1. Tax avoidance. The private bank mentioned in the previous exercise has a number of European clients

for whom it provides substantial tax savings. By exploiting loopholes in complex tax laws, the bank

allows some of its wealthy clients to avoid the high tax rates prevalent in their home countries. In

some cases, clients pay only a small fraction of the tax they would otherwise owe. Yet these clients

achieved their success due, in part, to services provided by their home country. They benefited from

an excellent state-funded education and from a stable and productive economy that is highly subsidized

and regulated by the state. Is it ethical for the bank to provide this kind of advice?

Hint. First analyze the taxpayer’s obligation, and then address the bank’s dilemma. Keep in mind that

a private bank that fails to provide competitive tax advice is at a severe disadvantage for attracting clients.