TAX EVASION VS. TAX AVOIDANCE

Taxation is the power of the State to impose a charge or burden upon a person’s income, properties or rights, to raise revenues for the use and support of the goverment to enable it to discharge its appropriates functions.

I am thankful and blessed  to our employer who included me as one of the two  employees in the company who attend a seminar in taxation last September 4, 2010 entitled: Guide to a Tax-Efficiency Business – “The Smart & Legal Way of Working with Taxes”.

I just want to share what I’ve learned in the seminar and some of the topics included is the differences of Tax Evasion between Tax Avoidance.  

Tax Evasion or Tax Fraud is the use by the taxpayer of illegal or fraudulent means to defeat or lessen the payment of tax while Tax Avoidance or tax minimization is the use by the taxpayer of legal or lawful means to reduce tax liability. 

The differences of Tax Evasion and Tax Avoidance are as follows: 

TAX EVASION (or TAX FRAUD)            TAX AVOIDANCE

* Illegal or fraudulent                                       * Lawful

* Result of inefficiency                                     * Benefit of knowledge in tax laws

* Punishable by law criminally                          * Not punishable by law

* Taxpayer has no peace of mind                     * Taxpayers is assured 

There are ways or forms of Tax Avoidance with details as follows:

1. Tax option – A taxpayer may choose to pay lower tax rate in some transactions as permitted by laws.

2. Shifting – This is basically transferring the tax burden to another without violating the law.

3. Transformation – This is the opposite of shifting. The objective is to recover or reduce the tax expense.

4. Exemption – This denotes a grant of immunity from tax.

5. Handling Accruals – This process is seeing to it that expenses incurred are recognized in the books of accounts for the taxable year.

6. Planning transactions – This is taking a proactive stand against taxes, say by postponing the start of your new projects in the following taxable year, if it’s not critical, thereby delaying recognition of revenue, and spending on staff development and other important programs near the end of the year to maximize your expenses for the current taxable year.

7. NOLCO – the operating loss of a company can be carried over as a deduction from gross income for the next three consective years immediately following the loss.

8. Compliance – This is still the best form of tax minimization, because by doing so you will eliminate penalties, surcharges, interests, and deficiency assessments.

Some of the factors that influence social acceptance of taxes, according to research are Simplified Taxation and Good Governance. Inversely, some factors that discourage people from paying taxes are Complex Taxation System, When Tax is seen as a Bondage and Corruption in the Government.

But no matter what, we can’t deny it: We are still liable to pay taxes. 

The Lord’s Stand on Paying Taxes 

Luke 20:20-25 

20 Keeping a close watch on him, they sent spies, who pretended to be honest. They hoped to catch Jesus in something he said so that they might hand him over to the power and authority of the governor. 21 So the spies questioned him: “Teacher, we know that you speak and teach what is right, and that you do not show partiality but teach the way of God in accordance with the truth. 22 Is it right for us to pay taxes to Caesar or not?” 23 He saw through their duplicity and said to them, 24 “Show me a denarius. Whose portrait and inscription are on it?” 25 “Caesar’s,” they replied. He said to them, “Then give to Caesar what is Caesar’s, and to God what is God’s.”

Jesus also paid His own taxes 

Matt 17:27

27 “But so that we may not offend them, go to the lake and throw out your line. Take the first fish you catch; open its mouth and you will find a four-drachma coin. Take it and give it to them for my tax and yours.” 

St. Paul Commanded the Romans 

Proverbs 13:7

7 Give everyone what you owe him: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.

If you’re interested to invest yourself to learn about business and taxation you can enroll at Businessmaker Academy.

For more details and informations about business & taxation you can contact me for a consultation and  willing to share to the best of my knowledge.


Comments

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