The purpose of any business is to...
Review on The Medtronic Case.
The purpose of any business is to
maximize profits and minimize cost as much as possible. Medtronic is no
exceptional since it is a business not only established to provide solutions to
people but also make profits. It is, therefore, justified to cut on cost as
much as they can. Since the laws in the country allow tax- inversion, the
company is justified to do so.
Balancing the desire
for maximization of cash with need for good corporate citizenship
For most businesses profits come first
when it comes to choosing between good corporate citizenship and money.
Therefore, to balance this, the corporates are committed to corporate social
responsibilities which benefit the country. For example, Medtronic has
committed itself to employing students from the best universities in the United
States. The decision not only helps the students but also the country since no
money is made in the country goes outside. The companies also invest in the
country in other projects like bonds or stocks then the taxes from these
investments are taken by the government.
How the U.S government
should respond to the increase in tax-inversion
The government can respond to the
corporates’ tax-inversion by lowering taxation rate on these companies. The
decision would be an incentive for maintaining their citizenship which in the
short term will cause the country’s economy to be slightly affected but in the
long run, will prevent more companies from relinquishing their citizenship for
another country with lower rates. The state of California in 2012 decided to
lower the rates and accommodate more companies. There was an economic crisis,
but in the long run, the taxes have been retained (Kocieniewski).
Alternatively, the government should try and cover the loophole the laws leave.
It could be like formulating stringent rules on the companies to control
There are various ethical ways to look
at this case, however, judging by Utilitarianism, the decision by Ireland not
to accept the money would be appropriate. Reason being that if the country were
to take money, it would impose lots of consequences like a lot of people losing
their job as Apple is threatening. The money to be paid would not be enough to
take care of debts the country owes, it would only hurt the economy. The
decision will also protect the country’s reputation for corporate tax rates for
international companies. However, according to the European Commission, the
deal between Ireland and Apple is illegal (Leahy and
A company should always work under the
policies stipulated by law. If Apple had operated under the laws in Europe, it
would not have been in the situation where it has to pay so much money. As much
as they try to avoid paying the amount through threatening, they will also lose
in their business as they cut on this. Maximization of profits is imperative,
but keeping the law in mind will help avoid problems from the beginning.
Profit maximization is the primary
reason for companies getting into a deal with a country, while maximizing
benefits for its citizen is what drives a country into making such a deal.
However, the company should reconsider before getting into this kind of deal
since the country might be bound to other powers above it, just like Ireland and
the European Commission.