Tax evasion
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Tax avoidance is an illegal practice opposing a tax law. Its is defined as a crime and as a result it is punishable in accordance with the law of the given country. Tax avoidance can be described as lying on tax returns, giving false evidences, and concealing tax information or addresses.
Forms
- taxpayers' failure to report to a supervisory body on their presence or activity,
- concealing sources of income subjected to taxation,
- concealing all income subject to tax, claiming deductions for non-existing expenses, lying that there were higher than actual, or claiming deductions one is not entitled to,
- claiming allowances for non-existing children or deducting amortisation for non-existing machines or equipment,
- not paying income tax deducted from employees' wages.
Causes
- decrease of the tax receipt, which can result in the increase of taxes and therefore in an additional tax on the honest taxpayers,
- economic distortion * taxpayers by not paying their taxes can increase their economic position contrary to those taxpayers who conduct their business lawfully,
- distorting the harmonious taxation * tax structure deviates from the plan of taxation when some taxpayers pay their taxes while others fail to pay theirs,
- demoralising influence on other taxpayers.
Reasons
- moral * tax payers view country as an oppressor who enforces duties of the citizens,
- economic * taxpayers decide whether the benefits from the tax fraud will outweigh possible punishment for the tax avoidance,
- political * tax avoidance is viewed as one of the ways of opposing state powers.
References
- Shackelford, D. A. (2001). Taxes and Business Strategy: A Planning Approach. Journal of the American Taxation Association, 23(2), 80-80.
Author: Andrzej Kowal
