Probable implication of Tax Evasion
What is tax evasion?
Simply put, tax evasion occurs when
any trust, individual, or firm, seeks to avoid paying taxes by illegal and unfair
means, by, for example, deliberately hiding income from the tax authorities to
reduce the liability of tax.
People have been known to submit
dishonest reports, including declaring less gains, profits, or income than what
was actually earned. Other means of evading tax are smuggling, and avoiding
paying out customs duty, value added tax, and income tax.
Smuggling involves the export or
import foreign goods through unauthorised routes, to avoid paying customs
duties, or to bring in contraband. Importers evade paying customs duty by
submitting false declarations of the description of the product and the
quantity imported.
Producers or retailers that collect
VAT from consumers evade paying taxes by showing lowered sales amounts. The
double taxation system that includes VAT and service tax has resulted in a lack
of clarity with respect to tax-related issues.
What is the direct result of evading
tax?
Tax evasion results in the loss of
revenue for the government. It generates more and more black money - money that
is acquired through illegal means - that people try and offload as quickly as
possible, by purchasing real estate, jewellery, gold, automobiles, paintings,
expensive clothes and accessories, and so on. This distressed purchasing
artificially inflates prices and therefore the market.
The greater the income in the black
money circuit, the greater the freedom of external economic transactions, and
the greater the leakage into foreign financial institutions and markets. Not
only is tax evasion detrimental to the progress of the economy, but also
harmful to the individual.
Paying taxes, and on time, means
better healthcare and education. The risk-reward for tax evasion is highly
unfavourable. It’s better to pay your taxes on time, and sleep well. If you are
a salaried employee, then TDS (Tax deducted at Source), helps you to pay your
taxes.
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