Corporate Tax evasion and its impact on the Economy
Feisty Virgin Jovi Romero Romero Roselyn Roselyn Salazar Andrei Santos Jay-Anne Subala Subala Ramir Ruedas 2A14
Introduction Tax Tax evasion has been a pressing issue with the !R re"ently# re"ently# A lot o$ "ases "ases were were %led %led agains againstt popula popularr indivi individual duals s and "orpor "orporati ations ons that that "aug "aught ht the the atte attent ntio ion n o$ the the peop people le and and the the medi media# a# Alth Althou ough gh tax tax evasion is presumably as old as the history o$ taxation& the re"ent "ase "ases s %led %led gave gave an alar alarmi ming ng awar awaren enes ess s to ever everyo yone ne## 'ith ith the the prevalen"e o$ tax evasion in an e"onomy& it deprives its "ountry o$ national $unds needed $or its development that "ould lead to a serious probl problem em or "risis "risis## (ur stand is that that "orpor "orporate ate tax evasio evasion n is a ma)or ma)or $a"tor $a"tor in the impedime impediment nt o$ e"onomi" e"onomi" growth# growth# This resear"h resear"h aims to raise raise aware awarenes ness s on respon responsib sibili ility ty o$ every every taxpay taxpayer er espe"i espe"iall ally y the "orporation as to how these taxes "ontribute to e"onomi" growth# The pape paperr is organ organiz ized ed as $oll $ollow ows* s* in the the open openin ing g part part we dis" dis"us uss s the the de%nition o$ terms and the "on"eptual di+eren"e between tax evasion and and tax avoi avoida dan" n"e# e# !n the body body&& we explo xplorred the tax sy syst ste em implemented in our "ountry& the importan"e o$ taxes and ethi"al issues arising $rom tax evasion# Also& the $a"tors that a+e"t the evasion o$ taxes& how they evade taxes& and the eviden"es that supports the thesis statement are $urther dis"ussed# (n the last part& we are going to reiterate our thesis statement and propose a possible solution and also the impli"ations o$ the prevalen"e o$ tax evasion i$ not resolved in the $uture# 'e are limiting this resear"h to "orporate tax evasion and its e+e"t on the e"onomy only#
Taxation Taxation is the imposition o$ a mandatory levy on the "itizens and businesses o$ a "ountry by their government# !n almost every "ountry& the government derives a ma)ority o$ its revenues $or %nan"ing publi" servi"es $rom taxation# Just as death and taxes are "ertainties in this world& so are ways and means to minimize i$ not eliminating altogether one,s tax liabilities# Thus& attempts by a taxpayer to e+e"tively lower his his tax tax liab liabil ilit ity y may may ta tae in many many $or $orms and and to what what exten xtentt the the taxpayer "ould do# There are two nown ways on how to do it& tax avoidan"e and tax evasion# A""ording to .ay& tax avoidan"e arises over ambi ambigu guiitie ties ove over the the de% de%niti nition on o$ a tax base base but but the the $a" $a"ts o$ transa"tion are admitted but they have been arranged in su"h a way that that the resul resultin ting g tax treat treatmen mentt di+er di+ers s $rom $rom that that intend intended ed by the relevant legislation# (n the other hand& tax evasion is "on"erned with "on"ealing or misrepresenting the nature o$ a transa"tion and is illegal $rom the viewpoint o$ the tax "ode /103# This )ust simply means that tax avoidan"e is manipulating the loopholes in the tax "ode to ones advantage with the primary goal o$ lowering the expe"ted tax liability while while tax evasion an illegal illegal pra"ti"e where where a person& person& organizat organization ion or "orpor "orporati ation on intent intention ionall ally y avoids avoids paying paying his5he his5herr true true tax liabil liability ity# !n relat relation ion to taxati taxation& on& e"onom e"onomi" i" growt growth h is the in"re in"rease ase in the mare marett value value o$ the goods and servi"es servi"es produ"ed produ"ed by an e"onomy e"onomy over time# 6anasan /101-10073 dis"ussed as su"h& evasion and avoidan"e are interde interdepende pendent nt a"tiviti a"tivities# es# Signi%"ant Signi%"ant and well-nown well-nown tax avoidan"e avoidan"e
