Tax Evasion and Avoidance
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 TaxesDirect TaxesIncome TaxCapital Gain TaxCorporate Tax
Indirect TaxesSales TaxCustom Duty and OctroiExcise Duty
Meaning of Tax EvasionTax Evasion is not paying the taxes when they are actually due which is absolutely illegal.
Some ways of Tax EvasionFailing to pay the dueSmugglingInaccurate Financial statementBriberyStoring wealth outside the country
Tax AvoidanceTax avoidance is basically finding the loophole that exempts you from paying taxes and it is not strictly illegal.
Methods of Tax AvoidanceDeduction available in case of minor childThere is no tax on long term gainsAdult Children are big tax saversTax is not implied in case of parentsShow 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 transactionsManipulation of sales/ receiptsUnder reporting of productionManipulation of Expenses Manipulation of Capital
Economic Consequences of Tax Evasion
Ill-Effects of Tax Evasion
Measures to Combat Tax EvasionReduction of Tax rates by the GovernmentSimplified Tax Laws and ProceduresWell Organised and Autonomous Administration StructureIncreased Awareness among the taxpayersCorruption free officials and taxpayersStronger penalties for non complianceSense of responsibilities among the tax payersUse of media
Legal Issues Of Tax evasion
Legal ExamplesWalter AndersonCadbury India Limited caseVodafone 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, 2012SlabNumber in LakhsPercentage of tax payers0-5 lakh288.489%5-10 lakh17.885.50%10-20 lakh13.784.30%More than 20 lakh4.061.30%
ConclusionTax 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.
ConclusionHaving 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.
