with the Tax Man
Written by Anastasia Cortez
Case Summary
Amazon.com has transformed the way people shop worldwide. Their success has made founder
Case Analysis
,
however, have not grown proportionally. The facts are that Amazon, like many other global
Critical Thinking Questions and Suggested Answers
1. Do you believe that Amazon is taking unfair advantage of the tax system?
Amazon, strictly speaking, is not taking unfair advantage when pursuing legal
opportunities to avoid taxes. What they are doing is, by all reports, completely legal. That
You might respond to this by referring to corporate social responsibility, asking if
corporations owe society more than the legal minimum behavior. An analogy might be
made to pollution. Ask students if they recycle. If they say yes, ask why it is not legally
required behavior and goes above and beyond the minimum. Are they happy knowing
2. If tax laws are changed so that companies are no longer allowed to reduce their tax
debt by deducting expenses for investment into research and development, do you
think that companies will reduce spending on innovation? Why or why not?
Perhaps it will reduce this type of investment in some companies. However, eliminating a
tax break will not eliminate the need for companies to continually invest in improving
3. How can communities attract business investment without giving away their tax
revenue?
This is a tough question, because the practice is so baked into American politics that it
would be very difficult to transition away from. Any locality that decided to take the high
road and stop giving away tax breaks would immediately be at a disadvantage when
4. Globalization has made it more difficult for national governments to tax corporate
income effectively because it is difficult to establish where the income was earned.
Companies like Amazon exploit this in order to shift their tax burdens to countries
with lower rates, effectively depriving some countries of revenue they deserve and
need and sending money to countries that do not bear the cost of supporting the
offering lower rates than their neighbors?
Competing for corporate taxes by offering the lowest rates is just like competing for
development by offering tax incentives (previous question) and would be difficult to
prevent for the exact same reasons.
i J. Ludema and A. John
Center for Values Driven Leadership, Benedictine University, August 28, 2018.
ii Harvard Business Review 46, no. 1 (1968;
reprint 2003): 53 62.