Tax fraud in the United States is the process by which individuals intentionally evade taxes or mislead their tax affairs to National Authorities in order to save funds and avoid having to pay large taxes on such entities as income and capital gain on investments. Tax Fraud can take a number of forms including tax evasion, income tax evasion and evasion of a wide array of different levels of taxes (CBS News, 2012). Every country imposes certain taxes on their citizens for capital gains and other means in order to improve and develop the financial state of their economy further. Each citizen when employed and receiving a salary above a particular income, will be taxed a certain percentage of his or her income. As their salaries increase, their tax requirement subsequently increases. A greater percentage of tax is paid by the wealthy and this provides a large contribution to the overall economy of society. However people also see taxes as a barrier to greater wealth. Such qualities as greed and temptation can lead people to conduct tax fraud and subsequently gain a greater income then the remainder of society. This paper will accordingly investigate the economical implications of widespread tax fraud across the United States as well as determine the main causes of tax fraud across the nation (Laws, 2015).
Within the United States, the Internal Revenue Service (IRS) monitors the payment of taxes by citizens to the government. It has been reported that over $345 Billion in unpaid taxes is owed to the Federal Government of the United States. This has resulted mainly from lapses in resources and the inability of the IRS to adequately monitor tax evasion and collect unpaid taxes from citizens conducting fraud (Laws, 2015). On a yearly basis, citizens conducting different means of tax fraud or evasion owe $30 Billion on average to the government. There are also other minor tax authorities that are responsible for collecting tax but they are also under resourced and have limited capabilities in scouring the United States for cases of tax evasion. Additionally, the costs of investigating particular individuals for tax evasion or tax fraud are immense and almost outweigh the monies collected by the IRS or other small tax collection agencies. These authorities also target individuals who are evading larger sums of tax normally in the thousands or even millions (CBS News, 2012). This is beneficial as millions of dollars owed can be returned to the government however it temporarily draws authorities away from other individuals conducting tax fraud who may not owe as much and are greater in number. Considering that there are numerous cases of tax fraud across the United States, it is easy for individuals to hide from the tax authorities and to continue to evade taxes for decades. Subsequently, under resourcing and specific targeting of tax cheats can result in long term tax fraud across the United States, which costs the government billions over long periods or decades or even centuries (Cobb, 2014).
Implications for the government involve not only significant losses of funds that are owed by citizens but restrictions on government spending in a number of crucial areas. The government subsequently has fewer funds to invest in healthcare and education for society. The government relies on the constant flow of funds to support its numerous areas and resources. This establishes a flow on effect as fewer government funds result in insufficient expenditure on essential resources in society and greater unemployment rates and reliance on further government spending for welfare (Cobb, 2014). The ultimate result is increasing levels of debt for the Government as the return on its expenditure continues to decrease. Increasing levels of debt make it more difficult for citizens to pay their taxes and to continue to sustain an effective income for household management.
There are also significant implications for small and large businesses that refuse to pay their taxes. Tax fraud and evasion restricts the ability of the government to support these businesses and provide subsidies in their various areas of effective governance (Laws, 2015).
In addition to the stipulated implications, there are a number of moral issues that concern tax fraud and evasion. Social corporate responsibility in society focuses on the requirement for corporations and individuals to pay their taxes in return for a viable standard of living. When more individuals escape tax fraud and evasion or receive lesser punishments for cheating the government of substantial money, the government receives less support and funding from society. The government of the day is pressured into extensively monitoring cases of tax fraud and ensuring that it decreases the rate of tax fraud and continues to drive the economy into surplus. When companies and individuals continue to conduct tax fraud or evasion, the reputation and legitimacy of the government rapidly decreases. Citizens who do pay their taxes develop skewed views of the government and its ability to adequately spend their tax funds and provide suitable services for current and future living (CBS News, 2012).
Tax fraud poses a number of questions in relation to the future of society and whether the continuation of such criminal activities will further detriment society and prevent progression and advancement. By allowing tax fraud to continue occurring, the government is essentially allowing people to benefit their own means rather than that of society and their respective communities. Society relies on the respective contributions of individuals in order to develop and be provided with the necessary funds for support mechanisms (CBS News, 2012). Poverty stricken and lower socio-economic areas of society rely on the consistent payment of taxes by individuals in order to be adequately cared for and well managed. Without sufficient funding and with significant losses from tax fraud, the government of the day becomes highly ineffective in supporting society and providing the necessary resources for future development and advancement as stipulated in this paper (Laws, 2015).
In conclusion, the respective causes and implications of tax fraud have been evaluated in this paper and it is apparent that there needs to be greater resources provided to official agencies and authorities in order to reduce the prevalence of tax fraud and evasion in society. This is particularly pertinent to the welfare, advancement and development of society currently and in the future.
- CBS News. (2012). America at tax time: what cheaters cost us. CBS News, Retrieved from http://www.cbsnews.com/news/america-at-tax-time-what-cheaters-cost-us/ Accessed on 28 July 2015.
- Cobb, S. (2014). Taxing Times: Dealing with tax identity fraud in America. We Live Security, Retrieved from http://www.welivesecurity.com/2014/04/14/taxing-times-avoiding-tax-identity-fraud-in-america/ Accessed on 28 July 2015.
- Laws. (2015). Economic Effects and Tax Evasion Explained. Laws, Retrieved from http://fraud.laws.com/tax-fraud/tax-evasion/economic-effects-and-tax-evasion Accessed on 28 July 2015.