Tax evasion is the avoidance of illegal taxes by individuals, corporations, and trusts. Tax evasion often causes taxpayers to deliberately misrepresent the true nature of their affairs to the tax authorities to reduce their tax liabilities and include dishonest tax reporting, such as declaring income, gains or benefits less than the amount actually earned, more reduction.
Tax evasion is an activity generally associated with the informal economy. One measure of tax avoidance ("tax gap") is the amount of unreported revenue, which is the difference between the amount of revenue that should be reported to the tax authority and the actual amount reported.
Instead, tax evasion is the legal use of tax laws to reduce a person's tax burden. Both tax evasion and avoidance can be seen as a form of tax non-compliance, as they describe various activities that intend to subvert the state tax system, although such tax avoidance classifications can not be denied, given that avoidance is lawful, in self-creation. system.
Video Tax evasion
Economy
In 1968, Nobel laureate economist Gary Becker was first theorized for economic crime, on the basis of which author M.G. Allingham and A. Sandmo produced, in 1972, an economic model of tax evasion. This model deals with income tax evasion, the main source of tax revenues in developed countries. According to the authors, the rate of income tax avoidance depends on the probability of detection and the extent of punishment provided by law.
The theoretical models of elegant literature in their attempts to identify variables tend to influence non-compliance. The alternative specifications, however, produce conflicting results regarding both the signs and the magnitude of variables believed to influence tax evasion. Empirical work is needed to resolve theoretical ambiguity. Income tax evasion seems to be positively influenced by tax rates, unemployment rate, income level and dissatisfaction with the government. The 1986 Tax Reform Act of 1986 appears to have reduced tax evasion in the United States.
In the 2017 study AlstadsÃÆ'Â|ter et al. concluded based on a random stratification audit and leaked data that the occurrence of tax evasion increased sharply as the amount of wealth increased and that the richest man was about 10 times more likely than the average person to engage in tax evasion.
Maps Tax evasion
Customs avoidance
Customs duties are an important source of income in developing countries. The importer intends to avoid import duties by (a) the invoice below and (b) misstatement of the quantity and description of the product. When there is an ad valorem import duty, the tax base can be reduced through underinvoicing. Incorrect quantity statements are more relevant for products with specific tasks. The description of the production was changed to conform to the Code H. S., which was commensurate with the lower tariff rates.
Smuggling
Smuggling is the import or export of foreign products by illegal means. Smuggling is done for total avoidance of import duties, as well as for smuggling imports. A smuggler should not pay any duties because the smuggled products are not distributed through customs-tax customs ports, and therefore are not subject to declaration and, by extension, to the payment of duties and taxes.
Value-Added Tax (VAT) and Sales Tax
During the second half of the 20th century, value added tax (VAT) emerged as a modern form of consumption tax worldwide, with the exception of the United States. Manufacturers who collect VAT from consumers can avoid taxes by reporting less sales. The US does not have a broad-based consumption tax at the federal level, and no country currently collects VAT; the majority of states even collect sales taxes. Canada uses VAT at the federal level (Goods and Services Tax) and sales tax at the provincial level; some provinces have a single tax that combines the two forms.
In addition, most jurisdictions that levy VAT or sales taxes also legally require residents to report and pay taxes on goods purchased in other jurisdictions. This means that consumers who buy something in jurisdictions with lower taxes or are not taxed in order to avoid VAT or sales taxes in their jurisdictions are technically illegal in most cases.
This is especially true in federal countries such as the US and Canada where sub-national jurisdictions impose varying VAT rates or sales taxes.
In liberal democracies, a fundamental problem with avoidance of local sales tax evasion is that liberal democracy, by its very nature, has little (if any) border control between their internal jurisdictions. Therefore, it is generally not cost-effective to enforce tax collection on low-value items carried in private vehicles from one jurisdiction to another at different tax rates. However, subnational governments will usually seek to collect sales taxes for high-value items such as cars.
Dennis Kozlowski is a very prominent figure because of his alleged sales tax evasion. What began as an investigation into Kozlowski's failure to declare the purchase of art for the purpose of avoiding the New York state sales tax ultimately led to Kozlowski's conviction and detention for more serious allegations related to misuse of funds during his tenure as CEO of Tyco International.
Government response
The degree of circumvention depends on a number of factors, including the amount of money a person or a company owns. Attempts to avoid decreasing income tax when the amount involved is lower. Avoidance rates also depend on the efficiency of tax administration. Corruption by tax officials makes it difficult to control embezzlement. Tax administration uses various means to reduce embezzlement and increase enforcement rates: for example, privatization of tax enforcement or tax farming.
In 2011 HMRC, the UK tax collection agency, stated that they will continue to crack down on tax evasion, aiming to raise Ã, Â £ 18 billion in earnings before 2015. In 2010, HMRC initiated a voluntary amnesty program targeting the professional middle class and collecting Ã, Â £ 500 million.
Corruption by tax officer
Corrupt tax officials work closely with taxpayers who intend to avoid taxes. When they detect an evasion instance, they refrain from reporting it in return for a bribe. Corruption by tax officials is a serious problem for tax administration in many less developed countries.
Avoidance rate and penalty
Tax evasion is a crime in almost all developed countries, and the guilty party is responsible for fines and/or imprisonment. In Switzerland, many actions that would lead to criminal tax evasion in other countries are treated as a civil matter. Incorrect income in tax reporting is not always considered a crime. Such matters are handled in the Swiss tax court, not a criminal court.
