Please read the following three readings and answer with one page.

Respond to the following question:

Stakeholders approach: Should a multinational firm develop tax-avoidance strategies in the host country? Why or Why Not? How should a global manager approach this problem?

Most firms pay no income taxes Congress Study finds that the majority of domestic and foreign corporations in the United States avoid paying federal income taxes. By David Goldman, CNNMoney.com staff writer Last Updated: August 12, 2008: 4:38 PM EDT NEW YORK (CNNMoney.com) -- Nearly two-thirds of U.S. companies and 68% of foreign corporations do not pay federal income taxes, according to a congressional report released Tuesday. The Government Accountability Office (GAO) examined samples of corporate tax returns filed between 1998 and 2005. In that time period, an annual average of 1.3 million U.S. companies and 39,000 foreign companies doing business in the United States paid no income taxes - despite having a combined $2.5 trillion in revenue. The study showed that 28% of foreign companies and 25% of U.S. corporations with more than $250 million in assets or $50 million in sales paid no federal income taxes in 2005. Those companies totaled a combined $372 billion in sales for the largest foreign companies and $1.1 trillion in revenue for the biggest U.S. companies. The GAO report, which did not name any specific companies, said that some corporations reported zero income before deducting expenses while others said they had zero net income after deducting expenses. Either way, those companies reported no tax liability, the GAO said. But many of the companies the report found had paid no tax were likely small businesses that pay other taxes. Generally, many small firms, because they do not have shareholders, are able to shift corporate income to individual income. "Small businesses that are going to be liable for a lot of income tax are likely to use other tax forms so they only pay individual income taxes," said Eric Toder, a senior fellow at the Tax Policy Center. The study was requested by Sens. Byron Dorgan, D-N.D, and Carl Levin, D-Mich., in an attempt to determine if corporations are abusing so-called transfer prices. Transfer prices are charges on transactions between subsidiary companies within a larger corporate group. Companies may try to lessen their U.S. tax hit by improperly transferring income to foreign subsidiaries in countries with lower rates. The GAO study did not attempt to determine if companies were abusing transfer prices, but it said that potential abuse of transfers could reduce the amount of taxes companies pay in the United States. "The tax system that allows this wholesale tax avoidance is an embarrassment and unfair to hardworking Americans who pay their fair share of taxes," Dorgan said in a statement. U.S. politicians disagree about how much income tax the government should levy on corporations. Currently the rate is 35%, but most foreign governments have set their rates below the U.S. level. "The U.S. corporate tax rate stayed the same while foreign countries have drifted down, which increases the incentive for companies to report income in other countries," said Toder. "If the U.S. drops the rate to 30% but closes other tax loopholes, that may ultimately generate more tax revenue for the government." First Published: August 12, 2008: 3:46 PM EDT Corporate Loopholes in Tax Law Targeted John D. Mckinnon and S. Ovide, Wall Street Journal Sept 20, 2012 WASHINGTON Microsoft Corporation and Hewlett-Packard Co. used accounting strategies to hold down their U.S. tax bills while shifting profits in and out of the country, according to a Senate subcommittee investigating how multinational companies exploit the intricate U.S. corporate-tax code. Senate investigators said much of the activity appears to comply with the letter of current tax regulations though they regard some of the practices used by H-P as potentially abusive and subject to challenge. Both tech giants said their strategies are legal. The findingsfrom one of a series of reports on corporate-tax practices by the Senate Permanent Subcommittee on Investigationscome as Congress prepares for a debate next year on an overhaul of America's business taxes. "Major U.S. corporations are increasingly earning their profits here but shipping them overseas to avoid paying the taxes they owe," said Sen. Carl Levin, the subcommittee's chairman. The Michigan Democrat called these offshore strategies "unacceptable." The companies drew different conclusions. They said the subcommittee's report shows the need to overhaul the U.S. tax code and ease rules that put American businesses at a global disadvantage. The report says that from 2009 to 2011, Microsoft used an offshore subsidiary to shift nearly $21 billion in revenue offshore. Investigators said that saved the company as much as $4.5 billion in taxes on goods sold in the U.S. Under current U.S. tax law, corporate profits attributed to offshore subsidiaries generally avoid U.S. tax until the money is brought home. Many U.S.