Was That A Tax Fraud ?

In a world where people are becoming more and more sensitive about collective responsibility of individuals towards the society, Tax Frauds are being increasingly frowned upon, and while that happens, the hatred and revulsion of people towards taxes has not receded even a bit, giving rise to a very complex mass psychology towards tax compliance and fraud.
Was that a Tax Fraud ?
Source - Wikimedia Commons (https://commons.wikimedia.org/wiki/File%3ACarrouselfraude.svg)

In civilized society, there are always two major forces that affect behavior of individuals. The first of them are the laws made by the State, which are applicable on all, and are sought to be complied universally. The other force is the acceptance of behavior norms and values in a given society – the social acceptance of what is right and what is not so – that also affects the behavior of people. While the laws made by the State do matter a lot more than the social norms, the significance of social norms of ethical behavior can also be

a major consideration, especially in matters related to taxes that place a burden on individuals and are often resented by the masses.

Why should We Pay Taxes?

Why should anyone pay any tax, why should one depart with one's hard earned money, why and what for? None of these questions is a new one, and yet these are questions which will never die. But before you try to answer that question, there is one more question that needs to be answered. Why do we need a government, or do we need a government at all? Imagine for a moment that there is no government. So if you need roads, or airports or street lights, people just come together, collect some money, and get the roads or airports or street lights built. But there is more that we might need. We need safety, and order, and also somebody to prevent other countries taking us over for a ride. So maybe once again, people can come together, collect some money and get it done. It is not exactly impossible. There is just one small problem.

What if somebody refuses to share the burden. If one person does that, a few more may do the same, and if many do the same, then people like you and me may ask ourselves as to why are we the only fools bearing the burden of the whole society, and maybe if we too step back, perhaps there will be nobody ready to contribute anything for these necessities. And yet, all these are required. And before we forget, if there is somebody in the neighborhood, who thinks he is the big don, you and me may have to worry much more about keeping ourselves and our families safe, and when we do that, we may end up losing much more than we would ever be, by paying just taxes.

Taxes are never welcome, and yet there can be no respite from them either. Income tax is just another tax. If you venture into the world of economics, it will not take you long to realize that whether it is a tax on income, or consumption, or corporate profit, or turnover, or any other thing, in the end it is the people like you and me who have to pay it. And if we do not pay it... if we are smart enough to defraud the exchequer, we only compound the problems that we, as part of the society will have to face for it.

Why Tax Frauds Happen?

Whatever may be the structure of a tax, and whatever may be the tax rates, there will always be someone who will have to share a higher burden, and whosoever it

may be, there can always be arguments that it is not exactly fair. The reason for this is that there is no ideal or absolutely fair tax. It is always the case of next best that we can achieve. So whatever tax rate, and whatever may it be based upon, someone somewhere will always have enough rationale to feel that he is being cheated, and to use that rationale in justifying his evasion of tax. Psychologists call it 'rationalization', a defense against guilt and stress.

Taxes will always be associated with some stress, whether you pay them or evade them. One can use rationalization for whatever one may decide to do, and we all do that. Unfortunately, rationalizing paying taxes is far easier than rationalizing a decision to evade and defraud, for any law abiding, peace loving person with a good self esteem. Thus, without going into the normative judgmental process, one can still conclude that paying tax is easier than evasion, and overall a better state of health, both social and psychological.

A Fraud is Fraud… Tax Frauds are a Crime against other Taxpayers

Fraud is a fraud is a fraud, and how much one may try, it is not easy to fool your own self. Therefore it may not really be worth getting into the trouble, even if you beat the tax authorities. And by the way, there is always the risk of tax evasion getting caught later.

So the bottom-line is.....taxes may not be fair, but paying them is still the best alternative.......we can justify and rationalize everything, but doing it for paying the tax is better for everyone, including one's own self.

Social Outlook towards Tax Frauds can Facilitate Tax Compliance

Negative social view of activities like theft and duping plays an important role in keeping civilized people, especially those with high enough self esteem, away from such crimes. However, due to a commonly shared resentment against taxes levied by the State, such social resentment and rejection is often not extended to tax evasion. This means, the consciously or sub-consciously, people are not disturbed at the prospect of evading taxes, if they know they can get away with it. This attitude can be particularly worse in countries where the State is not very efficient or where the State fails to provide them the basic amenities that people expect from it. This situation, which is common in developing countries, but nor restricted to them, can often lead to a vicious cycle, where high levels of tax evasion prevents State from carrying out its functions properly, and its failures further lead to a justification for not paying taxes.

To break such vicious cycles, and to ensure that the honest taxpayer is not forced to carry on his shoulders the burden of dishonest tax evaders, society needs to treat tax frauds in the same way as other financial crimes.

Social acceptance of tax compliance as an ethical responsibility can be the beginning of a compliant tax regime!

Article Written By V Kumar

I am a freelance writer. I write for the passion of writing. Life has blessed me an opportunity to be a witness to many interesting aspects of life and people around the world. Indeed, these are very interesting times and we who live in this era are privileged to experience it. You can find my articles at http://vkumar.expertscolumn.com/

Last updated on 13-10-2017 305 0

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