Good Example Of The Italian Tax Mores Case Study

History, Circumstances, Ethical Issues

“The Italian Tax Mores” case, prepared by Arthur R. Kelly highlights an ethical issue specific to the modern corporate world. The case is based on a real life occurrence, which indicates that the moral absolutes are surpassed by the legal morality, which results in a moral contradiction. Therefore, an American leading bank that opened a subsidiary in Italy was faced with a moral issue when it was forced to apply the “Italian style” for declaring its tax return, which implied lying about the actual tax return by downsizing it with 30 – 70% of its real value (Kelly 54). Although he sustained and applied the “American style” tax return model because he considered the Italian procedure as deceitful, the general manager of the bank was pressured into approaching the “Italian style”, which meant the violation of the moral absolute.

Absolutes

Lying is the opposite of truth – telling and when individuals engage in the act of lying they are consciously and intentionally violating the truth, a moral absolute. While many moral schools indicate that lying is a violation of human morality and ethics and that truth should be a purpose in itself (Kant’s deontology), others suggest that an untruth should not be prohibited if lying has a purpose from which many benefit (Mill’s utilitarianism) (Macintyre 310).
The examined case study reflects a socially accepted case of lying, because it indicates that understating the tax return is a common procedure in Italy, hence, lying about corporate profits and revenues is accepted as a normal organizational behavior (Kelly 54). At this point, lying should be perceived from a cultural perspective, because the examined case also emphasizes a cultural difference between the “Italian style” versus the “American style” of declaring the tax return (Kelly 55). Based on this case, the Italian culture allows lying as a national practice, in situations regarding tax return, while the American culture is against this practice and committed to telling the truth, as a deontological practice.
Another violation of the moral absolute that is presented in “Italian Tax Mores” is the theft. The act of theft refers to the appropriation of items that belong to another person, without the permission of that person (Student Legal Services of Edmonton 2). Nevertheless, the appropriation of another person or organization’s belongings is not a theft if the author of the action is not aware that the belongings are someone else’s property (Student Legal Services of Edmonton 2).
Italian firms or any organization that engages in business activities in Italy is stealing, according to the examined case. By understating their profits, organizations from Italy are intentionally stealing from the country’s government. Knowing that the taxation of the real profits would be higher if declared as such, organizations are aware that they steal from the government if they understate their profits. According to the Italian regulations the tax return money belong to Italian population, as these money are used to better the living conditions of Italians (Kelly 55). Hence, by declaring lower profits than the ones actually realized, the firms in Italy are stealing the government and implicitly the country.
However, an ethical dilemma appears in this case, as the Italian authority, namely the revenue service, is aware of this procedure. Not only is this entity allowing the understatement of the profits, but it also encourages it, by proposing friendly meetings for “negotiating” the “amount of corporate income tax which it believes is due” (Kelly 54). In this case, theft represents a common activity, because companies and the Italian government that allows it are responsible for depriving the citizens of benefiting of improved living conditions.
The moral absolute holds that stealing, just as lying, are always wrong. Nevertheless, in this case they are accepted as means of doing business in Italy. Even more, if somebody tries to act according to the moral absolute and retrain from lying or committing theft, by declaring the actual profits, that person will suffer the consequences of acting against the locally entrenched procedures. This is what the general manager of the American bank from the analyzed case realized, after being overcharged by the Italian revenue service and in the end forced to apply the “Italian style” in taxation (Kelly 56).

Legal

While the acts of lying and committing theft are always wrong from the moral absolute perspective, from a legal perspective the situation is blurred. As mentioned earlier, the culture is an important element in defining what is moral and what is not, and it is also significant for establishing what is legal and what is not. In the American culture, the taxation system applied in Italy is considered illegal, as the examined case implies. For the general manger of the American bank in Italy, understating the profits of the bank seemed like a deceiving act, contradicting the moral practice of United State regulations (Kelly 55). On the other hand, for the Italian legislation, the practice of lying about the real value of the profits and stealing money that do not belong to the company acting this way was not illegal. Nevertheless, it was not illegal either to declare the actual amount of profits, as the general manager of the U.S. bank did, but the practice was discouraged.

Moral Philosophies

According to theological moral philosophy, there is a divine will that indicates what is right and what is wrong (Pomerleau 472). Aligned with this moral philosophy, the outcomes of the examined case present a corrupt society, wherein bribery, officially called “bustarella” is a common practice (Kelly 55). Moreover, any attempt of acting against this corrupt system is suffocated and punished, as it happened with the general manager of the American bank in Italy. These outcomes are bad for the citizens of Italy and for the corporations outside Italy, but they are good for the local government and firms, who can benefit from the negotiation of the profit statement.
The utilitarian moral philosophy states that an action is justified as long as it generates the greatest happiness for the greatest amount of beneficiaries (Mill 17). This theory defends injustice and the violation of the moral absolutes through lying or stealing, if the many benefits from such acts. Nevertheless, the outcomes are not good for the most people, because Italian citizens are deprived of their benefits. On the other hand, the outcomes are good from a business perspective, as the companies doing business in Italy benefit of a flexible taxation procedure.
In deontological moral philosophy, actions are guided by duty and duty incorporates rights, such as life and property or freedom, which influences individuals to either act according to their duty or violate the moral absolutes that compose their duty (Pomerleau 256). According to deontological moral, telling the truth and not committing theft are imperative to one’s duty. The Kantian deontological moral is insensitive to consequences and the imperatives should be followed for their own ends (Freeman 391). In this sense, for the deontological moral lying and committing theft are wrong because they violate human duty, not because of their consequences.
The reasonable man moral philosophy implies that a man with reason is able to discern how to act in a given situation in order to comply with morality. Unlike rationality, which indicates what is logically right to do, reasonability informs what is justified to others to do (Pomerleau 192). In the analyzed case, it would be justified to act according with the “Italian style” taxation, because every other company activating there was doing the same.

Conclusion

Although the moral absolute informs that lying and committing theft are wrong, the legal perspective is not always consistent with the moral absolute and neither are various moral philosophies. Except the theological and the deontological moral philosophies that strictly qualify lying and stealing as wrong actions, the utilitarian, egoistic, PR and reasonable man moral philosophies are sensitive to consequences and accept lying and stealing when the consequences are positive for the individual of for more people. Therefore, although lying and committing theft are moral absolutes that should never be acted upon, in some cases the legal system and moral philosophies encourage such acts for the right outcomes. The general manager of the U.S. bank should have applied the Italian style taxation in order to adjust to the legal system in Italy, but also to moral philosophical approaches such as utilitarianism (organizational outcomes), egoistic, PR or reasonable man.

Works Cited

Freeman, Samuel. Deontology. Deontology. Routledge. pp 391 – 396. 1985. Print.
Kelly, Arthur, L. “Case Study Italian Tax Mores”. Course Material. Print.
Macintyre, Alasdair. Truthfulness, Lies, and Moral Philosophers: Can We Learn from Mill and Kant? Princeton: Princeton University. 1994. Print.
Mill, John Stuart. Utilitarianism. London: Parker, Son, and Bourn, West Strand. 1863. Print.
Pomerleau, Wayne. Twelve great Philosophers: A Historical Introduction to Human Nature. New York: Ardsley House, Publishers, Inc. 1997. Print.