"ould indu"e in"reased evasion# (n the part o$ the individual taxpayer& evasion "an substitute $or avoidan"e when in"reasing the "ost o$ tax avoidan"e may in"rease tax evasion# ut the impa"ts on the e"onomy o$ both both are are the the same same88 loss loss o$ gove goverrnmen nmentt reven evenue ue&& in"r in"rea ease se in taxpayer,s a$ter-tax in"ome& and perverse e+e"ts on the e9uity and e:"ien"y goals o$ the tax system#
Body
THE PHILIPPINE TA !"!TE#
Taxation Taxation is the imposition o$ %nan"ial "harges or other levies& upon a tax taxpay payer by a stat state e that that $ail $ailur ure e to pay pay is puni punish shab able le by law law /;onzales& 2113# !t is a rule by whi"h a government government maes extra"tions or "olle"tion $or revenue in order to support their existen"e and "arry out their legal ob)e"tives# !t is the most "ommon and strongest power o$ a government# government# Taxes Taxes are the blood and li$e o$ a government& government& without it& a government "annot meet its ob)e"tives#
The main purpose o$ taxation is to a""umulate $unds $or the $un"ti $un"tioni oning ng o$ the gover governme nment nt ma"hin ma"hineri eries es /;onza /;onzales les&& 2 211 113# 3#
$un"ti $un"tioni oning# ng# The gover governme nment nts s abilit ability y to serve serve the people people depend depends s upon the taxes that are "olle"ted $rom the people# Taxes are a re9uisite in the government operation and without it& the government will be useless# =veryone who is a resident or non-resident re"eiving in"ome $rom sour"es within or outside the >hilippines should pay taxes# This in"ludes domesti" and $oreign "orporations#
Four $%s o& Taxation
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Revenue ? taxes that raise money to spend on armies& roads& s"hools& hospitals& and other indire"t government government $un"tions
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Redistr edistribu ibutio tion n ? re$er re$ers s to the trans trans$er $errin ring g o$ wealt wealth h $rom $rom the ri"her se"tions o$ so"iety to the poorer se"tions
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Repri"ing ? taxes levied to address externalities
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Representation ? @
PHILIPPINE TA LA'!
The >hilippine taxation system "overs national and lo"al taxes#
The laws on >hilippine Taxation are "ontained within the
Nationa( Tax La)
@The 10C >hilippine Bonstitution sets limitations on the exer"ise o$ the power to tax# The rule o$ taxation shall be uni$ uni$or orm m and and e9ui e9uita tabl ble# e#
The The Bong Bongrress ess sh shal alll evol evolve ve a
progr progressi essive ve system system o$ taxati taxation on /Arti" /Arti"le le D!& Se"tio Se"tion n 2 2&& paragraph 13#
All All mone money y "oll "olle" e"te ted d on any any tax tax levi levied ed $or $or a sp spe" e"ia iall purpose shall be treated as a spe"ial $und and paid out $or su"h purpose only# only# !$ the purpose $or whi"h whi"h a spe"ial $und was "reated has been $ul%lled or abandoned& the balan"e& i$ any& any& shall shall be trans trans$e $errred to the the gene genera rall $und $unds s o$ the the ;overnment ;overnment /Arti"le D!& Se"tion 20& paragraph E3#
The Bongress may& by law& authorize the >resident >resident to %x within spe"i%ed limits& and sub)e"t to su"h limitations and restri"tion as it may impose& tari+ rates& import and export 9uotas 9uotas&& tonnage tonnage and war$ar war$are e dues& dues& and other other duties duties or imposts within the $ramewor o$ the national development prog progra ram m o$ the the ;ove ;overrnmen nmentt
