Tax Evasion

Tax Evasion

Copyright: © 2015 |Pages: 8
DOI: 10.4018/978-1-4666-7254-3.ch009
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Abstract

Tax evasion is considered by the international laws and domestic laws of most countries as a form of fraud. In most countries, a gap exists between the expected tax revenues and the tax revenues that are actually collected. This gap is naturally due to tax evasion. Understanding why individuals and organizations evade taxes is the first step in reducing the aforementioned gap. For a taxation system to be well received and accepted by both the state and the public, it has to be just and fair, clear and precise, and take into consideration the interest of both the state and the citizen. This chapter explores tax evasion.
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Definition

Tax evasion is the illegal act of evading the payment of taxes by individuals and organizations. The relevant literature is rampant with articles that examine the effects of certain financial practices on tax evasion, as well as the steps that are being taken by governments across the world in order to combat this phenomenon. In fact, taxes constitute the main source of revenue for any nation, which is why tax evasion is an extremely dangerous practice that can have catastrophic consequences on countries and societies as a whole if left unchecked. That being said, governments around the world are continually updating their tax-related laws to ensure that tax evasion is kept to a minimum, and that taxes are being collected efficiently. One example of this is Jordan’s Income Tax Act No. 28 that was introduced in 2009. . Studying the impact that newly introduced tax amendments have on citizen compliance and tax evasion has identified several characteristics that make up a good taxation system. Most notably, for a taxation system to be well-received and accepted by both the state and the public, it has to be just and fair, clear and precise, and take into consideration the interest of both the State and the citizen (Al-Naimat, 2013). Ultimately, the study concluded that the new amendments of the Income Tax Act No. 28 increased the commitment of taxpayers to paying their taxes.

One of the main matters that the Internal Revenue Service and the US federal government have to face concerning the IRS tax evasion and harmonizing the federal budget is referred to as the “tax gap”. The US is known to have a tax deficit that it might never collect. Hard work has taken place to try to terminate the gap, however, just a slight percentage, has been collected by the IRS. The gap remains to grow.

The reason behind this inequality is a lack of resources for the Internal Revenue Service. The failure of the Internal Revenue Service to inspect each case lets the tax gap grow and IRS tax evasion goes without punishment.

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