Case Study #1 - Group 2
Offshoring, or moving a company's headquarters to a less taxing country, has become an increasingly relevant moral dilemma. It allows businesses to drastically decrease costs, while only really harming the government of the country that has been left. This case examines the decision to move the headquarters of a large car part manufacturer from the U.K. to Dubai. The business was started in the industrial era of the U.K., allowing him to establish his company as a modern day global firm and exporting all around the world. Thus, having to pay hefty taxes to the U.K. on all his profit despite the majority coming from abroad, it can be argued that the founder wouldn’t have any of this profit had it not been for his English grassroots. However, should the company face grave jeopardy in terms of continuing operations, it would be a disservice to U.K. employees and government, therefore, despite issues with morality the company should move to Dubai. If the company remains in the United Kingdom, there is a high likelihood that they will not make enough money to sustain themselves; they would have to lay off English employees. If the company ran out of money, it would not benefit the United Kingdom anyways. The current business from the United Kingdom is only ~20% of business anyways, which could likely be replaced by Dubai markets. The CEO would still have a branch in the U.K., just not their headquarters. The United Kingdom would still benefit from the company and still be paid taxes, but only on business done in the country. Additionally, by staying in the United Kingdom, he would be behind his competitors. Many other large businesses offshore their headquarters to avoid paying taxes, and staying in the country would only put him at a disadvantage. Also, employees could work remotely from the United Kingdom still to keep English workers employed. The move to Dubai would also be more morally correct than what some large companies such as Starbucks do to avoid taxes. Starbucks began its endeavor in the U.K in 1998, and since then, they have only paid 8.6 million Pound Sterling in income taxes, which is less than $11.4 million. They have generated over 3 Billion Pound Sterling, around $4 Billion once converted. This method of avoiding income taxes is severely less in line with morals, and focuses more on profit. This shows that there are much more options that are worse morally, making his decision look much better in comparison. Overall, we believe that the company should move to Dubai, as it allows for maximum profits, opens a new market for them to compete in, still remains loyal to the U.K by paying taxes, keeps a significant amount of its employees, and it's a much better alternative to other ways of avoiding taxes.