Shakedown Case

790 Words Oct 20th, 2008 4 Pages
CASE STUDY: SHAKEDOWN
Statement of the Problem: What should Zhuk do to keep his business and to avoid extortion from government officials? Objectives:
To provide solutions on how companies in Ukraine can fight corruption and face threats of extortion.
To apply business ethics and corporate social responsibility
Alternative Courses of Action:
a) Pay – Extortion
Zhuk can pay off the Ukraine Tax Authority officials. After all, he would not be breaking the law if he did so. He will be a victim of extortion and succumbing to it is not a crime. He will consider the bribes as additional tax he has to pay for doing business in Ukraine and carry on with his company. He will be able to provide jobs for locals as his employees and keep
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Suggested Initiatives:
1) Improve regulation and inspection procedures. In order to increase confidence in the government’s regulatory role in the economy, efforts should be made to: simplify government regulations and inspections; systematize and unify the work of inspection agencies and the procedures for conducting inspections; publicize clear and understandable information on inspections and the rights and duties of inspection agencies, and make taxation bodies liable for unfounded verifications, or establish an agency that registers inspections and limits the number of inspections. Many businessmen believe this would discourage frequent inspections. 2) Unified business tax In order to keep businesses out of the shadow economy, urgent measures are needed to reduce the taxation pressure and replace at least a portion of multiple taxes with a unified business tax.
The high cost of doing business in Ukraine also relates to the key objective of inspection agencies which is to extract the maximum amount of money from a company. In order to cope with this problem, tax compliance should be simplified, and control by inspection agencies should be made transparent. 3) Improve enforcement of “conflict of interest” legislation. Legislation that disallows conflicts of interest is already in place. These laws prohibit officials

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