Module 9

ETHICAL PRINCIPLES IN BUSINESS

Special Topic: Taxation

Taxation
-​ It is the act of laying a tax, the process or means by which the sovereign, through
its lawmaking body, raises revenue to defray the necessary expenses of the
government.

❑ Theory and Basis of Taxation

-​ existence of the government is a necessity
-​ reciprocal duties of protection and support between the State and its inhabitants
❑ Lifeblood Theory
-​ taxes are the lifeblood of the government

❑ Purposes of Taxation
1. Primary
- raise revenue to support governmental needs
2. Secondary
- compensatory
- regulatory

❑ Basic Principles of a Sound Tax System

- Fiscal adequacy
- Administrative Feasibility
- Equality / Theoretical Justice

❑ Limitations of Taxation
1. Inherent limitations
2. Constitutional limitations

❑ Inherent Limitations of Taxation

1. Non-delegation of the power to tax
2. Exemption of the government from taxation
3. Public purpose
4. Territorial jurisdiction
5. International comity
❑ Constitutional Limitations of Taxation
1. Due process of law
2. Power of the President to veto any particular item or items in a revenue or tariff bill
3. Non-imprisonment for non-payment of poll tax
4. Congress may authorize the president to fix tariff rates, import and export quotas,
tonnage and wharfage dues and other duties or imposts
5. Rule of uniformity and equity in taxation
6. No appropriation for religious purposes
8. Non-impairment of the jurisdiction of the Supreme Court in tax cases
9. Concurrence by a majority of all members of the Congress for the passage of a law
granting tax exemptions

❑ Rule of uniformity and equity in taxation

- Tax Systems
1. Progressive Tax System
2. Regressive Tax System
3. Proportionate Tax System

❑ TRAIN LAW (R.A. No. 10963)

- Tax Reform for Acceleration and Inclusion
- signed into law on December 19, 2017
- implemented on January 1, 2018
- initial package of Comprehensive Tax Reform Program

❑ Objective of TRAIN LAW

- to correct a number of deficiencies in the tax system to make it simpler, fairer, and
more efficient
❑ Major changes in TRAIN LAW
- Personal Income Tax
- Transfer Taxes
- Business Taxes
- Excise Taxes
- New Taxes

❑ Personal Income Tax Tax Table before and after TRAIN:

❑ Personal Income Tax

- 90,000 exempt benefits
- Personal and additional exemptions for dependents
- Premium for health and hospitalization insurance
- 8% option for self-employed individuals and/or professionals

❑ Transfer Taxes
1. Estate Tax
- Tax Rate: from 5 – 32% to 6%
- Deductions: Standard Deduction & Family Home
2. Donors Tax
- Tax Rate: from 2 – 15% to 6%

❑ Business Taxes
1. Value Added Taxes
- VAT threshold: from P1,919,500 to P3,000,000
- VAT exempt transactions
2. Other Percentage Taxes
❑ Excise Taxes
- Cigarettes
- Manufactured oils and petroleum products
- Mineral products
- Automobiles

❑ New Taxes
- Sweetened beverages
- Non-essential services

MODULE 11
ETHICS AND THE EMPLOYEE

THE RATIONAL ORGANIZATION

Traditional model
Organization
– a structure of formal relationships which involved planned coordination of the activities
of a number of people for the achievement of some common, explicit purpose or goal,
through division of labor and function, and through a formal hierarchy of authority and
responsibility

Top Management
– the board of directors, the chief executive officer (CEO), and other company officers
such as the president, chief financial officer (CFO), chief technology officer (CTO), chief
human resources officer (CHRO), and various vice presidents
Middle Managers – those who direct the units below them and who are in turn directed
by those above them
Operating Layer – those employees and their immediate supervisors who directly
produce the goods and services that constitute the essential outputs of the organization

THE POWER OF CONTRACTS RECIPROCAL OBLIGATIONS

-​ To obey organizational superiors, loyally pursue the organization’s goals, and
avoid any activities that might threaten those goals
-​ To provide the employee with a just wage and just working conditions

THE EMPLOYEE’S OBLIGATION TO THE EMPLOYER

Law of Agency – legal duties of agents towards their principals Although the employee
can fail to live up to this duty and end up:
❑Conflict of Interest
❑Bribery and Extortion
❑Employee Theft
❑Theft of (Digitized) Information and Trade Secret/Proprietary Information

CONFLICT OF INTEREST
Based on Financial relationship ​ ​ ​ ​ OBJECTIVE
Based on Emotional ties or other kinds of relationship ​SUBJECTIVE
An employee has an interest that could influence what she does for her company if the
employee were performing a certain task for her company but he/she has not yet been
given that task to perform ​ ​ ​ ​ ​ ​ POTENTIAL
An employee has an interest that could influence what she does for her company if the
employee were performing a certain task for her company and he/she actually has been
given that task to perform ​ ​ ​ ​ ​ ​ ACTUAL
Exists when an employee has no actual conflict of interest, but other people looking at
the employee’s situation may come to believe (wrongly) that he or she has an actual
conflict of interest ​ ​ ​ ​ ​ ​ ​ APPARENT

BRIBERY
-​ A person voluntarily solicits or accepts any benefits in exchange for influencing
an official act so as to afford the giver better than fair treatment

EXTORTION
-​ A person obtains property from another using coercion (e.g. threats of future
physical injury, property damage, or exposure to criminal charges or public
humiliation) or an implicit or explicit threat to give the payer worse than fair
treatment

THEFT
-​ The act of taking or using property that belongs to another without the consent of
its rightful owner

