theoretical solution to the phenomenon of “tax evasion”

AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

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Theoretical solution to the phenomenon of

“tax evasion”

BY: AOUISSI AMINE; Researcher in CONSTANTNE University. ALGERIA.

Introduction:

Historic expansion of economic activity and expansion of trade make

the task of controlling these two variables by the authorities’

concerned (public sector) is difficult, which give rise to the

emergence of some phenomena that have had some negative effects on

economic and social system in the whole society.

Perhaps the most important of these phenomena is the phenomenon of

"tax evasion"; a phenomenon that accompanied the activity tax since

it (the emergence of tax) what is noteworthy is the different causes

of this phenomenon at the same time, forms and results are what we

will try to refer to them in this simplified approach.

I-Definitions :

1-A.MANGAINAZ

Use poor status than the one provided by the legal rules (1).

2-J.C.MARTINZ

Art avoid the attractiveness of the area of tax law(2).

3-LOUISSIAT MAHAL:

Is a circumvention of the tax law in order to get rid of taxation or

to reduce the tax base under(3).


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4-H.M.HOSSINE:

Escape from the tax imposed on it, by breaking the law, evasion may

occur when determining the tax base and that the concealment charge

of some of the taxable or a wrong report, may also be the occasion of

tax collection and as if the charge of concealing wealth(4).

5-M.DOUIDAR:

No material tax evasion charge when free legal tax burden in whole or

in part without the burden moves to another person(5).

6-K.ROZYF:

Are smuggled material and all accounting operations and all legal

proceedings and attempts and resorts in charge of arrangements, in

order to get rid of the tax due(6).

Can be concluded that they were driven through these definitions that

tax evasion is a set of actions and behaviors of others, whether

legal or monetary or material which is in charge of accounting for

the disposal of the tax evasion.

II-MOST ATTEMPTS TO ELIMINATE THE PHENOMENON:

II-1-Control (7):

Fiscal Control: The fiscal control of the most important actions

taken by management to preserve and maintain the treasury, and is a

means through which to ensure the accuracy of the information given

by the costly and forms are:

- The right information.

- The right to redress errors and guarantees for costly.

- The right of control.


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II-2-Tax investigation (8):

A) Investigation of accounting:

J.C.MARTINZ say that the fraud extended to reductions of petty

exaggeration of sales or import without a permit to the neglect of

recording all of inflating revenue through cost figures.

This type of investigation allows the management to ensure fiscal

health of the accounting literature and recordings and, through

review of all accounting books and documents into place.

B) Depth investigation of the overall fiscal situation:

and procedures based on this investigation to administrative

officers to the rank of investigator in this regard, they control the

compatibility and harmony entrances authorized by the party in charge

of financial and tax situation between the pattern of living and on

the other where the research of foreign accounts And the legislation

in this area to the observer right to communicate with financial

Companies with which the charge of "the banks to provide funds" as

the investigation was conducted in the documents based real estate

and built in the interest of registration, as well as documents

related to the costly and a wealth of quotas, bonds , Shares, loans,

cars, etc(9) ...

II-3-Amend the tax administration and improve(10)

:

A) - stability and justice legislation.

B) - streamline the tax system.

C) - improving the physical possibilities.

D) - Improving human potential.

E) - to improve the administration.

III-Theory attempt to address the phenomenon of tax evasion:

Tax evasion, the conflict between the Treasury -public authorities-

(that one of the most important sources of funding are taxes); and

Companies, which the most important things for them is maximize its

profits by minimizing taxes.

The first seeks to collect taxes, which constitute an important part

of their revenues, while for the second seeks to maximize profits and

consider this to happen and try to reduce the volume argues that

taxes in some cases, one of the reasons for bankruptcy, which is

therefore open to the phenomenon of tax evasion.

The Company’s expenses qualitatively are many, including what is


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within the cycle of exploitation (the purchase of raw materials and

supplies), some of which are outside the cycle of exploitation

(buildings, machinery and equipment).

How it dealt with expenses that are outside the cycle of

exploitation? Traditionally circumvent them in a legitimate (on the

basis that bear the expenses of each session) and add that fee to be

added to the mock sessions, followed by:

Depreciation: With regard to buildings and transportation.

