Chapter 2: Three-Card Monte

1. Summarize the positions of both critics and supporters of these tax strategies.
For the position of critics, these tax strategies are unethical and may harm the
development of the country. This is due to the corporate tax from the corporation is the
main source of revenue which government use for the expenses of social welfare. Thus
the payment of tax is considered as a social responsibility for the corporation.
For the supporters of these tax strategies, they probably think that these are good
strategies in maximizing the corporation profit. This is because the corporation able to
reduce the tax expenses in a legally as it is acting within the law in force at the time. At
the same time, the corporation will also able to maximize the wealth of its shareholders
through the reducing of tax expenses.

2. Supporters and critics of these tax strategies agree that corporations are making
use of legal financial options that are available to them under current tax law.
However, does that equate to ethical business conduct? Why or why not?
This does not equate to ethical business conduct as avoiding tax is avoiding a social
obligation. Paying a fair amount of tax in the countries where they operate is seen as the
socially responsible thing for corporations to do as the corporations have obtained
benefits either directly or indirectly from the public services provided by government.
For example, the public service includes healthcare, education and infrastructure. Thus,
corporations need to contribute to the government by providing fund for public services
through tax payment. If most of the corporations are practicing tax avoidance, the
government would eventually have to cut on their spending since their revenue has been
decreased. This will have a real impact on everyday lives of people. In conclusion, the
corporations should not justify the tax avoidance as ethical business conduct through the
belief that the activity is within reasonable ethical and legal limit and the activity is in the
corporations best interest.

3. The French chairman and CEO of Louis Vuitton, Bernard Arnault, recently
announced that he was leaving France for Belgium, allegedly to avoid the new
highest-income tax rate of 75 percent. Is that any different from what corporations
are doing? Why or Why not?
There is no different from what the corporations are doing as it is also a type of tax
avoidance strategy for the individual tax expense. Through this affair, the revenue of the
government will also be reduced and consequently affected the social welfare. Besides

that, he is also the one who are enjoying the public infrastructure available. Therefore, he
has the responsibility to payback the social for what he had enjoyed.
The only difference that we can noted between the corporate tax avoidance and individual
tax avoidance will be the total amount involve in these 2 parties, Corporation logically
will earn much more than an individual in a single financial year. Thus, the tax incurred
by the corporation for sure is much larger than individual incurred. Subsequently,
governments revenue reduce more significantly from the corporate tax avoidance
compared to individual tax avoidance.