Tax Evasion on the Global level
Tax Evasion on a Global level
It’s that time of year where you’re either trying to figure out your own taxes or paying someone who does your taxes for you, but for some cases this isn’t the same process. When you or your accountants start to underline your income or barring fraud or pay less than what the tax law mandates there comes consequences for a criminal offense under federal and state statues. This criminal offense is known as tax evasion, which in 1943 the U.S. Supreme Court decided that in Spies v, United States ruled that an overt act is necessary to give rise to the crime of income tax evasion. There are two types of tax evasion. One that requires proof beyond reasonable doubt, which is under section 7201 and the violator, is charged with a felony. The second is under section 7203 but instead of being a felony, a person is charged with a misdemeanor. The difference between the two is simply just neglected to filing their tax return. The IRS has certain criminal investigation units to detect and investigate tax fraud throughout the United States. Tax evasion isn’t just a United States problem, as all countries around the world have to deal with tax fraud. In this essay I will discuss the issues surrounding tax evasion and what different countries are doing to try to prevent tax evasion.
When thinking about tax evasion you would think that the majority of the crime comes from wealthy Countries that generate high levels of income but the fact of the matter is that lower-income countries showed them being the biggest victim. Tax evasion affects the poor three times as much to tax evasion as they receive foreign aid. (Bearak, 2016) Developing countries show a large number of tax evasion because they simply don’t have the income to provide for the government. Creating a tax structure around these issues like businesses not keeping records of the books, many people earning money off the books and just lack of money can be very difficult for both the people in the country and Government enforcing the tax codes. Often these countries create tax codes that can be easily manipulated in the favor of the person due to the lack of resource’s the Government has to enforce the laws. These countries are sometimes forced to focus on taxing financial capital rather than taxing the financial income. According to The United Nations Economic Commission for Africa they estimated that the implications of studies resulted in a range from 30 billion to $60 billion a year in tax evasion losses just in Africa alone. (United Nations Economic Commission for Africa, p. 34)
Tax evasion generates an estimated $500 billion of dollars of losses in government and revenue creating large distortions throughout the globe. That number is represents about over 20% of corporate tax revenues. Another estimated amount is the $32 trillion in private money that is kept offshore, which accounts for about 3% return on capital. (Cobham) In 2013 the G8 decided to create a comprehensive tax plan of laws and regulations to take down some of the tax evasions committed by both individuals and multinational corporations. Despite being brought up in 2013 the G8 now the G20 haven’t exactly made forward progress despite saying how important it was on their list. The Organization for Economic co-operation and development mission is to promote policies that will help improve the economic and social well being of the world and they reported that technology is the new step on fighting tax evasion. Some examples: In Rwanda and Canada they introduced of point of sale technology to address electronic sales suppression which resulted increase in VAT collected sales and recovering over 822 million in taxes. OECD continues to try to improve the well being of the world by bringing together global tax and crime experts to discuss efforts of fighting tax evasion. What they came up with was five priorities for action, which were: 1. Ensure that the professionals were actually going thru with tackling tax crime. 2. Step up level of international and cross-government co operations to build a plan against tax crime. 3. Implementing the OECD’s ten global Principles to learn from the lessons from around the world to best fight crime. 4. Using technologies strengthen the ability to share intelligence by communicating data quickly and securely. 5. Build a path to combat all financial crimes even in developing countries showing that nobody can hide from being a tax criminal. (Organisation for Economic Co-Operation and Development, 2017)
When dealing with tax evasion the Untied States has had some different ideas trying to stop it especially after the “Panama Papers” which were leaked documents that showed wealthy Americans using the offshore companies to hide their money from IRS. The IRS requires you to submit an FBAR if you have any interest in any foreign bank, securities, or other financial accounts to help limit the use of offshore banking and financing. Another form of fighting tax evasion was when the crisis in Greece happened, they decided to enforce more regulations to ensure that a business owner provide receipts and to make sure the customers are aware of their legal right to request a receipt for goods purchased.
Globally the issue with tax evasion will always be present but if these countries don’t collaborate with each other and help with the different regulations and laws regarding tax evasion then this crime will only keep rising. OECD has many good ideas but if they don’t implement these different ideas globally they there will be even more loopholes. Tax avoidance is one of the most powerful example of corporate dominance. When these corporations are able to dominant it is an indication of bad governance by these countries to allow these companies to avoid their taxes with immoral behaviors affecting the idea of globalization. (Dillion, 2016) Focusing on helping the governments around the world with innovating different regulations and approaches on fighting tax evasion will only be the start, but when we start to see the numbers of tax evasion annually dropping then that’s where we will start making progress.
Bearak, M. (2016, April 8). How Gloval tax evasion keeps poor countries poor. Retrieved from Washington Post: https://www.washingtonpost.com/news/worldviews/wp/2016/04/08/how-global-tax-evasion-keeps-poor-countries-poor/?utm_term=.aa32ba7bbecb
Cobham, A. (n.d.). Tax Avoidance and evasion- The scale of the problem. Retrieved from Tax Justice Network : http://www.taxjustice.net/wp-content/uploads/2017/11/Tax-dodging-the-scale-of-the-problem-TJN-Briefing.pdf
Dillion, S. (2016). Tax Avoidance, Revenue Starvation and the Age of the Multinatuonal Corporation. . Suffolk University, Law. American Bar Association.
Organisation for Economic Co-Operation and Development. (2017, November 7-8). Fifth OECD Forum on Tax and Crime. Retrieved from OECD: http://www.oecd.org/tax/forum-on-tax-and-crime.htm
United Nations Economic Commission for Africa. (n.d.). Illicit Financial Flows. Retrieved from UNECA: https://www.uneca.org/sites/default/files/PublicationFiles/iff_main_report_26feb_en.pdf