Directors responsibilities with regard to avoidance of tax Assignment

Directors responsibilities with regard to avoidance of tax - Assignment Example The firm accepts that the government has legal powers and can to take a share of the company’s profits away. Different countries have different tax rates and they must they paid as they are part of the rules and regulations of the country. If they are avoided they company would not be held socially responsible. It is agreed that the company can take all lawful measures to reduce the tax rates. But any illegal mean to avoid paying tax would result in avoid of taxes which has a negative multiplier effect on the company and its profitability. The duty of the director of a company is to have a good faith; an element that would promote the company following corporate social responsibility as it would be a benefit for the society on a whole. This would result in a positive multiplier effect in the long run and improve its relations with other stakeholders. A good reputation would be built if they pay the exact amount of tax otherwise they would not maintain a high standard of reputa tion in the market, thereby losing its credibility and goodwill. Tax evasion is practiced by directors illegally and it gives a smudge to the reputation of the company as a whole. But they live in a fool’s paradise if thy think it would not be known to general population and from that immature act they lose their credibility forever. This leads to customers driving away from the company as well. Recently, some multi-nationals have been found to be avoiding paying taxes in millions despite their enormous sales. The examples are Starbucks, Google, Amazon, Facebook and eBay but due to media coverage these multi-nationals have come under severe scrutiny. In countries like UK, businesses prosper because they have portrayed a good social and responsible image for its customers and there is a trust factor. They do this by not providing transparency in the accounts shared by the public. Via doing such an act they are on the verge of becoming directors of an insolvent firm. This would be a threat to the company’s long term profitability. Thus the directors must understand that taxes are a form of cost just like wages, rent, etc. LEGAL OBLIGATIONS ON COMPANY DIRECTORS IMPOSED THROUGH DIRECTORS’ DUTIES It is a natural phenomena in the modern world that governments run on the taxes paid by it’s citizens.1 The expenditures of a state have to be met by the taxes paid. The companies earning more have a bigger share in taxes than the ones earning less. The issue arises when multi-nationals earning in billions use legal strategies to avoid paying taxes. Having made legal grounds to undertake this, their action cannot be termed illegal and they cannot be held accountable in court.2 Such cases have recently come on the scene, thanks to the media reporting, but what can be done about it is still an issue. A director is a high-level employee of the company and is responsible for the company’s performance and answerable to it’s employer, th at is, the company. A director is not dutiful to the members of that company, and this also leaves out the company’s creditors and members. So, a director owes its trust element to the company only and this is determined by