Blurred Lines

We live in an age of more. Every single day, thousands of new companies join the fray to climb to the top of the corporate ladder. This world is ruthless, tossing aside those who do not push the envelope, those who do not take risks. Multinational giants along their way to the top often cross moral lines – entering into ethically grey areas. On such instances who should be held accountable for their misdeeds, the country harboring the company, or the company itself?

Such organizations operate across several countries, often having multiple subsidiaries increasing the complexity of their financial structure. They bank on the fact that different countries have different laws. Such firms establish themselves in countries with laws favorable to them, and herein lies the crux of the case. As long as the company doesn’t break the laws it is bound by, it cannot be held accountable for its actions however close they reach the fringes of what is ethically right. Usually countries structure laws to attract investors and companies, on occasion leaving loopholes for them to exploit.

One such instance is when India signed the Double Tax Avoidance Agreement (DTAA) with tax havens such as Mauritius and the Cayman Islands way back in 1982, allowing companies residing in India and one of these two nations to pay their taxes in either territories. This is propitious to firms as these havens exempt certain forms of tax, hence sending a beacon to companies the world over to invest in India. When in 2007, Vodafone orchestrated a transaction through the Caymans without paying any tax – as per the laws of the Cayman Islands – the revenue department of India cried foul. Following an acrimonious court case, the Supreme Court dismissed the charges against Vodafone, cementing the capitalist nature of India’s economic policy.

In the end it was Vodafone’s shrewd interpretation of the law that profited them. Unless countries legislate laws which are not subject to subterfuge, companies can and will continue to capitalize on the situation, for as long as they don’t explicitly break the law they are not culpable for their actions.

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