-based companies shift income-producing assets, such as patents or marketing rights, to offshore subsidiaries in part to minimize taxes. The Senate report suggests that some companies also find ways to avoid U.S. corporate taxes when they bring money home. It says that in recent years, H-P effectively repatriated up to $9 billion annually in offshore profits through loans from overseas subsidiaries, and avoided U.S. corporate tax. Under current rules, U.S. firms must pay tax on overseas profits at the time they bring them home, but an exception exists for certain loans from subsidiaries. The subcommittee report says H-P's pattern of frequent loans from its offshore subsidiaries runs "contrary to the intent of U.S. tax policy." Microsoft and Hewlett-Packard defended their practices. "In conducting our business at home and abroad, we abide by U.S. and foreign tax laws,\" a Microsoft spokeswoman said. "Microsoft has a complex business, and we must comply with the complicated tax code of the United States, resulting in an exceedingly complex tax structure. That is why we've advocated for reforms to simplify the U.S. tax code and make it more competitive with the rest of the world." "H-P has complied fully with all applicable provisions of the U.S. Internal Revenue Code," a company spokesman said, adding that the Internal Revenue Service has never raised concerns about the programs. "We are disappointed to see what appears to be a politically motivated attack on one of America's largest employers." The subcommittee released internal H-P documents suggesting that officials viewed the loan program as a way of repatriating money from overseas, and were aware of possible tax concerns if the rules weren't followed carefully. In testimony before the subcommittee Thursday, IRS General Counsel William Wilkins acknowledged that enforcement of the tax laws is "challenging" when companies shift intangible propertysuch as ownership of patentsoffshore. Mr. Wilkins said the IRS had intensified its efforts to scrutinize these and other cross-border transactions. The International Technology Industry Council, which represents high-tech companies, said the continuing Senate probe demonstrates, among other things, the need to cut the U.S.'s relatively high corporate-tax rate of 35% and stop taxing the global profits of U.S.-based multinationals; most other countries tax only domestic profits. "The combination of the high rate, the global reach of the system, as well as significant, complex and costly compliance rules all serve to impede U.S. companies' ability to succeed globally, as well as their ability to invest their global success back in the U.S. economy," the group said in a letter to Sen. Levin. While the U.S. taxes its companies' overseas profits, it allows them to defer payments until the money comes home. That plus the high corporate tax rate, create incentives for multinationals to leave profits overseas. Critics say the system invites abuse, by encouraging companies to shift domestic earnings to places where income is lightly taxed and leave it there indefinitely. Awash In Record Profits, Corporations Shift Even More To Offshore Tax Havens By Travis Waldron on Mar 11, 2013 at 1:05 pm http://thinkprogress.org/economy/2013/03/11/1699101/corporateprofitstaxhavens/ Even as American corporations are raking in record profits, the largest among them are shifting larger amounts of money away from the United States and into offshore tax havens that allow them to pad their bottom lines even more, according to multiple analyses of legal filings made since the beginning of 2013. The Wall Street Journal found that the 60 largest companies moved $166 billion offshore in 2012, shielding 40 percent of their earnings from American taxes and costing the U.S. billions in lost revenue: The amount of money at stake is significant, particularly when the U.S. budget deficit is high on the political agenda. Just 19 of the 60 companies in the Journal's survey disclose the tax hit they could face if they brought the money back to their U.S. parent. Those companies say they might have to pay $98 billion in additional tax. A similar analysis from Bloomberg found that 83 of the largest American companies moved $183 billion overseas in 2012, bringing the total offshore to $1.46 trillion for those 83 companies alone. Most of the companies, like Apple, Microsoft, and Yahoo, have set up subsidiaries in low-tax countries like Bermuda, Ireland, and the Cayman Islands specifically to receive tax benefits. That has ramifications for states, which lost $42 billion in revenue to corporate tax dodging in the last three years alone, and taxpayers and small businesses, who often have to pick up the tab