/Art /A rti" i"le le D!& D!& Se"t Se"tio ion n 2 2&&
paragraph 23#
The >resident shall have the power to veto any parti"ular item or items in an appropriation& revenue or tari+ bill& but the veto shall not a+e"t the item or items to whi"h he does not ob)e"t /Arti"le D!& Se"tion 2C& se"ond paragraph3#
The Supreme Bourt shall have the power power to review& revise& revise& reverse& modi$y or a:rm on appeal or "ertiorari& as the law or the Rules o$ Bourt may provide& %nal )udgments and orde orders rs o$ lowe lowerr "our "ourts ts in x xx all all "ase "ases s invo involv lvin ing g the the lega legali lity ty o$ any any tax& tax& impo impost st&& asse assessm ssmen ent& t& or toll toll or any any penalty imposed in relation thereto /Arti"le D!!!& Se"tion 7& paragraph3#
Loca( *overnment Tax La)
@Fo"al government taxation in the >hilippines is based on the "onstitutional grant o$ the power to tax to the lo"al
gov governm ernmen ents ts##
Fo"al o"al tax taxes
may be impo mposed& sed& as the the
Bonsti Bonstitut tution ion grants grants&& to ea"h ea"h lo"al lo"al gover governme nment nt unit& unit& the power to "reate its own sour"es o$ revenues and to levy taxes& $ees& and "harges whi"h shall a""rue to the lo"al governments governments /Arti"le G& Se"tion 73# 'ith respe"t to national taxes& lo"al ;overnment units shall have a )ust share& as determined by law& in the national taxes whi"h shall be automati"ally released to them /Arti"le G& Se"tion H3#
Tax Exemptions in the Phi(ippines
As mentioned above& everyone who is a resident or non-resident re"eiving in"ome $rom sour"es within or outside the >hilippines should pay taxes# Iowever& their some exemptions in paying taxes# A""ording to the >hilippine Bonstitution& the $ollowing are exempted $rom taxes8 taxes8
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Bharitable institutions& "hur"hes& "onvents& mos9ues& non-pro%t "emeteries& "emeteries& lands and buildings and improvements
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All All
in"o in"ome me&&
reven evenue ues& s& asse assets ts o$ nonnon-st sto" o"
and and
nonnon-pr pro% o%tt
edu"ational institutions used a"tually& dire"tly and ex"lusively $or edu"ational purposes
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6inimum wage earner
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hilippines
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>rizes and winnings $rom a "harity horse ra"e sweepstaes $rom the >hilippine Bharity Sweepstaes (:"e
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SSS and ;S!S ene%ts
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Annual taxable in"ome o$ Senior Bitizens or those at least H years old who have in"ome o$ not more than >H& per year
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onations to the >hilippine government $or s"ienti%"& engineering and te"hnologi"al resear"h& resear"h& invention and development
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(ther donation exemptions exemptions
Factors that a+ect the evasion o& taxes, Tax Tax evasion o""urs be"ause o$ two $a"tors8 psy"hologi"al elements and administrative and legal aspe"ts# >sy"hologi"al >sy"hologi"al elements a+e"t the evasion o$ taxes be"ause some people may doubt the leaders o$ their "ountry regarding regarding the use o$ taxes in the e"onomi" development o$ the "ountry# =vasion is more liely among those who $eel that they pay an
