TAX EVASION Frazer Fennell

TAX EVASION

Tax evasion is an illegal activity in which a person or entity deliberately avoids paying a true tax liability. Those caught evading taxes are generally subject to criminal charges and substantial penalties. To willfully fail to pay taxes is a federal offense under the Internal Revenue Service.

One huge incident occurred in the UK recently that involved the TNC starbucks who were speculated to be committing tax avoidance. Starbucks’ UK-based European business paid just £18.3m in tax last year, while paying the coffee giant’s parent company in Seattle £348m in dividends collected from licensing its brand. One way that they avoided the UK corporation tax was by sending lots of money over to HQ in Amsterdam as business investment, when in reality they were just trying to be taxed at the lower european corporation tax rate. For the business and its workers this was a huge benefit as the company paid less tax and had extra money that they can reinvest into the business or even its employees in the form of pay rises or bonuses. However for the UK government this was a huge detriment as it meant that a huge sum of tax revenue in the coffee sector of the economy was missed. For the british people this is very bad as there will be less government spending which may start the negative multiplier effect.

Another interesting way that people try to tax evade is through the use of artwork. This works when an individual has a sum of money that they want to make tax free, they will get a semi-famous artist to create a painting and then value it at the same value of the sum of money. Then the individual will donate it to a local museum at the value price and receive the money from the museum/gallery from the auction they hold or if they keep it, and finally since it's a charitable donation the money cannot be taxed and the individual will then receive the money tax free.

Some may consider tax evasion smart however it is very risky for businesses for many reasons. One of them being if it's not a loophole and is against the law firms can face huge fines and even jail time for the ones responsible. Also it can be bad for public relations as some consumers may stop purchasing your businesses products and services due to the company being unethical. FInally it also takes a lot of time and expertise which could drive up costs and unfocus a business from their main targets and goals within a market.