Tax Evasion

Topics: Tax, Tax rate, Taxation Pages: 4 (1213 words) Published: May 14, 2013
Tax evasion
Tax evasion is an unlawful practice which has the effect of reducing the government revenue needed for the provision of infrastructure, public services and public utilities. (Otosanya , 2009). Spicer (1975) also stated that, tax evasion “ tax evasion result in a loss of tax revenues, impair the chances of realizing the distributional or equity goal of taxation, and if they become widespread, as they have in recent times, then more tax payer, may lose faith in the tax administration system and may be tempted to join the ranks of tax evaders. According to Yitzhaki (19740 mentioned that the tax rate in Allihang-ham-Sandmo model has a substitution effect favoring evasion and income effect it and that the effect is uncertain. While Clotfelter (1979) clarified that the evasion is hard to define by tax payer, it is acceptable for the tax payer try to minimize their tax liability.

Factors and implications of tax evasion
Cited from Allingham and Sandmo (1972) showed that maximization of expected utility implies that evasion will tend to increase with marginal tax rates. Previously finding by Clotfelter, it is consistent that higher tax rates tend to stimulate tax evasion. Hypothesis made by Clotfelter is that people who evade tax increased if the marginal tax rate increased. Spicer and Lundstedt (1976) and Vogel (1974) found that older people have the attitude not to evade tax than the youngster. Conversely to Song and Yarbrough (1978) clarified that tax payers aged 40 to 65 are less likely to while people in younger and older categories are more likely to evade. This is happen because, usually high salary worker start at older age such 40 and above. They have the responbility to pay tax either the tax rate is low or high . The youngsters like to spend more than earn their income. The liability they have to face increase when they do not have enough penny to save and it is impossible for them to pay tax to the government. By this, it will...
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