un$airly high level o$ taxes /'itte and 'oodbury& 1073# Some people& "ommonly in "orporations& thin that they pay higher taxes than that o$ others and as a result& they tend to mae ways on how to lessen their taxes# (n the the othe otherr hand hand&& admi admini nist stra rati tive ve and lega legall aspe aspe"t "ts s in"l in"lud ude e dishonest tax reporting or a""ounting $raud& manipulation o$ re"ords& and "orrup "orruptio tion# n# Bommon Bommon pra"ti pra"ti"es "es o$ tax evasio evasion n in"lud in"lude8 e8 under under-repor reportin ting g o$ in"ome in"ome&& over over-st -state atemen mentt o$ expen expenses ses&& use o$ %"titi %"titious ous re"eipts& the eeping o$ double sets o$ boos& $alse or %"titious entries in boos& %"titious transa"tions in the name o$ dummies& non-re"ording o$ sale sales& s& and and othe others rs## ish ishon ones estt tax tax repor eporti ting ng is main mainly ly done done by a""ountants by hiding the true status o$ the %rm to the tax authorities# They simpli$y re"ords re"ords so that the %rm will will pay less taxes taxes and being able to generate more pro%t# Tax evasion "ommonly arises when a person over overst stat ates es the the expen xpense ses s /$al /$alse se re"ei e"eipt pts3 s3 or "oun "ounts ts in inel inelig igib ible le expenses# As a result& less in"ome will be re"orded but in reality& they gained gained more pro%t pro%t and spent spent less less $or their expense expenses s than than what what is indi"ated in their %nan"ial statements# Borruption is also a ma)or "ontributor to tax evasion# ased on the Fati Fatin n Amer Ameri" i"an an exper xperie ien" n"e& e& Iers Iers"h "hel el beli believ eves es that that now nowle ledg dge e o$ widespread "orruption o$ senior poli"ymaers in a "ountry may signal the mismanagement o$ publi" $unds and hen"e indu"e resistan"e to
"omply with tax laws# >eople tend to mae ways not to pay their taxes be"ause they believe that their money will not be used properly by their government in maing their "ountry better#
Krom the above table are the "orporate tax rates o$ >hilippines& .orea& and Sudan $rom the years 20-214# 'e "hose to "ompare .orea and Sudan to the >hilippines be"ause they are )ust some o$ the most "orrupt "ountries in the world# .oreas ma)or issues "an be tra"ed ba" to a number o$ natural disasters and the "ollapse o$ the Soviet Lnion while Sudan has been wrapped thoroughly in the grasp o$ war $or many years# The table shows that >hilippines had a "onstant EM "orporate tax rate $rom 20-214# .orea had 24#2M "orporate tax rate $rom the given years ex"ept in the year 211 in whi"h they had 22M# Fastly& Sudan had 17M $rom 20-21 but has in"reased to E7M $or 211-214# This implies that the high "orporate tax rates o$ Sudan and .orea are understandable be"ause o$ their e"onomi" situations#
Taxes and the Economy
The Tax e+ort $or the year 21E "ontributed to the in"rease to 1E#7M o$ the ;ross omesti" >rodu"t o$ the >hilippines $rom the 1E#EM o$ the previous year# year# Ien"e& the tax evasion "ases $or the year 212 a""umulated to almost >12 illion# (ut o$ the 12 "ases %led by the ureau ureau o$ !nter !nternal nal Revenue evenue&& C2 "ases "ases were were identi identi%ed %ed as tax evasi evasion on "ases "ases o$ di+ere di+erent nt "orpora "orporatio tions# ns#
There There were were 0 out o$ 1
"orporations whi"h violated the same law& Se" 2C and 2 o$ the Tax Re$orm A"t o$ 100C# Republi" A"t 424 Se" 2C dis"usses the rate o$ in"ome tax o$ domesti" "orporations whi"h is E7M imposed upon the taxable in"ome derived during ea"h taxable year $rom all sour"es within and without the >hilippines by every "orporation taxable under this Title as a "orporation& organized in& or existing under the laws o$ the >hilippines# (n the other hand& Se" 2 ta"les the rate o$ in"ome tax o$ $oreign "orporations a "orporation organized& authorized& or existing under the laws o$ any $oreign "ountry& engaged in trade or business within the >hilippines& shall be sub)e"t to an in"ome tax e9uivalent to E7M o$ the taxable in"ome derived in the pre"eding taxable year $rom all sour"es within the >hilippines#
