Sometimes companies move their corporate headquarters out of their home countries to countries with more favorable tax treatment. Which duty do you believe is higher, the duty of corporations to pay tax to the government or the duty of corporations to pay dividends to shareholders?

 Sometimes companies move their corporate headquarters out of their home countries to countries with more favorable tax treatment. Which duty do you believe is higher, the duty of corporations to pay tax to the government or the duty of corporations to pay dividends to shareholders? 

Actually, I think it is not sometimes, it usually, especially big companies move their corporate headquarters out of their home countries to countries with more favorable tax treatment. In fact, six of Silicon Valley’s biggest companies had a combined tax gap of more than $100 billion this decade, according to a new analysis(Taylor, 2019). The research analyzed Facebook, Apple, Amazon, Netflix, Google, and Microsoft between 2010 and 2019 with their 10-K filings, which are financial forms submitted by businesses to the U.S. government. It also claimed that those profits continued to be shifted to tax havens such as Bermuda, Ireland, and Luxembourg. 

So, which duty is higher? The duty of corporations to pay tax to the government or the duty of corporations to pay dividends to shareholders? I believe for corporations the duty of corporations to pay dividends to shareholders is somewhat higher than the duty of corporations to pay tax to the government. Essentially, the basic function of a business is to make a profit for its owners. In a capitalist market-driven economy, a business that fails to make a profit ultimately ceases to exist and ultimately affects the property of its shareholders. If corporations reward their employees with their shares, it also provides incentives to be creative, innovative, and productive. Moreover, it is much easier to seek funding and grow business quickly, which leads to an increase in labor demand and eventually increases the income per household. Higher salaries mean households and individuals have more money to spend and it also means higher income taxes they have to pay. It is a positive circulation for the economy. In addition, many countries have one common problem, corrupt bureaucrats. We are not so sure the taxes we pay are all effectively used in our society or the public good.

However, it does not mean paying taxes to the government is always a bad thing. Governments need resources and funds to keep their basic functions such as infrastructure, roads, parks, airports, electricity, water, and more. These infrastructures are vital elements for operating businesses. Legislative make laws, rules, and regulations to settle disputes between business owners. We also need many authorities to make public policies. A government is a body of people that work to effectively and successfully guide a unit or community. One thing government does is set and administer policy. They use customs, laws, and institutions to exercise political, executive, and sovereign power with the intent of managing a state of wellbeing that benefits all aspects of the community or unit.

To summarize, I reckon that although for corporations the duty of corporations to pay dividends to shareholders is somewhat higher than the duty of corporations to pay tax to the government, paying taxes to the governments is still necessary since they provide some basic elements of conducting businesses. Of course, it's not a major duty, but it's must be part of the duties.

Should the concerns of stakeholders other than shareholders be taken into account by corporations?

First of all, shareholders are one of the stakeholders in a corporation, but stakeholders are not always shareholders. A shareholder owns part of a public company through shares of stock, while a stakeholder has an interest in the performance of a company for reasons other than stock performance or appreciation. A shareholder can be an individual, company, or institution that owns at least one share of a company. Stakeholders, on the other hand, can be owners and shareholders, employees of the company, creditors, customers who may rely on the company to provide a particular good or service, its suppliers, and more. The key difference is that shareholders can trade the stocks and may not have a long-term need for the company, while stakeholders are bound to the company for a long-term period and for reasons of greater need. For example, if a company is performing poorly financially, its employees, who are stakeholders and rely on it for income, might lose their jobs. Due to these reasons, the stakeholder has a greater need for the company to succeed over a longer-term, and therefore, I believe the concerns of stakeholders other than shareholders must be taken into account by corporations.

 

Why are taxes often more of an issue with corporations than with other business entities?

In the US, it’s because other business entities like partnerships, most LLCs, and small businesses are generally pass-through entities where the incidence of taxation passes directly through to the individual owners, while corporations are separate legal entities. Because it is an independent entity, its decision is made by teams, and its taxes payments are affecting directly its net income, corporations' decision-makers tend to use its tax advantages to pay taxes as little as possible.

Reference

Taylor, C. (2019, December 3). Silicon Valley Giants accused of avoiding over $100 billion in taxes over the last decade. CNBC. Retrieved December 24, 2021, from https://www.cnbc.com/2019/12/02/silicon-valley-giants-accused-of-avoiding-100-billion-in-taxes.html