Question

Please provide your thoughts:

What is the term "tax morality"?

????If for example, your company has a subsidiary in Russia where some believe tax evasion is a fine art, the morality is to comply with Russian tax laws or violate the laws?

Answer 1

MEANING OF TAX EVASION:

Tax evasion is an illegal action 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.

Tax Evasion Versus Tax Avoidance:

While tax evasion requires the use of illegal methods to avoid paying proper taxes, tax avoidance uses legal means to lower the obligations of a taxpayer.

This can include efforts such as charitable giving to an approved entity or the investment of income into tax deferred mechanism. Tax avoidance may be characterised as a mis-use or abuse of the law rather than a disregard for it. It is often driven by the exploitation of structural loopholes in the law to achieve tax outcomes that were not intended by the Parliament but also includes manipulation of the law and a focus on form and legal effect rather than substance. The way things are done in order to take advantage of structural loopholes, or to dress up or characterise something to satisfy form but not substance can also stamp an arrangement as avoidance.

What is meant by the term tax morality?

In many countries taxpayers, corporate or individual, do not voluntarily comply with the tax laws. Smaller domestic firms and individuals are the chief violators. Given the local prominence of most foreign subsidiaries and the political sensitivity of their position, most MNCs follow the full disclosure practice. Some firms, however, believe that their competitive position would be eroded if they did not avoid taxes to the same extent as their domestic competitors. There is obviously no prescriptive answer to the problem, since business ethics are partly a function of cultural heritage and historical development.

Unlike tax evasion, tax avoidance is, by definition, legal. This is not the same thing as saying it’s acceptable. No one wants to live in a society where everything questionable is banned or where you cannot criticise someone for doing something legal.

There is certainly scope for closing the tax loopholes that create the biggest avoidance schemes. There is something fundamentally unfair about the very rich avoiding the punitive rates paid by ordinary people. But this is a policy question that can only be answered by serious proposals for reform, not self-righteous pontificating about tax dodgers being ‘disgusting’. And, in any case, the biggest problem is that ordinary people are overtaxed due to, for instance, the insidious creep of fiscal drag.

But given that, picking an example at random, having a beneficial interest in an offshore investment trust that does not pay UK tax (even if you do later pay UK tax on your dividends) is completely legal, is it ethical?

The perspective that avoiding tax is inherently theft rests on some very peculiar assumptions. It needs to be accepted that current tax rates are either just, or not high enough, that the right things are being taxed in the right way, and that taking advantage of any loopholes is wrong.

For instance, in order to think that setting up a company to avoid income tax is immoral, you need to assume that: (i) income should be taxed at a higher rate than corporate profits; (ii) there is an obvious and absolute moral distinction between income and profit; and (iii) there are objective grounds to determine when it is legitimate to register a company.

It also needs to be assumed that providing the government with all the funds it demands is moral. It’s easy to talk about hospitals, schools, the roads, defence, and welfare. But that skirts over the real question of whether government should be funding these things at all and, if so, whether they should cost what they do.

It also ignores less palatable areas of expense, such as spending on foreign wars, nuclear weapons, a quixotic and destructive drug war, nonsensical vanity projects, bloated and pointless government departments, and corporate welfare. The same people who attack tax avoidance also decry much of this, yet remain absolutely committed to the ‘obligation’ to fund the state’s largesse above and beyond what the law requires.

These issues may not have an obvious answer. But that’s exactly why tax dodging cannot just be lazily and self-righteously vilified as ‘disgusting’ by definition.

However, it is hard for an evader to protest that despite the evasion, he or she has still paid the fair share of tax.  This is because the fact of the lie shows that the evader knows that, as a matter of fact, his or her tax should be higher than that disclosed.

Tax avoidance, on the other hand, does not require deceit.  An avoider may well make full disclosure of all the facts in relation to the impugned arrangement

CONCLUSION

Having seen above arguements it can thus be commented in a way having different views to the same statement that " in Russia where some believe tax evasion is a fine art, the morality is to comply with Russian tax laws and not to avoid them."' However tax avoidence through legit manner may be adopted considering laws of that country.