“Taxes are the price we pay for civilization,” said Oliver Wendell Holmes, the great Supreme Court justice of US. But, sometimes it seems that people who cannot offshore havens or afford smart accountants pay the most of it. The common people, who do not know about clever tax avoidance schemes like the rich people, are the main ones who bear the brunt. And most of all, these common people cannot afford to hire accountants who know the ABC’S of tax avoidance, maybe because most of their disposable income is lost to these taxes.
The government has taken various measures to crack down on selfish people who love to avoid taxes. And, as a result, avoiding taxes has become much more risky than before. Instead, people who practice tax avoidance should pay for taxes and play by the rules, in order to avoid the worst consequences of tax evasion. Since, with a substantial amount of fees for joining the tax avoidance scheme, tax avoiders are also required to pay their dodged taxes, in addition to penalties and interest.
In order to protect taxpayers from dishonest promoters of tax avoidance schemes, there are a set of High-Risk Promoter rules. These rules will make people aware about the dangers of promoting tax evasion schemes.
We have listed down the ten things that you must know about tax avoidance schemes. These are some of the important facts about tax avoidance that a tax avoidance promoter will not want you to know. This list incorporates several risks that people can face, in order to avoid their taxes. When they apply for a new tax avoidance scheme, they can get caught in the possible financial costs, as well as face reputational damage for tax evasion. In fact, they can even get a prospective criminal conviction and can land up in jail.
So, if you are planning to sign up for any such scheme, carefully go through this list of 10 things that a tax avoidance promoter will not tell you. You may be told that tax evasion schemes may legally reduce your tax bill, but before venturing into any such risk, consider the following facts about tax avoidance.
1. Many tax avoidance schemes do not work. Perhaps, you would be told that tax evasion is legal. However, if the scheme does not work out, you will file a wrong tax return that would not be as per the law. And, in such a case, you will be lawfully obliged to pay your due taxes, plus you will be charged with penalties.
2. You will have to pay a significant amount of legal fees. If your tax avoidance scheme is charged with a lawsuit, you would have to pay a hefty legal fee. In fact, even your promoter can bluntly ask you to pay a ‘fighting fund’.
3. A tax avoidance scheme may cost you much more than you asked for. Such schemes are quite complex. They can build up unplanned tax consequences for you. Moreover, the fee that you pay to your promoter is not counted as paid tax. As a result, you can pay much more than the tax you intended to avoid.
4. If you avoid taxes, you can face criminal conviction and land up in prison. If you intentionally conceal or mislead any information from the revenue and customs department, you can be put on trial and eventually be condemned.
5. Any of the tax dodging schemes is never approved by the government. Just because you have got a Scheme Reference Number for tax avoidance from the government, does not imply your scheme is cleared by the said department. The government issues these numbers only if a tax avoidance scheme has some signs of avoiding tax.
6. You can be exposed as a tax avoider. If your name enters in the court records or public registers at the time of your court case, you can be reported to the media and face publicity as a tax dodger.
7. You can be marked as a high-risk taxpayer. If you use any tax dodging schemes, you can be marked as a high-risk taxpayer. This means that all your future tax affairs will be carefully examined, and not just your relief claim.
8. You are the one at risk. Your promoter will not guarantee you that an avoidance scheme will work. And it is most likely that he will not even be there for you, once the government begins investigation on your tax affairs. Some promoters can guarantee you just to sell their schemes, but eventually they disband.
9. The government can beat your tax evasion scheme in court. It is noted that the revenue and customs department wins eight cases out of every ten cases, when promoters and taxpayers take their schemes to court.
10. You will have to pay the tax anyway. You will not benefit from a cash-flow, when the government investigates your scheme. New law says that you will directly have to pay the contended tax.
ERNIE BUSTAMANTE