In November 2015, U.S.-based biopharmaceuticals company Pfizer [NYSE: PFE] and Ireland-based pharmaceutical company Allergan [NYSE: AGN] announced a $160 billion merger to move Pfizer's domicile out of the United States to Ireland in the largest inversion deal ever. The announcement came just days after the U.S. Treasury Department laid out a set of restrictions on tax inversions; however, the deal was structured to avoid those restrictions. According to the U.S. Department of the Treasury, "By undertaking an inversion transaction, companies move their tax residence overseas to avoid U.S. taxes without making significant changes in their business operations." Two primary benefits provided by inversions were: (1) the removal of a company's foreign operations and income from the U.S. taxing jurisdiction to achieve pure "territorial" tax treatment (in which income was taxed only in the country where it was earned); and (2) the reduction of U.S. taxes on income from U.S. operations through the use of various "earnings stripping strategies" (e.g., making payments of deductible interest or royalties from the U.S. entity to a new foreign parent). According to Reed College economist Kim Clausing, inversions and other income-shifting techniques reduced Treasury revenues by as much as $111 billion in 2012.

Etsy was an online craft bazaar founded in 2005 in a loft in Brooklyn, New York. The company was known for its emphasis on social responsibility, transparency, authenticity, and its somewhat nontraditional approach to business. In January 2015, Etsy converted its Irish subsidiary to an unlimited liability company, a move it described as implementation of an "updated global corporate structure." In a subsequent U.S. Securities and Exchange Commission (SEC) filing, it stated that this changed structure might "result in a reduction in our overall effective tax rate." In August 2015, the company came under fire for this move. Bloomberg ran an article headlined "Etsy Taps Secret Irish Tax Haven and Brags About Transparency at Home." Americans for Tax Fairness charged that Etsy had "changed its behavior and [was] now using unethical business practices." John Montgomery of Startworks declared, "Etsy sold its soul for a lower corporate tax rate." The Wall Street Journal summarized the reaction with the headline "Etsy Faces Pressure to Abandon Irish Tax Strategy." This case explores Etsy's initial decision, the critical public response to it, and Etsy' choice to ignore the fallout and stay the course.

An increasing number of global corporations have experienced negative publicity over complicated tax structures established to minimize their tax burdens. In the case of U.S. companies, there has been a growing outcry over "inversions," a means of restructuring the business so that the U.S. parent was replaced by a foreign parent entity in a nation with lower corporate tax rates. Apple CEO Tim Cook was called to testify regarding Apple's tax strategies by the U.S. Senate Permanent Subcommittee on Investigations in April 2013, and executives from Apple, Google, and Microsoft faced an Australian senate inquiry into their alleged tax avoidance in April 2015. Criticism of corporate tax planning-also called tax avoidance-was dubbed "tax shaming," and even prompted consumer boycotts. Some analysts have suggested that companies begin considering tax policy as an aspect of corporate social responsibility, rather than simply a fiscal decision. Even though many companies are affected by this "tax shaming," a 2014 Ernst & Young survey of 830 tax and finance executives in 25 jurisdictions revealed that most had "little appetite" for directly engaging the media, with 65 percent agreeing (or strongly agreeing) that "engaging with the press on tax issues is a no-win proposition for business" and only 13 percent disagreeing. Results of the study notwithstanding, some companies did indeed respond to public pressure regarding their tax planning; this case describes some of these responses.