Introduction The Imperial Ritz Hotel is faced with Tax evasion, a criminal offense. Tax evasion is the criminal act of using illegal means to avoid paying taxes. Tax evasion schemes are plentiful, but all involve the misrepresentation of an individual’s or business’ income and/or assets when reporting to the Internal Revenue Service, in order to reduce the amount of taxes they owe. Tax evasion activities include: Under-reporting income Inflating deductions or expenses Hiding money Hiding interest in offshore accounts The terms "tax avoidance" and "tax evasion" are often used interchangeably, but they are very different concepts. Basically, tax avoidance is legal, while tax evasion is not. Tax avoidance is the legitimate minimizing of taxes, using methods approved by the IRS.
Historical Background Imperial Ritz Hotel is doing well in United States in their first five years. They are earning well having qualified domestic professionals running the company. The problem arouse at the end of the fifth year by the time a new CEO is about to take over. The company is accused of Tax Evasion. The reason, cause and purpose of Tax evasion committed was not revealed. Maybe the retiring official is the culprit who wants to bag a lot of money before he leaves the company or maybe not. Nobody really knows but one thing is for sure Tax Evasion cannot be accomplished by one person only. It involves at least the Treasurer, Accountant and probably the Accounting Department personnel.
Point of View: Board of Director of Imperial Ritz Hotel
Statement of the Problem: The damaged image of the company due to multiple criminal acts specifically Tax Evasion committed by Imperial Ritz Hotel.
Objective To regain the company’s status, rebuild costumers’ trust and employee morale to make the company profitable again.
Areas of Consideration Financial Position -Profitability of the company that drastically dropped Company Image -Damaged image of the company which directly affected the costumers trust Human Resources -Employee morale and tenure Law Compliance -The company failed to abide and comply with Law These areas need to be given focus on making Alternative Courses of Action or solution to the problem to achieve our objective.
Alternative Courses of Action: 1. Pay off the tax liabilities and continue the operation 2. Pay off the tax liabilities and change the company’s Trade name and Trade mark. Redesign the Hotel from outside to inside appearance and fire the involved officers in the criminal acts. 3. Pay off the tax liabilities and temporarily close the branch and resume after 12-15 years. 4. Sell the branch.
ACAS 1 Advantages: BIR will not chase the company anymore. Company image is being cleaned from criminal issues.
Disadvantages: Employees morale is not regained Some people are still hesitant to patronize the hotel because of past records Profitability is not assured to increase.
ACAS 2 Advantages: BIR will not chase the company anymore.
Creates a new company image. The public will not think that they are patronizing the same company who had a bad reputation before. Employees will be more confident to work under new management and officers. Profitability is probable as long as the company offers services with quality. Disadvantages: Company will need to start afresh. Company needs to extensively advertise under the new trade name and trade mark to appeal to the public which entails cost. Company needs to hire new qualified professionals to fill in the position of the fired officers. Company will spend additional fees for registration of new Trade mark and Trade Name. It may take some time to gain a lot of customers
ACAS 3 Advantages:
BIR will not chase the company anymore. Company image is being cleaned from criminal issues. People will forget the bad reputation due to lapse of time No additional cost expended for redesigning the entirety of the branch
Disadvantages: Employees will lose their jobs Will still incur cost in shutting down the business temporarily Cost of maintenance will be incurred to maintain the building facilities for future use No profits earned during the hiatus years
ACAS 4 Advantages: No need to pay the tax liability because the new owner will shoulder the burden No more headaches
Disadvantages: Employees will lose their jobs
Difficult to find a buyer since he/she has to pay for the taxes aside from the price of the branch itself Shareholders will suffer loss
Decision ACAS 2 In the point of view of the BOR who are also shareholders of the company, the branch should not be sold because they will suffer loss. They will not be able to recover their investment. The new CEO should not give up the branch. He is a new CEO and he should come up with a good solution to impress the Board of Directors and owners. The company needs to renew their trade mark, trade name and almost everything to erase the old bad reputation. As the company offers quality they will surely build and gain a new Good image and status: ☑Company Image The company need to fire the officers who are involved in the Tax evasion crime and hire new qualified ones so that employees will be encouraged to work hard again because of the new officers which improves employees morale: ☑ Employee Morale Having a new Trade Mark and Trade Name marks a new beginning for the branch. In the beginning, it will be costly due to payment of tax liability, cost to register new Trade Mark and Trade Name, cost to advertise, cost to redesign, remodel services and cost to train new officers but it will all be recovered if the company will offer quality services and strive for effectiveness and efficiency. They will gain more customers. It will start to profit from the operation: ☑Financial Position
After paying the tax liability, the company cleared its name in the list of the BIR. With this unforgettable experience, the company should learn from it and never neglect the law. ☑ Law Compliance Now that all the areas of consideration are being satisfied, Plan of Action should be developed.
ACTION PLAN Objective
To regain the company’s status, rebuild costumers’ trust and employee morale to make the company profitable again.
Project Activities
Persons Resources Responsible of Needed Implementatio n
Pay BIR for taxes and penalties of Tax Evasion
Money
Fire involved officers Hire new competent and reputed officers Train officers
Human Capital Management Machines
new
Create and Register new trade mark and trade name Advertise extensively
Materials
Budget
Date of Implementation
Expenses to pay the tax and penalties + expenses to fire and hire new officers + expenses to train new officers +expenses to advertise + expenses to modifications of operations+ expenses for trade mark and name registration = Total Cost
After the Inauguration of the new CEO
CASE STUDY ANALYSIS
Prepared by: Roshel P. Guadalquiver Class: MWF 6:00 -7:00 PM
