White Collar Crime Tax Fraud

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WHITE COLLAR CRIME: TAX FRAUD

Tax fraud is a white collar crime that has become one of the major challenges of taxation.

It is one of the most prevalent issues in criminology that affects the actual collection of revenue.

This is attributed to the facts that most people avoid paying taxes, leading to prolonged problems

in revenue collection. As a result, Tax fraud has caused immense challenges in the collection of

revenue in the country. It is a white collar crime that causes a change in the country’s revenue

collection system (Berkhout, 2016). To a great extent, tax fraud has resulted in huge revenue

gaps in a number of countries. In which, the revenue collection in many countries has become

unsatisfactory thus prompting the need to investigate the issue of tax fraud which has become a

widespread white collar crime in revenue collection.

Tax fraud

Tax fraud is a white collar crime that has weakened tax administration leading to a

decline in revenue collection. It is a widespread problem in criminology that affects society. It

usually involves a deliberate attempt by an individual or an organization who avoid paying taxes

(Nalishebo and Halwampa, 2014). As per the laws, it is considered as a white collar crime where

individuals evade payment of taxes.

Usually, a person is required by law to remit a portion of their income in the form of

taxes owed to the government. However, studies indicate that only a small proportion of the

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population remit taxes, thus causing gaps in revenue collection in the country (Nalishebo and

Halwampa, 2014). .

Currently, there are various categories of tax fraud. The common among them is tax

avoidance and tax evasion. Tax evasion is a category of tax fraud which is considered to be the

one of the leading cause of huge revenue gaps in a country’s economy. As white-collar crime it

involves an illegal act carried out by an individual or an entity that entails not paying taxes as

required by the law. In regard, tax evasion happens in a situation where income tax or other

taxable activities are concealed by the taxpayer. Tax evasion also happens in a situation where a

person offers false information about their source of income. That is amount or source of income

is deliberately misrepresented thus amounting to tax evasion. In that case, a person is considered

to have engaged in tax fraud through tax evasion (Nalishebo and Halwampa, 2014). .

Furthermore, concerns have been raised over taxpayers overstating their tax reducing

factors. This includes deductions, exemptions as well as credits. It is a phenomenon that is

commonly experienced in the informal sector economy, where there are a lot of fraudulent tax

activities taking place. It is also an area that happens to be out of reach for the tax net thus most

individuals that are employed in this sector evade payment of taxes. As a result, under tax

evasion, individuals develop the behavior of omitting or withholding tax information with an

intention of minimizing tax liabilities.

Another category of tax fraud is tax avoidance. It is a common white collar crime act that

takes place within the legal frameworks of the tax system. It refers to the process by which a

person bends the rules of the tax laws for their own benefit. That is the aim is to gain a tax

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advantage. This involves a situation where a person exploits the legal tax loopholes in order to

avoid paying taxes. In most cases, the person takes advantage the tax code as they engage in

activities that are legal which are run to counter the purpose of the tax law. In which the taxpayer

will engage in tax activities that are aimed that reducing their tax liabilities through deductions

and also taking advantage of tax credits (Nalishebo and Halwampa, 2014).

Nevertheless, tax avoidance is a white collar crime that greatly affects the tax revenue. It

is one of the significant contributors of tax fraud as one circumvents the government’s tax policy.

Even though the primary objective of taxation is to mobilize funds to finance the government

expenses, tax fraud hinders the ability of the government to funds its programs in the country.

This eventually results in a subsequent revenue loss to the country since there are huge revenue

gaps in the collection of taxes. In regard, the issue of tax fraud can greatly hurt a country’s

economy since it involves illegal practices that are carried out by an individual or an

organization in an attempt to avoid their tax obligations (Berkhout, 2016).

There are also other illegal behaviors that contribute to tax fraud. These include

cybercriminals attacks as well as a hidden economy which illegally deprives the collection of tax

revenue. Under the hidden economy, it involves a situation where individuals fail to declare their

source of income. In such situations, their income is unknown to the relevant tax authority. On

the other hand, the cybercriminal attack involves a systemic coordinated attack on the country’s

tax system.

Similarly, due to the discretionary nature of the tax system, there are several tax

incentives and exemptions which create a loophole for exploitation for the fraudsters. As a result,

the various tax incentives tend to erode the tax base thereby causing loss of revenue to the

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government. Overall, it reduces the total income that would have been used to develop vital

government projects among other utilities.

