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TAX EVASION AND AVOIDANCEPrepared by:Sarrah Kaviwala C-40Shivani Patil C-33Vedant Sharma C-17Himani Singh C-27Devesh Pandey C-46Disha Mahawar D-20
WHAT IS TAX?A tax is a Financial charge or other levy imposed upon a tax payer by a state to fund various public expenditure.In other words a fee charged by a government on a product, income or activity.If tax is levied directly on personal income then it is Direct Tax.If tax is levied on price of goods and services then it is called indirect tax.
TYPES OF TAXES Direct Taxes1. Income Tax2. Capital Gain Tax3. Corporate Tax
Indirect Taxes1. Sales Tax2. Custom Duty and
Octroi3. Excise Duty
MEANING OF TAX EVASION Tax Evasion is not
paying the taxes when they are actually due which is absolutely illegal.
SOME WAYS OF TAX EVASIONI. Failing to pay the dueII. SmugglingIII. Inaccurate Financial statementIV. BriberyV. Storing wealth outside the country
TAX AVOIDANCE Tax avoidance is
basically finding the loophole that exempts you from paying taxes and it is not strictly illegal.
METHODS OF TAX AVOIDANCE Deduction available in case of minor child There is no tax on long term gains Adult Children are big tax savers Tax is not implied in case of parents Show the monetary transaction as loan
DIFFERENCE BETWEEN TAX EVASION AND TAX AVOIDANCE
MAIN CAUSES OF TAX EVASION IN INDIALow level of Voluntary Tax Compliance
Weak Enforcement of Tax Laws
MANIPULATION OF ACCOUNTS FOR TAX EVASION Out of book transactions Manipulation of sales/ receipts Under reporting of production Manipulation of Expenses Manipulation of Capital
ECONOMIC CONSEQUENCES OF TAX EVASION
ILL-EFFECTS OF TAX EVASION
MEASURES TO COMBAT TAX EVASIONA. Reduction of Tax rates by the GovernmentB. Simplified Tax Laws and ProceduresC. Well Organised and Autonomous
Administration StructureD. Increased Awareness among the taxpayersE. Corruption free officials and taxpayersF. Stronger penalties for non complianceG. Sense of responsibilities among the tax
payersH. Use of media
LEGAL ISSUES OF TAX EVASION
LEGAL EXAMPLES
Walter Anderson Cadbury India Limited case
Vodafone tax Scandal
ADMINISTRATIVE ISSUES
. To design appropriate system
Equity based tax system
Provisions
Simplifications of tax procedure
E - Filing system
SOURCE: REPORT RELEASED BY MINISTRY OF FINANCE, APRIL, 2012
Slab Number in LakhsPercentage of tax payers
0-5 lakh 288.4 89%
5-10 lakh 17.88 5.50%10-20 lakh 13.78 4.30%More than 20 lakh 4.06 1.30%
CONCLUSION Tax Avoidance and Tax Evasion both are meant to
reduce the tax liability ultimately, but what makes the difference is that the former is justified in the eyes of law as it does not make any offence or breaks any law.
However it is biased as the honest tax payers are not fools, but they can also make arrangements for postponing unnecessary tax.
If we talk about the latter, it is completely unjustified because it is a fraudulent activity, because it involves the acts which are forbidden by law and hence it is punishable.
CONCLUSION Having been aware of the ill effects of tax evasion,
it becomes each one of our responsibility to support the government by complying with the tax procedures and pay taxes promptly.
As it is rightly said that every drop of water makes an ocean, it can also be said that our small contribution makes a huge difference in the growth of the economy. Instead of expecting for change to happen, let us be the change agents who can bring in a drastic development by just fulfilling our responsibilities promptly.
If each one of us speaks the same language, then there will be least or no scope for us to be exploited by any institution or authority. So let us fulfil our duties first and claim our rights next.
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