Allowance: With regard to the expected hazards.

This is what led to improved the economic and financial situation of

the Company, through the inclusion of such expenses in the budget

accounting (or financial), they take into account when calculating

the tax and reduce it, though it shows the interest of one party only

if it included a few attendance at the Company Payment of taxes, and

this is what makes the public Treasury, in a kind of satisfaction

that it had secured a relatively access revenues and this is what we

will focus it (which is to ensure that revenue - taxes - for the

treasury and permanent manner as a positive in the first place).

Through this approach can point to two positive commensurate each one

particular interest of the parties to the conflict:

- For the Company: the quest to reduce taxes (expenses) in order to

maximize profits.

- For the public treasury: the quest to ensure that taxes (income)

and reduce tax evasion.

Note:

This study is based on postulate doomed taxes are part of the

expenses of the Company and not deducted from profits, the fact is

that what the Company see in taxes ;not as part of the distribution

of profits, which bring to the tax evasion.

III-1-Solution:

No doubt that taxes are additional expenses borne by the Company

(Major Postulate of this valuable trigger).


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III-2-The idea plenary

Why the taxes not be one of expenses which are outside the cycle of

exploitation, although it originally linked cycle of exploitation

(cuts in company profits during the exploitation)?

Expenses beyond the cycle of exploitation must be depreciated which

taxes must also be depreciated.

How:

Be a rate of depreciate and / or fixed-term legally depreciated it

(the cover), considering that taxes the first year of exploitation in

the years to cover the pro set a legal depreciations (Installments) and

the second year of the year after and so on.

And the following example illustrates the process:

Example:

Assume that an Company with a fixed profit per year (to facilitate

understanding of example only) equal to 100,000 MU1, and the rate of

tax on profits (IBS), equal to 30%, 10 year period of study.

III-3-Application:

III-3-1-The traditional way:

The amount of tax (IBS) = annual profit annual X 30/100 = 30000 MU.

The amount of tax for 10 years = amount of tax X 10 years = 300,000

MU.

Profits for 10 years = 100000 X 10 = 1000000 MU.

Profit after tax = 1,000,000 - 300,000 = 700,000 MU.

III-3-2-MODERN WAY:

Follow the pro schedule for the application of theoretical solution

on the basis that each year the tax paid depreciate value in the past

five pro,

that the duration of depreciation = 5 years ;and the rate of

depreciation = 20%.

1 MU : Monetary Unite .


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a)Table: 01:

Source: researcher

b)Interpretation of the table:

Trying to understand the table divided into two parts (to track the

different variables):

-Tracking the amount of tax with time:

Source: researcher

It is noted from the graph gradually decrease the amount of tax

during the first years and then back up slightly to settle at a

relatively almost 24,000MU after the fifth year.


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-Tracking the amount of accumulated Installments with time:

Source: researcher

Chart note the growing backlog in the amount of Installments up to

the maximum in the fifth year (with the end of fighting last

installment for the first tax) and then to settle down after that at

24,000 MU.

Important note: We note that the level of stability of the amount of

tax after the fifth year almost to the level of stability equivalent

amount of accumulated Installments and assume that the result of the

stability hypothesis annually the amount of profit, estimated at

100,000 MU; The reason for steadfastness after the fifth year due to

the depreciation, estimated at five years.


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Evaluate the solution:

Pros:

THE GOVERNMENT SECTOR (THE

TREASURY)

COMPANY

1 - including taxes on the

Company said, the government

has increased the proportion

of guaranteed access to tax

(murder tendency to evade

tax), in the event the

Government to maintain the

same tax rate.

2 - taxes Regarded as

expenses; and must be

depreciate by the Company

because it will reduce taxes

next year; we find also that

statement in the interest of

the Company in real terms with

respect to its financial

position in order to attempt

to show the volume of taxes

(inflate taxes the first year

reducing taxes next year) are

already required to give These

figures (real) and have ruled

him somewhat to the idea of

tax evasion by even more than

the first, and it has ensured

that permanent income it

through taxes.