In Switzerland, however, some tax errors (such as forgery of deliberate records) are criminal. In addition, a civil tax violation may result in punishment. It is often assumed that the rate of avoidance depends on the severity of the penalty for evasion.
Privatization of tax enforcement
Professor Christopher Hood first suggested the privatization of tax enforcement to control tax evasion more efficiently than government departments, and some governments have adopted this approach. In Bangladesh, customs administration was partially privatized in 1991.
Abuse by private tax collectors (see tax farming below) sometimes leads to a revolutionary overthrow of governments that have outsourced tax administration.
Agriculture tax
Agricultural taxes are a means of collecting historical income. The Government receives payments at once from private entities, which then collect and retain income and bear the risk of embezzlement by taxpayers. It has been argued that tax farming can reduce tax evasion in less developed countries.
This system may be misused by a profitable "tax farmer" if they are not subject to political obstacles. Harassment by tax farmers (along with the tax system that excludes the aristocracy) is the main reason for the French Revolution which overthrew Louis XVI.
PSI agency
Pre-shipment inspection bodies such as SociÃÆ'Â © gÃÆ' © © rale De Surveillance S. A. and its subsidiaries, Cotecna, are in business to prevent the avoidance of import duties through invoices and mis-registration.
However, PSI agents have worked with importers to avoid import duties. Bangladeshi authorities found Cotecna guilty of being involved with importers due to large-scale customs evasion. In August 2005, Bangladesh has hired four PSI companies - Cotecna Inspection SA, SGS (Bangladesh) Limited, BIVAC Verification Bureau (Bangladesh) Limited and INtertek Testing Limited - for three years to ensure the price, quality and quantity of imported goods. In March 2008, Bangladesh's National Revenue Board canceled the Cotecna certificate for serious irregularities, while importers' complaints about three other PSI companies increased. Bangladesh plans to have the customs department train its officials in "WTO assessment, trade policy, ASYCUDA system, risk management" to take over the inspection.
Cotecna was also found to have bribed Pakistan's prime minister Benazir Bhutto to secure PSI contracts by Pakistani importers. She and her husband were sentenced in Pakistan and Switzerland.
By country
Greek
A paper by economist Annette AlstadsÃÆ'Â|ter, Niels Johannesen and Gabriel Zucman, using data from HSBC Swiss ("Swiss leak") and Mossack Fonseca ("Panama Papers"), found that "on average about 3% of personal taxes are avoided in Scandinavia, but this figure rose to about 30% above 0.01% of the wealth distribution... Taking tax avoidance into account increased the apparent rise in inequality seen in tax data since the 1970s, highlighting the need to move beyond data taxes to capture income and wealth above, even in countries where tax compliance is generally high.We also found that after reducing tax evasion - by using tax amnesties - tax evaders do not legally evade taxes more.This result indicates that the tax fighting avoidance can be an effective way to collect more tax revenue from ultra-rich people. "
United Kingdom
HMRC, the UK tax collection agency, estimates that in the 2014-15 tax year, pure tax evasion (excluding things like hidden economics or criminal activity) cost the government £ 5.2 billion. This compares to the wider tax differences (the difference between the amount of taxes that should be, theoretically, collected by HMRC, against what was actually collected) of £ 36 billion in the same year, the amount representing 6.5% of the liabilities. At the same time, tax evasion is estimated at £ 2.2 billion (this does not include international tax arrangements that can not be challenged under British law, including some forms of basic erosion and profit shifts (BEPS)).
In 2013, the Coalition government announced a crackdown on economic crime. This creates a new criminal offense to help avoid tax evasion and remove the requirement for tax investigation authorities to prove "intention to avoid tax" to prosecute offenders.
In 2015, Chancellor George Osborne pledged to raise Ã, Â £ 5 billion by "fighting" the tax evaders by announcing new powers to HMRC to target people with overseas bank accounts. The number of people prosecuted for tax evasion doubled in 2014/15 from a year earlier to 1,258.
United States
In the United States, Federal tax evasion is defined as an illegal attempt aimed at avoiding the assessment or payment of taxes imposed by federal law. Tax fraud beliefs may result in fines and imprisonment.
The Internal Revenue Service (IRS) has identified small businesses and sole proprietors as the largest contributor to the tax gap between what Americans pay in federal taxes and what the federal government receives. Small businesses and sole proprietorships contribute to the tax gap because there are several ways for governments to know about skimming or non-reporting income without advancing a significant investigation.
In 2007, the most common means of tax evasion was the overstatement of charitable contributions, especially church donations.
Estimated loss of government revenue
The IRS estimates that the 2001 tax loophole is $ 345 billion and for 2006 is $ 450 billion. A study of the 2008 tax discrepancy found a range of $ 450- $ 500 billion, and unreported revenues to about $ 2 trillion, concluded 18-9 percent of total reported income was not reported correctly to the IRS.
See also
References
External links
- Tax Evasion and Fraud collects news and comments on The Economist
- "Tax Evasion collects news and comments". The New York Times .
- General Employment Income Tax Scheme in IRS
- United States
- Released US Justice Department statement to Jeffrey Chernick, UBS tax evader
- US Justice Tax Division and enforcement efforts
Source of the article : Wikipedia
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