Research Paper

Topics: Tax, Taxation in the United States, Corporate tax Pages: 6 (2233 words) Published: October 9, 2013

Executive summary

This paper examines the concept of tax avoidance and evasion. The two terms have different meanings and they all contribute to the decrease in government revenue. The government raises most of its income through taxation. However, defaulters greatly contribute to a substantial decrease in the overall government income. There are very many ways in which people carry out taxation malpractices. Some of them have established a loophole in the legal system that gives them a chance to evade taxes without facing the risk of being prosecuted. This has greatly encouraged the act. On the other hand, government taxation officials and agencies also contribute towards tax avoidance and evasion. Officials encourage tax avoidance by taking bribes and letting some people and business walk without paying their taxes. On the other hand, there have been complaints about the PSI contributing to tax evasion and avoidance. Over the years the government has worked tirelessly towards ensuring that incidents of tax evasion and avoidance are greatly reduced if not eliminated. Introduction of the Alternative Minimum Tax is aimed at making sure that nobody avoids taxation completely. The United States Tax Disclosure Regulations are aimed at enhancing transparency and increasing promptness when it comes to dealing with tax defaulters. However, according to the study there is still more that needs to be done to deal with tax avoidance and evasion.

The two terms are often interchangeably used but according to accounting the two terms refer to two different things. In accounting, tax evasion refers to the illegal schemes derived in order to hide some taxes from being taxed. On the other hand tax avoidance is the legal skill of using the current system of taxing to pay minimum tax for ones assets. Avoidance Involves tactical interpretation of the law for economic gain. U.S is among the developed nations with the highest numbers of tax defaulters, this is due to the presence of large number of illegal immigrants who do not pay their taxes. Tax avoidance is perfectly legal and encouraged by the IRS, but tax evasion is against the law depending on the level of tax fraud; however, stiff measures have been designed to curb the issue and lots of challenges are still being experienced. This paper is going to look at the United States taxation system, methods of tax evasion and measures that the government has put in place to prevent tax avoidance and evasion. Another element that will be examined is the role of tax officials and government agencies in perpetuating tax avoidance and evasion. Taxation in the United States

Taxing in the uses is experienced at different levels, within the work layout. The US tax system is set up on both, at federal and state level. The federal government does not have authorities to interfere at state level and every state has their own tax system. The taxes are imposed on income, payroll, property, sales, imports, estates and gifts. Income tax which all those who are employed and receive income are subject to generates most revenue for government. This is usually referred to as individual tax. On the other hand there are taxes that target groups an example of this are the corporate taxes for businesses or institutions permits. Despite, the group taxes having comprised of many people, the individual tax from income revenue is the highest contributor to the countries income. Last year in the United States the income revenue contributed more than 20 percent to the national income. This is due to the reduced number of tax defaulters in the individual sector as the tax is deducted from their salaries before they even receive their pay or salary. In the United States, the rules that govern taxation are based on taxation policy and do not depend on the financial accounting of the taxes from the citizens salary. Custom duty is the other form of tax that is usually required when goods are...

References: Carl, D. "Who Pays? A Distributional Analysis of the Tax Systems in All 50 States", Institute on Taxation & Economic Policy, Third Edition, November 2009. Print
Dyreng, H. & Maydew, E. Long-run corporate tax avoidance. The Accounting Review. 2008. Print
Leiserson, G. "The Individual Alternative Minimum Tax: Historical Data and Projections". Brookings Institution & Urban Institute. 2008. Print
Slemrod, J. "Cheating Ourselves: The Economics of Tax Evasion." Journal of Economic Perspectives, 21(1): 25–48. 2007. Print
Turbotax. Web. April 19, 2013. <>.
Topic 556 - Alternative Minimum Tax. February 05, 2013. Web. April 19, 2013. .
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