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Comment by jrowley | Hacker News Reader

While a public company answers to it's shareholders, it also has a responsibility to support the community it lives within, because often success can be directly attributed to where the company started. Aggressively avoiding taxes could very well be considered unethical by some parties.

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Some may consider avoiding taxes to be unethical, others might say not avoiding them would violate a fiduciary duty.

From my very minimal accounting course I remember my teacher, who was serving as part of the tax appeals board at the time, telling us that we were allowed to use any opening in the law to save tax but we were not allowed to lie.

The intent of my comment was to draw attention to the other side of this coin.

>You are allowed to use any opening in the law to save on taxes, but not lie.

The other side of that is:

If you (as a C(ETF)O of a company) do not use every opening in the law to save on taxes you may be violating a fiduciary duty to your shareholders.

Oddly enough nobody is concerned with fiduciary duty when a CEO pulls a few million dollar bonus out of a failing company.

The CEOs don't set their comp.

Also, depending on the company "a few million dollars" isn't even a meaningful amount of money.

The shareholders and board very much are, although for a failing company often they will set up a CEO with the explicit goal to wind down the company my milking it to death (which often takes many months or years, and starts long before employees would be notified about the plan) and offer multimillion bonuses conditional on extracting dozens more millions for shareholders from a dead horse by riding it in sunset until all that's left is debt to "someone else".

When people bring up "fiduciary duty" in either a taxes or outsourcing context (i.e. it's Apple's fiduciary duty to build its products in China), I always ask for a pointer to a successful lawsuit in which this particular fiduciary duty was enforced.

Yes, in theory it's their fiduciary duty to minimize taxes, but I've never heard of a board being sued because they didn't squeeze every last dollar out of their tax bill.

First link in the quick Google search I did, which starts with a story where Henry Ford wanted to stop paying special dividends to partial owners. "At trial, Ford testified to his belief that the company made too much money and had an obligation to benefit the public and the firm’s workers and customers." The judge did no agree. I haven't read the whole article yet, but it seems definitely to apply (and also notes there is little precedent in this area).

1: http://www.professorbainbridge.com/professorbainbridgecom/20...

I'd say a 100 year old case speaks to a lack of enforcement of fiduciary duty in the courts.

On the other hand, "Henry Ford got smacked for it" speaks loud enough to stop most executives and their corporate lawyers from testing the waters. Even if some time has passed.

http://www.delawarelitigation.com/uploads/file/int51%281%29....

That's just an example of fiduciary duty, not one relevant to taxes or outsourcing, which I mentioned in my original comment.

Again, has anyone every sued a company to demand that they try harder to lower their tax bill or move operations overseas?

Some companies even brag about NOT outsourcing. Socially conscious marketing.

>not one relevant to taxes or outsourcing, which I mentioned in my original comment.

Perhaps this is related to the fact that I wasn't responding to your comment?

>Some companies even brag about NOT outsourcing. Socially conscious marketing.

And?

I think their point is: does refraining from outsourcing expose a company's leadership to fiduciary duty risk?

If such a decision is overwhelmingly likely a bad choice, most likely yes.

However, obviously there's always potential risks and costs involved in outsourcing that need to be taken into account when evaluating such decisions.

This would also presumably require that the leadership be informed of the obviously better course of action.

The dispute was about dividends. No mention of taxes or outsourcing.

(Semi off-topic)

Maybe not what you want, but in 2008, the CEO of KBS, South Korea's public broadcasting corporation, was fired by the government for having agreed to court settlement in dispute with National Tax Service over how much tax KBS should pay.

Yes, he was fired because he had followed the settlement suggested by the freaking court. (The real reason was that he was a liberal appointed by the previous president Roh, and the new government led by conservative Lee Myung-Bak wanted him gone.)

Years later the court ruled that the firing was unlawful (duh), but somehow he wasn't reinstated, and anyways, the damage was done.

So you are of course not taking any advantage of Pension tax reliefs in your 401K and IRA's ?

401K/IRA tax avoidance techniques are codified in law to encourage people to save for retirement so we don't have generations of elderly homeless people.

The tax loopholes that companies like Apple tax advantage of are another thing entirely.

>The tax loopholes that companies like Apple tax advantage of are another thing entirely.

No, the significant ones (i.e. offshore subsidiaries) are very much codified.

Letter of the law vs. spirit of the law.

Subsidiaries in countries with low tax rates certainly aren't against the spirit of the law.

Isn't the spirit to promote foreign investment, as opposed to domestic companies restructuring themselves to look foreign on paper?

I'd imagine it's more about not driving all the domestic companies away.

There's a big difference between taking advantage of pension tax reliefs in exactly the way a tax authority designed them to be used and creating an offshore subsidiary charging artificial royalties to exploit the tax authority's openness to actual foreign-owned businesses investing in the local area.

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