!n e"onomi"s& taxes are o$ten "onsidered e"onomi"ally ine:"ient& whi"h suggests tax evasion may potentially have a positive impa"t on an e"onomy# The theory is that sin"e taxes operate by in"reasing
the the pri" pri"es es o$ thin things gs&& over overal alll "ons "onsum umpt ptio ion n de"r de"rea ease ses s as tax taxes in"rease& and there$ore& e"onomi" a"tivity $alls# ut "ome to thin o$ it& those taxes are attributed to pro)e"ts $or the "ommon good su"h as roads oads&& util utilit itie ies s and othe otherr in$r in$rast astru ru"t "tur ure& e& so the the gove goverrnmen nmentt "olle"ts taxes in order to provide these publi" goods# The basi" laws o$ e"onomi"s might suggest that in the absen"e o$ the government& privat private e "ompan "ompanie ies s would would exist exist to provi provide de these these publi" publi" goods goods and "ould do so more e:"iently& as they would not be hindered by taxes and government bureau"ra"y# ut we all now that $or a "ountry to run& it needs its government# Thus $or the government to $un"tion& it need needs s $und $unds s $rom $rom the tax taxes o$ the the "iti "itiz zens ens and and busi busine nes sses# ses#
The budget allo"ated $or 21E amounted to more than >10C0#H Trillion Trillion and yet we lost almost >12 illion be"ause o$ these "orporate tax evasi asion "ase ases whi" hi"h "oul "ould d have have been been a big big hel help $or the development o$ the di+erent se"tors o$ our "ountry# (ne example o$ this this is the impr improveme ovement nt o$ the ="onom ="onomi" i" Se"tor Se"tor "onsis "onsistin ting g o$ the !ndustry& Servi"e and Agri"ulture Se"tor whi"h "omposes those big "orporations that "ontribute to the e"onomi" growth& 9uanti%ed as ;>& ;>& and emplo employme yment nt o$ the "ountr "ountry y# The budget budget $or ="onom ="onomi" i" Servi" Servi"es es maes maes up 27 27#7M #7M whi"h whi"h is >7 >711 11#1 #1 il illio lion n o$ the national national budget $or the year maing it the se"ond highest se"toral allo"ation and >ubli" Servi"es being the %rst#
The industry and servi"es /!N S3 se"tors "ontinue "ontinu e to be the growt growth h drive drivers rs o$ the >hi >hilip lippin pine e e"onom e"onomy y# Ioweve Iowever& r& this this growt growth h need needs s to be su sust stai aine ned d and and made made mor more in"l in"lus usiv ive# e# A glob global ally ly "ompetitive se"tor is one that is able to tap the global maret and& there$or there$ore& e& grow $aster# $aster# An innovative innovative se"tor& se"tor& on the other hand& implies the "reation o$ new produ"ts& whi"h "an mean additional marets and perhaps new produ"tion pro"esses that will allow the se"tor to lin better with the primary se"tors& namely agri"ulture and %sheries# %sheries# Lnderl Lnderlyin ying g all these are the strategi strategies es to expan expand d mare marets& ts& part part o$ whi"h whi"h is the expan expansio sion n o$ the domesti" domesti" mar maret resulti resulting ng $rom population population and in"ome growths growths##
The bigger bigger part&
howeve however& r& will will be the penetr penetrati ation on into into $oreig $oreign n mar marets& ets& in"lud in"luding ing tourism# To promote global "ompetitiveness and innovation in the !ndu !ndust stry ry and Serv Servi" i"e e se"t se"tor ors& s& the the gove goverrnmen nmentt will will "ont "ontin inue ue to impr improv ove e the the busi busine ness ss "lim "limat ate& e& prom promot ote e an envi envirronme onment nt that that in"reases produ"tivity and innovative "apa"ity& en$or"e regulations that enhan"e "onsumer wel$are and expand maret a""ess#
The