The Company from the beginning

required paying tax; and the

Benefit of the proposed method is:

1 - The restoration of expenses

spent on taxes even partially, even

if it accounting.

2 - most importantly, reduce taxes

next year, making it the best

financial position and the actual

earnings (in the Hypothesis of: The

government keeps the same tax

rate).


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Negatives:

THE GOVERNMENT SECTOR (THE

TREASURY)

COMPANY

actual income decreased from

year to year

-1 download - the second year

and beyond expenses accounted

budge even more confidence

with the client because of

positive accounting

phenomenon.

2 - lack of profits to

shareholders in the years

after the first, loading the

years because of expenses

resulting from extinguishing

the amount of tax for the

first year.

In light of this assessment we believe the most affected party is the

government sector; which we treat as follows:

a) With respect to the government sector, there are two

possibilities, the first to sacrifice so much financial authorities

in order to stimulate the missing holders to pay taxes, the precedent

solution(the new method) is in favor of the former; or government

must find a tax rate which guarantees regular income natural

(traditional method), which we will discuss:

- Use the tripartite way to find new rate which guarantees access

to public sector tax dues as follows:

(1-0.3) 746346.12

(1-x) 700000

X=0.3434≈34.34%


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- we find that the appropriate tax rate: 34.34%, a rate which is

garnet revenues of the government sector from taxes while maintaining

the modern way;

- for generalize this solution in the form of general solution; we

choose one of these laws:

…………..(01)

Or

……………..(02)

-Where the first law (No: 01), we find that:

Z: is the value of the taxes collected for n years.

Xi: how much profit it received each year i, = i from 1 to n.

Y: is the rate to be applied.

-In the second law (No: 02) is the same with the previous variables:

Yi: is the tax rate imposed on annual basis to a variable rate (in

the case of the government sector discuss the balance between taxes

early years with the last close any Installments).

B) the Company sector (in charge of tax):

Companies bear a fake burden (accounting) increased over the years,

but the fact of the matter is not bear any burden as the installment

should be paid to the government sector (part retained by the tax

imposed to pay) and the lifting of whatever the government sector,

the tax rate in the Interests of the Company; the amount of tax paid

from the first year decreases the amounts of taxes paid for the

coming years.

In addition to the Company to maintain its financial position, even

if imposed by the retention of those Installments not to mention the

possibility of investing those Installments to buy shares in the

medium term or deposited in banks on deposits for the (average).


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Conclusion:

With this, we have made an effort to find a theoretical solution to

the phenomenon of conflicts has constantly occur between the two

sectors, namely, what was important in economic and social life

alike, and most of the results of that conflict was serious and at

the level of the two parties, many Companies went bankrupt because of

arbitrary tax imposed, The majority of public coffers bled by the

phenomenon of tax evasion.


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REFERENCES:

1) A.MARGAIRAZ « LA FRAUDE FISCAL » 2EME ÉDITION ET SUCCES ANNEE 1977 P125.

2) J.C MARTINZ « la fraude fiscal » PU .PARIS 1984 P43.

3) L.MECHLE « SCIENCE ET TECHNIQUE FISCAL » PU France 1959 TOME 2 P733.

.58 ص 1992- جامعت وهران-دٌوان المطبوعاث الجامعٍت" اقتصادٌاث المالٍت العامت"حسٍه مصطفى حسٍه.د (4

.229 ص1996دار المعرفت الجامعٍت " دراست االقتصاد المالً"محمذ دوٌذار (5

.223 ص1971الذار المصرٌت "الىظم الضرٌبٍت "عبذ المىعم فوزي .د(6

. 15 ص2006طبعت "دلٍل المكلفٍه بالضرٌبت الخاضعٍه للرقابت "(7

8) J.C.MARTINZ « SOURCE PRECEDENT » PU.F PARIS 1990 P74.

9) . مه قاوون الضرائب المباشرة131المادة

.210 ص1986الذار الجامعٍت بٍروث " تىظٍم الىظم الضرٌبٍت"عبذ الكرٌم صادق بركاث (10

theoretical solution to the phenomenon of “tax evasion”

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