The Pros And Cons Of Tax Evasion

3508 Words15 Pages
Introduction Many developing countries fail to raise the tax revenue required to finance their public sectors. The revenue mobilization is believed limited by tax avoidance and tax evasion. Tax avoidance is an activity whereas the person or a business may undertake in order to reduce tax payments while tax evasion is defined as a violation of law. In developing countries, the tax revenue losses due to tax avoidance and tax evasion are differing between a domestic component and international component. Instead of knowing the differences of tax avoidance and tax evasion in different components, the most important things that need to be considered is how the political, social and administrative determine the tax gap, what is the taxpayer’s attitude towards tax evasion, is the tax morale affect the tax compliance, and what is the solution taken to overcome the tax evasion. Domestic component “Shadow economy is unreported income from the production of legal goods and services either from monetary or barter transactions, hence all economic activities that would generally taxable, were they reported to the tax authorities” Schneider and Enste (2002), p.78-79. In other words, the shadow economy is a deliberation act to conceal all market-based legal production…show more content…
Orewa (1957) state that the main reason of tax evasion is a high degree of inter-district mobility and argues that mobility of wage earners, salaried persons with permanent address is an important factor due to they keep themselves in movement from one place to another in order to earn legal money. The top five of main reasons of tax avoidance and tax evasion are there is no public enlightenment campaign, lack of adequate tax incentive, poor relationship of tax payers and authorities, tax proliferations, and illiteracy of tax calculations (Muhammad Muazzam Mughal, April
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