CSR is that they both interrelate in a way that is crucial for the business. Paying tax will always reduce the amount of profit earned by the company that no company will want. Similarly in this case Microsoft scores better in CSR activities regarding tax payment and is favoured by most consumers in Australia due to this. Though the subject of tax is not much known like labour conditions and human rights, it was never given so much attention by the companies (Smith et al. 2011). Hence, this will have to be included in the CSR policies and will see different results probably.
NGOs and other organizations have come forward to take care of tax evasion and avoidance by multinational companies. They are extremely active in this field and with their intervention in such subjects, the media become very active and highlight these problems that criticize companies for their tax strategies. Apple Inc and Google were hugely criticized for their tax avoidance strategies in Australia and accordingly they had to work on it. If we look back 20 years, we will see there were many different aspects of corporate social responsibilities, but tax payment has become one of the major elements of CSR nowadays (Singh et al. 2011). Because of its craze and interest, most of companies have reduced tax avoidance and started playing fair and safe on it. Hence, it can be said that the above multinational companies namely Apple, Google, and Microsoft should change their tax strategy in Australia since their tax planning is a tactical move for the company but not ethical. If the companies want to be in the good books of the consumers, they have to act ethically with one of the most crucial aspects of corporate social responsibility which is not practised well by these companies, and hence they are not even fulfilling the CSR activities properly (Sikka et al. 2010).
ASX and P&R
In the recent past, the stock exchange in Australia showed the dipping curve of Apple’s shares that made the company work on their operations more and they have stated that one of the biggest reasons for a low payment of tax is the downward share curve of the company. The global financial crisis has also taken a toll on these companies’ financial health which they frame to be a reason for their low tax payment or tax avoidance. The Australian economy has not been able to keep pace with the US economy but even in the Australian market tech behemoths like Apple, Microsoft and Google have topped which has brought them into the limelight and the confusion of tax avoidance got elevated (Richardson et al. 2011). Apart from this the stock market of Australia doesn’t seem to have much movement which is a real concern. It can be expected that the stock market of Australia would bounce back from the financial crisis, and this will help them to show these companies that their shares are doing good in the market which will help them to force these companies to pay their taxes properly and effectively. The problem lies with tax avoidance which is not right and should be effectively scrutinized by the government of Australia and ensures that they could sue these companies to evade tax that would help the country and boost its economic condition (Muller et al. 2012). Hence, overall it can be said that the ASX and P&R. in the recent past Apple has come under the wrath of the Australian government several times for not being honest in paying their taxes not only hit the company but also its goodwill due to its unethical practices. This issue has the impetus on the Australian government to change its overall tax system and rules and regulations which will help the country to get the deserved amount of tax from these companies. These decisions are taken at the G20 summit.
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Recommendations made for the issues discussed above to be solved are given below:
Tax policy principle: The companies have to disclose the tax principles and tax strategies that they will be adopted while doing business in Australia (McBarnet et al. 2009). It will also be taken care that how the tax policy is impacting the companies. Whether they are corresponding with the corporate values or not et cetera. The adoption of tax principles has to be escalated to the government and it should be up to the standard of the government policies. Companies should treat the tax rules as an integral part of the operation policies and should comply with them for the betterment of the tax process.
Tax strategy and social and environmental sustainability: The companies that are at the centre of public controversy related to tax avoidance, including Apple, Microsoft, and Google are widely trusted for their performance and their constant sustainability in the market which encourage them to invest in the business are believed to help these companies operate (Lanis et al. 2015). This is probably an indicator of total quality management and long-term sustainability in the market and long-term competitiveness. These policies should obey the rules and regulations of international tax policies laid down by the governments and other bodies so that they can help both the parties namely organizations and concerned governments.
Stakeholder management and tax strategy
Companies are always careful about stakeholder management, but this also affects the tax strategy of the company (Landry et al. 2013). The tax strategy affects the stakeholders attached to the company. It is quite natural that Google, Microsoft, and Apple will have to pull up their socks in case of handling their stakeholders when they start giving away original tax amounts since it will hurt the cause of the stakeholders related to these companies (Hasseldine et al. 2013). Stakeholders like the consumers and shareholders and other active external stakeholders will have to compromise on their dividends which will be affected due to the payment of tax to the government. In the case of Australia, these MNCs are very casual and have to take more interest in their tax strategies framed. Overall it can be said that the tax strategy by Google, Apple, and Microsoft is not ethical and should be changed so that they are not in a fight with the Australian government regarding the tax issue (Gribnau et al. 2015).
References
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De Villiers, E. (2014). The Income tax-deductibility of corporate social responsibility expenditure (Doctoral dissertation).
Dowling, G. R. (2014). The curious case of corporate tax avoidance: Is it socially irresponsible? Journal of Business Ethics, 124(1), 173-184.
Graetz, M. J. (2015, July). Can a 20th-century business income tax regime serve a 21st-century economy? In Australian Tax Forum (Vol. 30, No. 3).
Gribnau, H. (2015). Corporate Social Responsibility and Tax Planning Not by Rules Alone. Social & Legal Studies, 24(2), 225-250.
Hasseldine, J., & Morris, G. (2013, March). Corporate social responsibility and tax avoidance: A comment and reflection. In Accounting Forum (Vol. 37, No. 1, pp. 1-14). Elsevier.
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Jenkins, R., & Newell, P. (2013). CSR, Tax and Development. Third World Quarterly, 34(3), 378-396.
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