Page 80 - DCOM301_INCOME_TAX_LAWS_I

Unit 3: Tax Planning: An Introduction

(ii) Strong Surveillance System: Government should bring strong surveillance system in Notes
place which will check suspicious trade and transaction taking place and will have also
have the complete authority to check tax defaulter, etc.
(iii) Simplified Tax Laws and Filling Mechanism: Present tax laws and tax filling mechanism is
very complex and very difficult for a layman to understand it and claim for various
deductions available in various sections. Simplified tax law will make things easy for
everyone to pay taxes.

(iv) Disclosure of all Government Employees Assets: Disclosure of assets of government
employee every year will somehow restrict them to indulge them in illegal activities and
pay taxes on all income earned rightfully. This will also leads to overcome the loss of
country resources and force other to do work completely and legally.
(v) Transparency in Government Expenditure: There should be transparency on government
expenditure at every level to make sure the every rupee sent by government is reached at
grass root level. This will avoid the vaporization of a large chunk of money done by
higher-class official, politician, bureaucrats, contractors, etc. All offices of government
should be brought under the audit of Comptroller and Auditor General of India (CAG).
Bringing expenditures of ministry of defiance was one of the major such developments.
(vi) Issue of Special Bonds by the Government: Special bonds may be issued by the government
asking the black money hoarders to invest in them by providing them immunity from
criminal proceeding existing under the existing law.
(vii) Bringing Strong Corruption Laws: Corruption is the root cause of tax evasion; if corruption
is reducing it will considerable reduce the tax evasion. And for reducing corruption and
effective strong law like LOKPAL is needed, which can have the power to investigate
every government employee and framing the maximum time for every case to make the
final judgments unlike present which take years and still cannot punish them.

(viii) Ban & Surveillance on Illegal Trade & Practices: Trades like smuggling of commodities,
drugs, baiting on cricket & various other activities like election polls, flesh trade are one
of the major causes of tax evasion as this activities are illegal they are not viable to pay
taxes on this and thus they evade taxes. Surveillance on these activities will reduce tax
evasion and crime as well.

Self Assessment

State whether the following statements are true or false:
7. Tax evasion is not considered a crime.
8. It is not possible to understand the true impact of taxation without recognizing the existence
of evasion.
9. Government earning is depends upon the tax revenue.

3.4 Tax Avoidance

Tax avoidance is the legal utilization of the tax regime to one’s own advantage, in order to
reduce the amount of tax that is payable by means that are within the law. Tax avoidance is a
strategy which involves exploiting legal means of reducing taxes with the goal of minimizing
tax liability. Avoidance is a perfectly legal approach to handling taxes, although sometimes
avoidance practices can stray into the realm of being abusive, at which point people may cross
the line into tax evasion. In tax evasion, people utilize illegal means to avoid paying all or part
of their taxes; evasion can result in prosecution and fines or prison time.

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