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| Features |
| Tax evasion: Highway to continued poverty |
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by
Patrick Achitabwino, 09 November 2006
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05:35:34
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Tax, taxes and more taxes. Most people look at taxes as a worm that mercilessly eats their economic muscles. There has always been a great desire by many more people to beat the tax system, most especially among traders.
Incessant allegations have been made many a times concerning undervaluing of imports all in a desperate attempt to either lower the selling costs or/and maximize profits.
Each year, a startling number of people and businesses engage in tax evasion which has become the most common economic crime. It is obvious that people look at remitting taxes as an unnecessary burden that further subjects their economic powers to bankruptcy. They thus therefore see it as no crime to exceed to the unimaginable limits of evading taxes.
The tax evasion trend has spread its tentacles throughout the world. Even the world’s most respected economies are struggling to control tax evasion.
David Cay Johnston reported in The New York Times of 26 March 2006 that the International Revenue Service (IRS) in United States of America discovered that Americans in far greater numbers than it had once thought were evading taxes by secretly depositing money in tax havens like Cayman Island and withdrawing it using American Express, Master Card and Visa Cards. The IRS estimated that almost one to two million Americans had clandestine bank accounts.
With the proliferation of the internet that has seen the world becoming a global village, electronic money transfers have lead to an increase in tax evasion so too money laundering. The combination of the two forces has become a thorn in economies of developing countries like Malawi. Even some of the major companies, accounting firms and banks on earth have at times been identified as advertising offshore banking secrecy.
Offshore accounts have become a gimmick for hiding income and assets from spouses, especially in divorce, or from creditors, including plaintiffs in lawsuits.
Tax evasion has therefore become a by-product of such strategy. Fees, profits, dividends, interests and capital gains have easily been hidden in offshore accounts.
In Nigeria, Francis Ughoke and Chuks Akuna of the AfricaFiles reported that the House of Representatives Committee on Petroleum Services ordered the United States Oil major, Chevron Nigeria Limited, to refund to the federal government US$492 million being money it (Chevron) failed to pay as part of its tax obligation.
ABZ Integrated Limited, an indigenous consultant company that was engaged by the Economic and Financial Crimes Commission (EFCC), in its investigations found Chevron culpable of the allegations of inflating its tax returns to the government and not paying its tax obligations as at when due.
If the exacerbation of tax evasions is a manifestation that taxes are an evil, then no doubt taxes are a necessary evil, an evil that no nation can survive without. Any token contributed towards taxes marks the genesis of paving many roads, ground breaking ceremonies of building hospitals and bridges, drilling boreholes, fertilizer subsidies, running the civil service, the list is endless. In general, the tax payers’ money is the lifeline of a nation.
The most unfortunate thing with tax evasion is that it deviates millions of money from being used in national development and economic consolidation. Evading taxes is a manifestation of ideologies that suffer ‘development myopism.’ Evading taxes equals nailing economic development on the infamous cross of abject poverty and economic retardation. Tax evasion throws spanners in the wheels of national development.
It is a moral obligation of each and every citizen to be contributing to the development of one’s country. Former US president J.F. Kennedy in his inaugural speech challenged his fellow countrymen, “and so my fellow Americans, ask not what your country can do for you, ask what you can do for your country.” In the same vein, we Malawians are challenged to do more for our country. Paying taxes is therefore a right step in the path of development.
If taxes are too high then tax evasion is no solution at all since it benefits a few who have the tactics to evade the taxes. The best remedy is lobbying for a reduction of taxes. The business community did lobby for some consideration on a number of taxes and that has been incorporated in this years’ budget. It is high time to raise the slogan: “No to tax evasion”.
—The author is membership services officer for the Society of Accountants in Malawi (Socam).
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