Ethical issues in tax evasion ppt

ETHICAL MANAGEMENT- TAX EVASION

Tax Evasion:• Most of the people do not pay their taxes. They try to avoid this by

some illegal means or by taking the benefit of some loopholes in the Indian tax system. Tax evasion is the term for the efforts by

individuals, corporate, trusts and other entities to evade taxes by illegal means.

• It is the deliberate arrangement of non disclosure of true state of their affairs to the tax authorities to reduce their tax liability or to avoid the

tax liability by declaring less incomes, profits or gains than actually what they earned or overstating their expenses

Tax Evasion Activities:Some of the Tax evasion activities include: Underreporting income Inflating deductions or expenses Hiding interest in offshore accounts Hiding money Shell companies Tax havens Equity swaps Avoid capital gain tax Avoid real estate tax

Ethical Reaches in Tax Evasion: Unjust to salaried class Unfair advantage to small business Social responsibility of a citizen

Parties Responsible for Tax Evasion:

Income Tax Officers?

Government?

MNC’s?

Companies Cook Up Their Books:

Short-Term Thinking

The Carrot and the

Stick

Companies Cook Up Their Books:

The Satyam Scam

CULTURE AND ATTITUDE OF COMPANIES:

India’s tax officers are as smart as any anywhere in the world, and western companies who bank on their being unsophisticated tend to make a big mistake

Tax policy in India is geared so that a tax officer in the field is supreme. There are thousands of them, and each interprets the law in the way he sees fit. And it’s this which leads to the perception of anarchy and chaos

Some executives argue that tax avoidance is a mere symptom the real disease being the high corporate tax rates and complex rules imposed by government. Others point out that they are big employers and contribute a lot in payroll taxes

Eric Schmidt, Google’s chairman, has said he is very proud of his

company’s tax-avoidance structures, which are based on the incentives that the government has offered them to operate. Accountancy firms have long supported such strategies, though they are becoming more concerned about reputation risk.

ELEMENTS THAT PROMOTE TAX EVASION:

Different Rates of Excise Duty (Example – Textiles)

Inflation

Agricultural Income not in the realm of Income Tax (Black to White)

Quotas (Over Invoicing for Import Benefits)

Real Estate Transactions (Capital Gain Tax & Stamp Duty)

LEGAL AND MORAL PRINCIPLES VIOLATED DUE TO TAX EVASION:

Obeying the law

Fair and transparency

Integrity

Responsibility towards the nation

Leadership

Measures to Control Tax Evasion: Reduce Movement of Black Money

Audit Program

Promote Banking System

The Black Money Bill

Tax Efforts

Conclusion: While tax planning is seen as compliant behaviour, tax evasion is

more of a grey issue. Evasion is fundamentally illegal

Paying a ‘fair’ amount of tax in the countries in which they operate is seen as a responsible thing for a company to do for the social good; providing the funds for public services such as healthcare, education and for public investment in infrastructure, be it in the developed or developing world. Such behaviour can leave a company vulnerable to accusations of greed and selfishness, damaging their reputation and destroying the public’s trust in them

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