Tax Evasion - Case-Study-Output

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 individuals 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 companys 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 companys 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:

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:

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 Project Persons Resources Budget Date of

Activities Responsible of Needed Implementa-
Implementation tion
Pay BIR for
taxes and
To regain the penalties of Money Expenses to After the
Tax Evasion Inauguration
companys pay the tax
status, and penalties of the new
Fire involved + expenses to CEO
rebuild
officers
costumers Human fire and hire
trust and Capital new officers
Hire new
employee competent and + expenses to
morale to reputed train new
Management officers
make the officers
company Machines +expenses to
profitable Train new advertise +
again. officers expenses to
modifications
Create and Materials of
Register new operations+
trade mark expenses for
and trade trade mark
name and name
registration =
Advertise
Total Cost
extensively
CASE STUDY ANALYSIS
Prepared by:
Roshel P. Guadalquiver
Class: MWF 6:00 -7:00 PM
Submitted to:
Dr. Mary Jane Benlot-Galera

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Introduction

Board of Director of Imperial Ritz Hotel

Statement of the Problem:

To regain the companys status, rebuild costumers trust and employee

These areas need to be given focus on making Alternative Courses of Action

Alternative Courses of Action:

1. Pay off the tax liabilities and continue the operation

BIR will not chase the company anymore.

Employees morale is not regained

BIR will not chase the company anymore.

Company will need to start afresh.

BIR will not chase the company anymore.

Employees will lose their jobs

Employees will lose their jobs

Objective Project Persons Resources Budget Date of

Class: MWF 6:00 -7:00 PM

Dr. Mary Jane Benlot-Galera

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