When it comes to tax everybody wants to be smart. However can you really be too smart when it comes to tax? Tax evasion is a big deal that the government of every country take seriously. It is defined as the illegal avoidance of taxes or underpayment of taxes owed to the government carried out in a deliberate manner.
While it is legal to try to minimize tax payments through legitimate means (tax avoidance) , avoiding tax entirely or deliberately concealing information on expenses and financial information from the government is an offense.
Consequences of Tax Evasion
You shouldn’t engage in tax evasion because of its consequences. We’ll look at the consequences one after the other.
- Financial Consequences
The financial consequences of tax evasion results in severe implications evident in penalty interest. This is the accumulation of unpaid taxes. The loss of refunds, meaning forfeiting legitimate funds; damage to your credit score which impedes future loans; seizure of assets which would require the government to confiscate the property of the offender.
- Legal Consequences
The legal consequences of being involved in tax evasion is that you will be fined, by being asked to pay substantial penalties that way exceeds the tax you wouldn’t pay in the first place. Not only that, the offender could be sent to jail on criminal charges, in addition to losing business license affecting the growth and potential of the business.
- Reputational Consequences
Aside from the business, as one with a standing reputation professionally and socially, participating in tax evasion could result in reputation damage that could take years to restore. Tax evasion harms professional reputation; it leads to loss of credibility; social stigma evident in isolation from the community; the presence of ethical compromise; halt of pending or potential contracts.
What is the Meaning of Tax?
Tax must first be known as something that cannot be negotiated. It is lawful and compulsory for individuals and businesses considered taxable. By definition, tax is a mandatory financial contribution that is levied by the government on individuals, businesses and organisations to fund public goods and services.
These services could be in the form of educational impact; healthcare; infrastructural development; social welfare programs and so on. Tax could be in the form of Value Added Tax (VAT), Income Tax, Sales Tax, Property Tax, etc., all of which have their rates.
What Does Tax Return Mean?
A tax return is deemed compulsory. It is a document mandatory to be submitted to the tax authority in your country. Tax returns are usually submitted annually containing information such as income, expenses, deductions, exemptions and tax liabilities.
Tax return is important as it helps to accurately provide calculated tax owed, claims deductions, incomes and expenses, and a proof of compliance with tax laws and regulations.
Tax returns can be individual tax returns, business tax returns, or self- employment tax returns.Whether it is personal tax, business tax, sales tax, or any other tax required of you, tax evasion should be avoided as this could have implicative consequences that could weaken what you have taken years to garner
