Due to the consistent looting, financial misappropriation, money laundering and other unwholesome activities by past and government officers, Nigerians are grumbling loudly. They are unwilling to part with their hard earned money when they believed it would end up in the foreign bank accounts of their leaders.
Another cause of contention between tax payers and the government is the lack of basic amenities in the country. Normally, the paid taxes should be used to aid government budgetary allocation for the provision of these structures such as electricity, good roads, quality health care and standard education, abundant jobs for the unemployed, subsidized rates on public utilities and so on. Sadly, Nigerians hardly see the positive results of their taxes, while workers are being owed months and years of salaries.
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What are some devices of tax evasion?
1. Avoidance by reporting a false account of profits through removal or reducing the true figure of income.
2. Running away from presenting a statement or return to safely keep the mandated records.
3. Deliberate avoidance of fulfilling his or her tax burden;
4. Refusal to pay state tax on proceeds made from lands and assets;
5. Refusal to pay state tax on rewards received within and exported into the country from abroad;
6. Fake account of donations to a pension program;
7. Minimising the whole quantity of tax burdens by filing fake tax profits, when the taxpayer made a deceitful declaration of total earnings and properties.
Just like the other countries of the world are battling with obstacles of tax evasion and avoidance, Nigeria is not an exemption. However, many clogs are in the wheel of Nigerian progress in bringing an end to this habit. Some of them are highlighted below;
1. Lack of a standard database for Nigerians, not even the invention of TIN (tax payer identification number) is helping matters.
2. There is no sufficient enlightenment on the importance of tax payment;
3. Substandard record keeping structure.
4. The big companies have more standard and modern strategies for planning their taxes.
Tax evasion comes in different forms. Some of them include;
1. Customs Rates
Sellers of imported goods are notorious for tax evasion. They usually devised plans to escape customs duties in two ways.
i. They record lower quantities of goods in their invoices, contrary to the true quantities they bought, so that they can be charged less on more goods.
ii. Importers alter the real description on the purchased products to products that have lower weight in order to pay less for heavier products.
2. Smuggling through outlawed roads
Apart from evading duty rates at the customs, importers also transport their wares through outlawed borders or passageways, as well as recording false invoices, forged products labelling and reporting forged quantity of goods.
3. Personal Income Tax/Employment Tax
Employers of labour are known culprits in the department of tax evasion, because most of them often deliberately hide from tax remission to tax officers.
In many cases, such offenders will delay tax payment for a long period of time, after which they will shut down their organizations, retrench the workers and declare bankruptcy, while abandoning their unpaid debt of income taxes.
Employers also escape tax by forging the account of their workforce income tax, payment of salaries in cash; or outright refusal to declare their workforce income.
4. Vat Evasion
Multinational companies are popular for their expertise in evading taxes. The most common means of VAT evasion is to balloon the deduction of VAT which was supposedly paid before at the initial stages. All they have to do is to doctor the invoices for sales they didn’t make.
Tax evaders are punished because it’s a criminal offence and most developed nations recognize that fact. The defaulter can be apprehended and charged to court, regaining freedom will attract jail-terms and fines. For instance, Switzerland is a country that doesn’t treat tax offences with levity, the government see it as civic issues, although deceitful acts of presenting false tax return on your earnings can be forgiven.
In Nigeria, punishment for tax evaders is weak but it’s been enforced.
From all indication based on all the facts and figures discussed so far, it’s apparent that tax evasion and tax avoidance are the bane of any country. Citizens are typically reluctant to file income taxes because they have lost faith in the country.
However, there is an urgent need to find lasting solutions to these problems. Government is responsible for enacting the tax laws and enforcing the tenets on the citizenry. The laws should be reviewed to accommodate adequate adjustments. Nobody is above the law, therefore stipulated penalties should be meted out to offenders regardless of social class.
In reciprocity, government have to be trust-worthy by utilizing the taxes on provision of essential infrastructures. Let the taxpayers get value for their money. Securities should be tightened. Salaries should be paid, construction of roads, stable power supply, standard education and good hospitals well equipped with modern machineries among others should be developed.
In addition, every tax collection agencies must be purged of mediocrity and bad eggs. The officers there need orientation in good communication skills because taxpayers deserve to be respected. Concerning the Joint Tax Board, the authorities are expected to sit round a table conference and address the problems associated with tax evasion, then find effective means of solving them once and for all.
There are other ways, situations and scenarios where there are obvious links between tax evasion and tax avoidance and situations where there could be confusion as to whether a seemingly obvious tax avoidance rule to a business may be the case of tax evasion to the government. There are lots of cases where there were situations of such nature, cases that would be discussed in subsequent posts on tax evasion and tax avoidance.
We hope this topic and explanation has been explanatory enough on the difference between tax evasion and tax avoidance. Please drop comments if you have further questions on the difference between tax evasion and tax avoidance! We would love to hear from you.