The Tax Evasion Problem
With regards to the ever-promising content season of the Tax Club OAU, the subject matter of the writer’s essay shall exclusively be centred on criminal tax challenges. It is widely known throughout the world that the most baleful tax crime is Tax Evasion. A Judge in the United States of America Billings Learned Hand once said “who doesn’t want to avoid taxes? He further summed up the American tax situation, saying, “anyone may arrange his affairs so that his taxes shall be as low as possible… for nobody owes any public duty to pay more than the law demands. However, this begs the quick discrepancy between Tax Evasion and Tax Avoidance.
TAX EVASION AND TAX AVOIDANCE
In sequel to the above, avoiding taxes is one thing, but income tax evasion is another. Tax evasion occurs when a person or business uses illegal means to escape paying taxes, whereas tax avoidance is the practice of using legal means in order to lower the amount of taxes owed. A private enterprise operating perhaps from one or two individuals in a small location does not have some allowances and exemptions that may be applied to taxes during the year, but income must be reported to ensure all legal channels have been properly handled. It is when income is channelled to other areas that an investigation may occur through Internal Revenue Service. Tax evasion is one of the highest degree crimes perpetrated by individuals and numerous owners of businesses. These crimes are so conventional that various large corporations and silk stocking business moguls carry out these breaches of the law all around the world. Thus tax evasion occurs when a person or company prevents income to be taxed by the Internal Revenue Service even when they know additional taxes should be going to the government.
In addition, Tax evasion and avoidance remains the greatest problems plaguing tax administration in Nigeria. Apart from salaried employees, most citizens in Nigeria pay inadequate taxes or no taxes at all and this has led to substantial loss of government revenue. The reasons for such behaviour could be attributed to several factors such as the insufficiencies and complexities of tax legislation coupled with tax payers taking advantage of loopholes in the tax law, high rates of taxation and a lack of sense of civic responsibility amongst the tax payers. Tax evasion and avoidance have been a menace which seem to have defied solution that had bedevilled the Nigerian tax system right from colonial times. Interestingly while some have solely put the blame on the tax authorities for not living up to expectation with regards to tax administration, on the other hand, others attribute it to the unpatriotic attitude of the tax payers.
This disturbing aversion has some historical antecedents. From time immemorial, there has always been an inimical response to the payment of tax by the people who viewed the tax collectors as a nuisance to the society. And the few that paid tax, did so with ample reluctance. Even as it was recorded in the bible, instances abound where the Jews treated the tax collectors with disdain and contempt. However, this negative attitude continues in modern times and with tax payers perfecting various methods of frustrating the tax authorities. To say the least, the negative attitude to taxation is unpatriotic in view of the well-recognised role which taxation plays in the economy. In fact, it is undeniable today that every government depends to a large extent on taxation not only for its socio-economic development but also as a means of ameliorating the existing inequalities of wealth in the society.
Furthermore, federal prosecutors have accused the “blade” star of many offences. Snipes allegedly hit income in offshore accounts and did not file federal income tax returns for several years. The actor’s federal tax debt is estimated to be in the range of $12 million. In 2008 snipes was acquitted of felony tax fraud and conspiracy charges, but was found guilty of misdemeanour charges. Snipes was sentenced to three years in prison and was granted bail while he appealed his conviction. Also Anderson’s case is the largest tax evasion case in the history of the United States. This former telecommunications executive was accused of hiding his earnings through the use of aliases, offshore bank accounts and shell companies. However, in year 2006, Anderson entered a guilty plea in which he admitted to hiding approximately $365 million worth of income. He was sentenced to 9years in prison and restitution of $200 million.
From the foregoing, it is significant to note the three component to establish Tax crimes, the government must initially demonstrate three factors concerning the crimes issued or charged through the law enforcement or an investigation by the internal revenue service. These are essential for convicting a person of these crimes. The person paying taxes must owe a much greater amount from what was reported on his or her income tax return filed. This could be hundreds or thousands more than what was provided on the form. In addition, the same person must deliberately have provided incorrect information. He or she must have the knowledge and awareness that the numbers were not accurate when placed on the return form. Lastly, the tax payer must have intended purpose of avoiding or tax payment from income earned in the year. Even the attempt to do so is enough evidence to prosecute these individuals.
In conclusion, some persons go to the creative lengths to save money, but there is a clear line between creativity and breaking the law. Avoiding taxes is legal and understandable, but on the other hand tax evasion comes with tough and grave consequences. As we can see from the troubles numerous persons have encountered, what you may save now will not be what you have to pay later. The government should embark upon adequate utilization of tax revenues on public goods to discourage tax evasion. We are all ambassadors for propagation of tax doctrine.
Do the Tax, Pay your Tax!
Faculty of Law