On the other hand, Government audit reports on the tax system further indicates that there

are fraudulent taxpayers who seek to defraud the government of billions worth of revenue

collections. In which there are cases of huge firms whose tax obligations have been reduced in

unclear circumstances. There are also cases where companies fill nil tax returns, yet they earned

billions worth of profit (Rosanne, et al, 2009).

In addition, a number of firms, especially in the informal sector of the economy have

exploited the various tax loopholes in order to avoid paying taxes. This happens through trade

mis-invoicing where individuals offer false information on the value and quantity of the goods

whenever they fillin in the customs declaration forms and invoices. Their overall motive is

usually to avoid payment of exercise duty. As a result tax fraud poses a significant threat to the

tax system (Global Financial Integrity, 2014).

In addition, tax fraud encourages illicit trade and financial flows in the country. This

deprives the country of a critical tax revenue stream. It has the economic effect of decreasing the

country’s revenue yields. In which tax fraud lowers the country’s tax liabilities leading to huge

revenue gaps in the country (Levi, 2013).

Moreover, tax fraud can also distort capital investments whereby it reduces the country’s

economic output in any given sector. This affects the overall spending and investment in the

country. This has reduced the need to engage in any investment activity. Thus leading to a

significant reduction in the growth of the country’s output. Similarly, tax fraud lowers the tax

base. This is influenced by corporate tax dodging where corporations exploit the tax loopholes in

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order to avoid paying taxes. Hence it raises the federal budget deficit causing a decrease in the

national savings as well as increasing rates which discourage investment (Berkhout, 2016).

. In conclusion, tax fraud should be addressed in a sequential and cordinated manner. It

should involve the introduction of measures that are aimed at broadening the tax bases. In which

the government should offer solid structures for tax administration as well as improve the

domestic resource mobilization. Therefore, there should be measures in place to help in the

reduction of tax fraud. This is because taxation plays an integral role in the development of a

country’s economy. In regard, having well-designed tax policies is crucial in raising economic

growth. The tax policy should be expanded to improve a country’s financial performance.

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Works Cited

Nalishebo, Shebo, and Albert Halwampa. “ Uncovering the unknown: An analysis of tax

evasion in Zambia." (2014).

In this article, the author analyses the different forms of tax fraud that have to lead to a

decline in revenue collection. Being a criminology problem the author explains how it affects

society. The author also explains the different categories of tax fraud which are considered to be

one of the leading causes of huge revenue gaps in a country’s economy.

E. Berkhout. “Tax Battles: The Dangerous Global Race to the Bottom on Corporate Tax.

Oxfam.” (2016).

The book addresses the dangerous global phenomenon of corporate tax fraud as one of

the major issues of white-collar crime affecting society. In the article, the author highlights how

corporates exploit the various loopholes in the tax system to avoid paying taxes. These affect the

overall spending and investment in the country.

Global Financial Integrity (2014). Hiding in Plain Sight: Trade Misinvoicing and the

Impact of Revenue Loss in Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-

2011.

The article highlights how corporate use trade mis invoicing to exploit the various tax

loopholes. This is based on a comparison done in different countries, in which the author tries to

explain the increasing revenue losses, which are a threat to the country’s revenue system.

Levi, Michael. Regulating Fraud (Routledge Revivals): White-Collar Crime and the

Criminal Process. Routledge, 2013.

The book addresses the issues of white-collar crime which has become a major issue in

society. The book highlights how fraudsters have infiltrated different systems among them the

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tax system. Other areas of discussion are the various laws on fraud as well how various agencies

tackle fraud. The author also offers an analysis of the policy trends that are related to fraud.

Altshuler, Rosanne, et al. "3 Understanding US Corporate Tax Losses." Tax Policy and the

Economy 23.1 (2009): 73-122.

The book explains the ratio of losses compared to income during the recession period of

2001. A comprehensive example is given of US corporate tax returns up to that period. In which

the author attempts to offer a variety of explanation on the surging tax losses while taking into

account the temporary tax provisions that affect the taxable income. In which average rate of

return rather fell instead of increasing despite the increase in a gap of corporate profits.

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