Tax Evasion

What is Tax Evasion
Tax Theft is the term we use for Tax Evasion. Tax evasion, as distinct from tax planning, is illegal and involves deliberately providing false information or omitting details that under law should be revealed.

Some has said that “evasion doesn’t discriminate”. People from all walks of life and all income levels evade tax. It is certainly not confined to the low income class, and, in fact, the wealthy with access to unscrupulous tax accountants are much more difficult to detect. Tax evasion is a no-no, as far as we’re concerned.

There are no exact figures published on the amount of tax the government misses out on each year through evasion. The figure of how many are cheating the Tax Office will probably never be known, but a fair estimate would probably be about $3 billion every year.

It cannot be challenged that the present high levels of taxation must be directly influenced by the even higher levels of evasion in this country. Evasion has been practised since the first rulers started to levy a head tax.

In ancient Greece, tax evasion was a capital offence. The French regard tax evasion as a citizen’s duty. But while in ancient times they evaded head tax by hiding their slaves under a bushel, today’s unscrupulous evaders are able to employ the top tax accountants to use every available device to pay less.

It is not surprising then, that the Tax Office has had to continually increase its tax inspecting staff to trace the missing money. Last year millions of $ was recovered in tax by inspectors and that was really just the tip of the iceberg.

In the USA they have the T-Men whose sole function is detecting tax cheats. Thanks to the silicon chip the Tax Office computers are now on the job and this promises more effective scrutiny.

But there is also the other group that regard all taxation as theft, and evasion as being smart rather than a crime. They are the ones that work on the principle of rendering unto Caesar only that which cannot be hidden from him.

In the end, the honest majority inevitably foot the bill.

Some evasion tactics taxpayers use
Evasion comes in many forms and it is far easier for the self-employed and big businesses to evade tax, than it is for the salary and wage earner.

Some common methods used have included:

  1. Retailers who “skim” money by taking cash from the till. This “suppresses sales” and accounts for an enormous amount of undeclared income

  2. Deliberately reducing the true Debtors (money owing to the business which forms assessable income)

  3. The acceptance of cash for goods or service. As this does not show in the back account, tracing is very difficult

  4. Under valuation of the stock figures. This reduces the current years profit, but is only tax deferral measure

  5. Charging expenses to the business which has not been legitimately incurred in producing the business income. For example Rest Homes: - the cost for groceries and rest home expenses are easily “loaded” with the proprietor’s home supplies. Tracing this is almost impossible. Add on the mother-in-law, aunty, brother and sisters and you have an unbelievable situation. A similar situation exists for builders who are also building their own homes.