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The article under discussion provides information about the Walgreen Company, which moves to another country in order to avoid paying taxes in the United States. For this goal, the company develops a special strategy that will help to be available on the United States market with its headquarters located abroad. This case is not a unique one; there are many companies, which have already used the same principle to avoid the high level of taxes. There are the companies, which are planning to do it similarly to Walgreen, as well.
This tendency is viewed from opposite points of view. On the one hand, these measures are necessary to take in order to save the company from the possible bankruptcy. On the other hand, if this tendency continues to grow, the United States market will be endangered to face the financial crisis. According to this fact, the goal of the work is to evaluate the reasons of this tendency on the example of Walgreen Company.
The Government Loss
According to the first point discussed in the article, the Walgreen plan seems to be unpatriotic and quite violating the U.S. legislation system. In fact, the company creates an illusion of moving to another place and establishes the main headquarter there. The tax rate of the chosen country is lower; hence, the company will save more money on the tax payment and as a result, increase its profit (McNay, 2014). From the juridical point of view, Walgreen does not break any laws and acts according to the U.S. laws and the laws of the country where the company wants to establish a main headquarter. However, one realizes that this move is an escape from the U.S. tax system; consequently, it is the legal type of fraud.
One more issue that can be related to the first point of article’s discussion is that the desire of Walgreen to move to another country is unpatriotic. The company will continue earning money in the United States, but the taxes will go the government of another country. According to this fact, this strategy will use the US economy to enrich the economy of another country. The United States will lose, while Switzerland or the United Kingdom will only prosper.
The second point presented in the article makes one look at this case from the Walgreen’s perspective. The welfare of the company depends on its profit and spending including taxes. If one of these aspects suffers, the company will not have a proper development that should lead to its financial growth. In this case, the biggest challenge for the company is the high tax rate. Therefore, it can be said that the company faces a problem, and any problem should be solved. The only possible solution that can be proposed by the company’s owner is to move the main headquarter to another country (McNay, 2014). In this way, Walgreen will receive a significant advantage that saves the company’s money in a legal way.
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Walgreen is a business, which cares about its own advantages and profit. Thus, the company’s decision to change headquarter corresponds, first of all, to the company’s needs and demands. Ignoring these principles may lead to the financial difficulties or even the company’s bankruptcy and collapse.
In my opinion, the situation described in this case demonstrates, first and foremost, the position of the U.S. government towards business in its country. The Walgreen’s strategy can be justified or, on the other hand, denied taking into consideration various details, facts, and consequences to the U.S. economy and overall prosperity of the company. However, one should look at the reason of this case; the background of this case lies in the U.S. legislation. The government creates conditions for the business, which makes its development difficult and challengeable. On the other hand, other countries may offer more attractive conditions of tax rate. Hence, the company has a dilemma and a necessity to make a choice that will satisfy its demands. Thus, in the current situation, the only beneficial decision can be the change of headquarters in order to save the company’s future.
Those who believe that this action is unpatriotic and damages the economy of the United States should take into account that the government should be also patriotic towards its businessmen. The enormous tax rate for the native businessmen is a wrong strategy because it demotivates people to run a business in the motherland. As a result, they start searching for better conditions abroad (McNay, 2014). It is clear that the government always takes the part of the earned money. This procedure is called assessed taxation. The taxes are needed to provide a government budget and cover the spending on the various demands. However, if one examines the case of Walgreen, it is evident that the U.S. government receives nothing in the end. However, if the tax rate was a little lower, the country could still have the part of the Walgreen’s profit.
It can be said that the Walgreen case is the result of the government and business inability to cooperate, which finally brings disadvantages for the both parts. The searching for the appropriate solutions should be the goal not only for the company but also for the government. In the introduced case, the only interested side in the solution of the dilemma was Walgreen, while the government did not try to provide any subsidies to prevent the company from moving to another country. In my opinion, Walgreen made a right decision, because it satisfies the demands of the company; otherwise, the company would operate at a loss.
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