thes these& e& the the gove govern rnme ment nt de"i de"ide des s to borr borrow ow $und $unds s $rom $rom di+e di+ere rent nt "ountries or other %nan"ial institutions whi"h is to be paid in due time with a large sum o$ interest# Thus hindering e"onomi" growth# !$ debt debt will will ex"e ex"eed ed the the "oun "ountr try ys s repay epayme ment nt abil abilit ity y with with some some probability in the $uture& expe"ted debt servi"e is liely to be an in"reasin in"reasing g $un"tion $un"tion o$ the "ountrys "ountrys output level# level# Thus some o$ the return eturns s $rom $rom invest investing ing in the domest domesti" i" e"onom e"onomy y are are e+e"ti e+e"tivel vely y tax taxed away away by exist xistin ing g $or $oreign eign "red "redit itor ors s and and inve invest stme ment nt by domest domesti" i" and new $oreig $oreign n invest investor or is dis dis"ou "ourag raged# ed# A" A""or "ordin ding g to 6etwally and Tamas"he /10043 as "ited by .aragol& this de"reases the domesti" "ountrys ability to grow its e"onomy and raises it dependen"e on $oreign debt#
The top 7 most "ontroversial "ontroversial "ases o$ Borporate Tax Tax =vasion $or the year year 2 212 12 with with their their "orre "orrespon spondin ding g liabi liabilit lities ies were were ;ammon ;ammon 6etal 6etal >rodu >rodu"ts "ts !n"# !n"# /1H0 /1H0E#7 E#763& 63& Je" Je" !n"# !n"# /14H /14H7#1 7#1 63& Ab Abant ante e !ndust !ndustri ries es /12C /12C# #7 7 63& 63& Bhin Bhina a Stat State e =ngi =ngine neer erin ing g Borp Borp## /C12 /C12#C #C63 63 and and All All > rugst rugstor ore e and ;eneral ;eneral 6er"ha 6er"handi ndise se /71H#0 /71H#0 63#
A""or A" "ordin ding g to the
report& the top 1 developing "ountries with the highest illi"it %nan"ial outOows outOows were were Bhina /P2#C4 trillion3 trillion3&& 6exi"o 6exi"o /P4CH /P4CH billion3& billion3& 6alaysia 6alaysia /P273& Saudi Arabia /P21 billion3& Russia /P172 billion3& >hilippines /P1E /P1E billi billion3 on3&&
avoidan"e and EM-E7M $rom "riminal a"tivities# !lli"it "ash Oows $rom "orruption& "orruption& bribery and the$t among government government o:"ials a""ounted a ""ounted $or EM-7M# The most depressing news $or us is that the >hilippines raned Hth in the list o$ developing developing "ountries "ountries in terms terms o$ illi"it "ash Oows# 'e "an only dream o$ the positive e+e"t on our e"onomy and on the number o$ )obs that would have been "reated i$ the >hilippine elite had de"ided to eep and invest the P1E7 billion here instead o$ stashing them abroad#
Tax Tax evasion tae away money that "ould be invested in produ"tive resour"es needed to diversi$y the e"onomy and address urgent so"ial problems# Tax evaded money is not spent on produ"tive investments that that "an "an have have a mult multip ipli lier er e+e" e+e"tt on an e"on e"onom omy y and bene bene%t %t the the signi%"ant ma)ority o$ a population& rather than )ust a sele"t $ew# The gover governme nment nt must must spend spend resou resour" r"es es attemp attemptin ting g to re"ou re"oup p taxes taxes it is owed& whi"h is waste$ul to so"iety# !$ no one underpaid taxes& more money "ould be attributed toward bene%"ial programs instead o$ being spent spent on "olle" "olle"tin ting g it# Also "ompar "ompare e a "orpor "orporati ation on that that pay its tax liability "orre"tly to the one that evade taxes& it "reates an arti%"ial adva advant ntag age e $or $or the the "omp "ompan any y evad evadin ing g tax taxes# es# This This "oul "ould d lead lead to "ompani "ompanies es with with less less busine business ss pra"ti pra"ti"es "es outlas outlastin ting g those those with with more more e:"i e:"ien entt pra" pra"ti ti"e "es& s& whi" whi"h h woul would d be detr detrim imen enta tall to the the e"on e"onom omy y be"ause be"ause those those "ompani "ompanies es that that evade evade taxes taxes outlas outlasted ted whi"h whi"h means means lowe lowerr nati nation onal al $und $unds s and and the the "omp "ompan anie ies s "los "losed ed woul would d resul esultt to
unemployment#
Tax Evasion Cases Fi(ed -y BI$
Borporation >ersonal
