Accounting strategies to avoid paying income tax

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Reference no: EM13866052

Ethical Scenario

You are Chairman of the Board of a successful technology firm. There is a nominal federal corporate tax rate of 35 percent, yet the effective tax rate of the typical corporation is about 12.6%. Your firm has been clever with use of transfer pricing and keeping money abroad and has barely paid any taxes over the last 5 years; during this same time period, profits were $28 billion. One member of the board feels that it is un-American to use various accounting strategies in order to avoid paying taxes. Others feel that these are legal loopholes and corporations have a fiduciary responsibility to minimize taxes. One board member quoted what the CEO of Exxon once said: "I'm not a U.S. company and I don't make decisions based on what's good for the U.S." Should the company should continue or discontinue using accounting strategies to avoid paying income tax? Identify at least 3 courses of actions or alternatives.

1 What is the ethical dilemma or issue?

2 What are the alternatives or possible courses of action? Identify at least 3 alternatives.

3 What are your recommendations? In other words, of the several alternatives you identified, what do you think the company should do?

4 What is your rationale for your recommendations? In other words, why do you recommend this course of action?

Reference no: EM13866052

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