By BUUMBA CHIMBULU
THERE are loads of ways people and corporations can cheat the government out of its taxes, unfortunately and tax fraud is among them.
This is abusing the tax and super systems for financial benefit.
Tax fraud cheats the government out of millions of dollars every year and is punishable by fines, penalties, interest, or prison time.
Tax fraud includes: hiding cash wages, avoiding tax, using complex offshore secrecy arrangements, falsely claiming refunds and benefits.
Other examples of tax fraud include claiming false deductions; claiming personal expenses as business expenses; using a false Social Security number; and not reporting income.
This type of fraud essentially entails cheating on a tax return in an attempt to avoid paying the entire tax obligation.
Tax evasion, or illegally avoiding payment of taxes owed, may be construed as an example of tax fraud.
There are serious consequences for tax crime. These include penalties, criminal convictions, fines, and prison sentences.
Tax fraud poses a risk to the community from decreasing revenue available to the government, and by its links with identity crime, money laundering and organised crime.
This type of crime can have a devastating impact on an individual, for example if their identity is stolen.
Tax fraud occurs when an individual or business entity willfully and intentionally falsifies information on a tax return to limit the amount of tax liability.
It involves the deliberate misrepresentation or omission of data on a tax return.
In Zambia, taxpayers are bound by a legal duty to file a tax return voluntarily and to pay the correct amount of income, employment, sales, and excise taxes.
Failure to do so by falsifying or withholding information is against the law and constitutes tax fraud.
Tax fraud in many cases is said to be evident if the taxpayer is found to have: purposely failed to file his income tax return, misrepresented the actual state of his affairs so as to falsely claim tax deductions or tax credits.
Others are intentionally failed to pay his tax debt, prepared and filed a false return and deliberately failed to report all income received.
It is however important to note that there is a difference between tax fraud and tax avoidance, many people usually mistake the two.
While tax evasion is illegal, tax avoidance involves entering into legal arrangements that exploit loopholes or unintended defects in tax law.
So, what is tax fraud? Tax fraud is something that is deliberate, seems intentional and it is willful.
Tax fraud is not the same as tax avoidance, which is the legal use of loopholes in the tax laws to reduce one’s tax expenses.
Although tax avoidance is not a direct violation of the law, it is frowned upon by tax authorities as it may compromise the overall spirit of tax law.
Tax avoidance sometimes could be described as maybe paying less than you owe by taking certain aggressive tax positions.
So, you might be filing, but you are doing things to avoid paying taxes that may or may not be legal or maybe extreme positions.
For example, claiming an exemption for a non-existent dependent to reduce tax liability is clearly fraud, while applying the long-term capital gain rate to a short-term earning may be looked into more to determine whether its negligence.
While mistakes attributed to negligence are non-intentional, the governments may still fine a negligent taxpayer with a penalty. Famous people throughout the world have been guilty of tax fraud.
Generally, in closing, an entity is not considered to be guilty of tax evasion unless the failure to pay is deemed intentional.
Tax fraud does not include mistakes or accidental reporting, which the governments call negligent reporting.