Ethics Three ma)or views have evolved over the last 7 years regarding regarding tax evasion# (ne view taes the position that tax evasion is always or almost unethi"al& either be"ause there is a duty to ;od to pay taxes& or be"ause there is a duty to some s ome "ommunity or to so"iety# so"iety# Another view is that there is never or almost never a duty to give anything to a "orr "orrup uptt gove goverrnmen nment# t# The The thir third d view view is that that ther there e is some some ethi ethi"a "all obligation to support the government government o$ the "ountry where you live but that duty is less than absolute#
The reasons $or "onsidering tax evasion as ethi"al are "orruption o$ the government and the a+ordability and $airness o$ the tax system# 6orales /1003 dis"ussed the viewpoint o$ 6exi"an worers# 6ost o$ these studies $ound that taxpayers do not have ethi"al problem with evading taxes be"ause their governments are "orrupt and they $eel that they have no ethi"al duty to pay taxes to a "orrupt government# Ie "on"luded that 6exi"an worers duty to his $amily is sometimes more important than his duty to the state# ;eni"ot /102C3 states that partial evasion is )usti%ed on the grounds that the government does not have the right to the $ull amount and that it would be un$air to impose heavier taxes on "ons"ientious men while wi"ed men usually pay less# (n the other hand& tax evasion is "onsidered as unethi"al be"ause o$ so"ial responsibility and moral duty to other tax payers# !t is the so"ial responsibility o$ every individual in the "ountry to pay taxes $or the bene%t o$ their "ountrymen# Some Bhristian groups also tae this view that individuals are morally bound to obey the laws o$ the "ountry in whi" whi"h h they they live live## The The mora morall duti duties es to othe otherr tax tax paye payers rs are are also also "onsidered as one o$ the reason why it is unethi"al to evade tax# All "ountrymen must be e9ual and they should $ul%l their responsibilities the same way as the other does#
Importance o& paying taxes
Taxes Taxes are the "harges that the government imposes on "itizens and "orporate "orporate businesses# businesses# The "harges "harges "olle"ted "olle"ted by the government government are used used to $und $und di+er di+erent ent gover governme nment nt pro)e pro)e"ts "ts that that would would in the end bene%t the "itizens o$ the "ountry as a whole# !t also plays a ey role in building up institutions& marets and demo"ra"y through maing the state state a""oun a""ountab table le to its taxpay taxpayer ers# s# >aying aying taxes taxes plays plays an import important ant role $or the bene%t o$ the so"iety and businesses by providing $unds $or the pro)e"ts o$ the government and unexpe"ted events lie re"ession and turmoil# The so"iety s o"iety is the main bene%"iary o$ paying taxes# Taxes are used to $und $und pro)e pro)e"ts "ts relat related ed to health health "are "are system systems& s& edu"at edu"ation ion system systems& s& and publi" transports whi"h is very essential $or the everyday living o$ the the "iti "itize zens# ns# Also Also&& the the mone money y "oll "olle" e"te ted d "an "an also also be used used to give give unemployment bene%ts& pensions& and other matters that "an bene%t the so"iety as a whole# 'ithout tax& the government would not be able to $und the essential pro)e"ts and servi"es that people need# >eople in the so"iety "an also be more responsible "itizen by imposing taxes on li9uor& "igarettes and gambling &spe"i%"ally the Sin Tax law & so that they may not pur"hase these items immediately be"ause o$ its higher "ost # Taxes also promote e"onomi" growth by generating the revenue needed needed to %nan"e %nan"e government governments s e"onomi" e"onomi" developme development nt poli"ies poli"ies and "reate a $ramewor $or development o$ private se"tor a"tivities#