THEFT OF (DIGITIZED) INFORMATION/ TRADE SECRETS

➢ The unauthorized examination, use, or copying of computer information or
programs ➢ Hacking – secretly getting access to a computer system to get
information, cause damage
➢ Trade secrets – consist of nonpublic information that would materially and
negatively affect the company if others/competitors will have access to these
THE EMPLOYER'S OBLIGATIONS TO THE EMPLOYEES
-​ The Fairness of Wages
-​ The Fairness of Working Conditions: Health and Safety

The Fairness of Wages

EMPLOYEE’S POV
-​ Wages are the principal (perhaps the only) means for satisfying the basic
economic needs of the worker and the worker’s family

EMPLOYER’S POV
Wages are the cost of production that must be kept low lest the product be priced
out of the market

The Fairness of Working Conditions: Health and Safety

1. Eliminating risks when cost is reasonable,
2. Studying potential risks of a job,
3. Informing workers of known risks,
4. Compensating workers for injuries
5. Avoidance of sweatshops

An Employer is Morally Responsible for Bad Working Conditions

1. When he/she knows about the conditions
2. When he/she can and should improve them
3. When he/she does not do anything from changing the condition

-​ Sees the organization as a system of competing power coalitions and formal and
informal lines of influence and communication that radiate from these coalitions
-​ Where is the POWER?

THE POLITICAL ORGANIZATION

GOVERNMENT CORPORATION
Similarities ​ ​ ​ ​ ​ ​ ​ Differences
CENTRALIZED DECISION-MAKING BODY ​ ​ CONSENT
LEGITIMACY OF POWER ​ ​ ​ ​ ​ LIMITS
OFFICIALS DISTRIBUTE BENEFITS AND BURDENS ​ MOBILITY
MONOPOLY OF POWER

EMPLOYEE’S RIGHTS

A. RIGHT TO PRIVACY
➢The right of an individual to determine what, to whom, and how much information
about themselves shall be disclosed to others
➢Become vulnerable with the development of recent technologies (i.e. electronic and
computerized)
➢This is justified because of our interest we have in the protective and enabling
functions of privacy
➢3 Elements of Privacy
1. Relevance
2. Consent
3. Method

B. Right to Freedom of Conscience

➢Whistleblowing
– is an attempt by a member or former member of an organization to disclose
wrongdoing in or by the organization including violations of the law, fraud, health or
safety violations, bribery, or a potential or actual injury to the public

➢ Can be Internal (reported only o the higher-ups within the organization) or External
(reported to outside individuals or bodies)

➢ Morally justified when:

1. the wrong is clear
2. the wrong is serious
3. other methods to prevent the wrong have failed
4. it will prevent the wrong
➢ Is a moral obligation when:
1. when the person has the moral duty to prevent the wrong or the only person who can
prevent the wrong
2. the wrong involves serious harm to the society
C. RIGHT TO PARTICIPATE IN DECISIONS THAT AFFECT THEM
➢ Participative and Democratic Management
➢ Douglas McGregor’s Theory Y Model
– managers assume that employees want and can develop the capacity to accept
responsibility and can be trusted to find the best means for achieving these goals on
their own
➢ Raymond Miles’ Human Resources Model
– to improve decision-making and performance efficiency, direct participation of
employees must be involved since these employees have creative and responsive
abilities
➢ Rensis Likert’s System 3: Consultative & System 4: Participative
– responsibility is spread widely through the organizational hierarchy. High level of
teamwork, communication, & participation

D. Right to Due Process

➢The right to a fair process of decision making when decision makers impose
sanctions on employees
➢ Employment at Will
– the doctrine that employers “may dismiss their employees at will … for good cause,
for no cause, or even for causes morally wrong, without being thereby guilty of legal
wrong”
➢In the Philippines, employers can ONLY terminate their relationship with their
employee if there is a just and authorized cause

E. Right to Work
➢UNUDHR: “Everyone has the right to work, to free choice of employment, to just and
favorable conditions of work and to protection against unemployment”
➢Moral right to earn a living by working
➢Instrumental value – means to survival
➢Intrinsic value – development of ourselves as human beings

F. Right to Organize/ Form Unions

➢The right of the workers to associate with one another to establish and run a union
➢Derives from the same right owners have to join together to form a company
➢Unions have the right to strike

ORGANIZATIONAL POLITICS
POLITICAL TACTICS
1. Blaming or Attacking others
2. Controlling Information
3. Developing a Base of Support for One’s Ideas
4. Image Building 5. Ingratiation
6. Associating with the Influential
7. Forming Power Coalitions and Developing Strong Allies
8. Creating Obligations

APPROACHES TO THE ETHICS OF POLITICAL TACTICS

Utilitarian:
Are the goals one intends to achieve by using the tactics socially beneficial or socially
harmful? Rights:
Do the tactics employed treat others in a way that is consistent with their moral rights?
Justice:
Will the tactics lead to an equitable distribution of benefits and burdens?
Caring:
What impact will the tactics have on the web of relationships within the organization

THE CARING ORGANIZATION

CARING MODEL OF THE ORGANIZATION
✓Caring is focused entirely on persons, not on “profit” or “quality”
✓Caring is undertaken as an end in itself, not as a means to productivity
✓Caring is essentially personal
✓Caring is growth enhancing for those who receive care

PROBLEMS
o Caring too much for others can lead to BURNOUT
o Due to fatigue, self-interest, or disinterest
o Bureaucracy
o Employees as DISPOSABLE
o Rewards that encourage COMPETITIVENESS that leads to Productivity