usinesses are also a ma)or bene%"iary o$ taxes# The government $unds the money ba" into the e"onomy as long term loans and5or $unding# They serve as a "reditor $or business who needs "apital $or the grow growth th o$ the the busi busine ness ss## Taxes axes is also also esse essent ntia iall duri during ng re"es e"essi sion on be"ause be"ause the gover governme nment nt in"re in"rease ase their their spendi spending ng whi"h whi"h in"lud in"ludes es spending in "onstru"tion& edu"ation& "ommuni"ation networs& massive power-generation& power-generation& and other ma)or in$rastru"ture in$rastru"ture pro)e"ts#
Conc(usion The result o$ the study is that "orporate tax evasion %led has a greater number than that o$ the personal tax evasion "ases# This )ust simply means& a de"rease in the national budget that "ould have been put put into into a lot lot o$ pro) pro)e" e"ts ts that that bene bene%t %ts s the the "omm "ommon on good good su su"h "h as in$rastru"tures& roads& edu"ation and espe"ially e"onomi" se"tor# This resear"h also $ound out the underlying "ause o$ tax evaders is that the government is nown to be "orrupt& but in reality& the e"onomi" se"tor is the 2nd with with the highest highest budget budget allo"ati allo"ation on in our "ountry "ountry whi"h whi"h means these "orporate tax evaders bene%t a lot $rom the taxes put into publi" servi"e# Borporate tax evasion also leads to budget de%"it whi" whi"h h resul esultt to $or $oreign eign debt debts s that that hind hinder er the the "oun "ountr try ys s e"on e"onom omi" i" growth# As pra"titioners& addressing these "ru"ial issues head on ? be it
"orruption&
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respo responsi nsibil bility ity# Just Just imagin imagine e that that the $ailur $ailure e o$ gover governme nment nt to "urb "urb smuggling and tax evasion "ould be something more than depriving the national treasury with $unds $or the "ountrys development needs# !t "ould be a serious se"urity threat and may end demo"ra"y as we now it# 'e proposed probable solutions to the issue o$ "orporate tax evasion# Kirst& is the revision o$ the tax "ode that "ould address to the issue o$ the loopholes on the law and a mu"h stri"ter penalty on those people people who attempt to evade evade their taxes# taxes# !n line with this& proper and stri"ter implementation implementation o$ the tax "ode should be maintained# Also& the system system should should be $ree $ree $rom $rom "orrup "orruptio tion# n# ;over ;overnme nment nt has a spe"ia spe"iall respo responsi nsibil bility ity to mae mae prope properr rules rules and promo promote te good good gover governan" nan"e# e# !n"reased transparen"y transparen"y "ould also "ontribute to en"ourage "itizens and busine businesse sses s to pay their their taxes taxes "orre "orre"tl "tly y# Fet Fet them them now the budget budget allo"ation per"entage and the evident pro)e"ts that their money spent on taxes taxes were were used used $or# $or# Kair taxes taxes not ne"ess ne"essari arily ly lower lower tax rates rates should be implemented in our "ountry# "ountry# This "ould lessen the number o$ tax evaders and "ould also enti"e investors to "ome in our "ountry# >rivate enterprise drives growth& redu"es poverty and "reates )obs and prosperity $or people around the world# Kair taxes& and open trade are vital drivers o$ this#
Bi-(iography
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http://www.oecdoser!er.or http://www.oecdoser!er.or"/news/archi!estory "/news/archi!estory.php/aid/2$3/%hy&tax&matters&for&de! .php/aid/2$3/%hy&tax&matters&for&de! elopment.html#sthash.'()%*+,h.dpuf http://www.philstar. http://www.philstar.com/opinion/23//23/011/e!ils-tax-e!asion-and-tax-ha!ens com/opinion/23//23/011/e!ils-tax-e!asion-and-tax-ha!ens
