Tax avoidance – a part of effective business strategy or a total misuse of legislation?

 

 

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”The minimization of taxes is totally legal, but if the taxpayer tries to get interests which do not belong to him according to the tax norms, it is interpreted as tax evasion” defines Maarit Anttila in her thesis.

Any country would have much more resources to improve their infrastructure and wellbeing of citizens if companies and everyone else paid their taxes in a proper manner.

Taloussanomat states that every year over a billion euros are lost due to tax-dodging schemes. Especially at these difficult financial times where money doesn´t move the way it’s supposed to, the consequences of selfish actions can be severe for everyone and everything around you.

Taloussanomat says in its article (listed below) that the EU wants to shut down all possible ways for tax avoidance but it seems impossible to do in reality. There will always be people or organisations that want to benefit of loop holes in the legislation. Also the pressures from within the company and especially its owners don´t make things any easier. Why must there always be the agenda of ones own first and everyone else’s second? Are we humans just too selfish?

When companies ”plan” their taxes and they don´t want to be ordinary tax payers due to high tax rates, the companies tend to choose to circulate their revenue through low tax rate countries – such as Luxemburg. These countries usually go by the name tax paradise.

I suppose that they have such light tax rates because the countries tend to be small. If a small country had high tax rates, wouldn´t it mean that there would be only a few entrepreneurs because it would be so expensive to run a business. In addition, smaller countries depend on their company culture since they don´t have for example so many natural resources to spread and utilize around the world.

The difficulty to find these tax avoiders is that the planning is completed in such a manner that there would be no trace of illegal activity. Of course – when you know you´re doing something illegal you do everything in your power to minimize the risk of getting caught. Tax avoidance schemes can take many years to complete which means that the traces are nowhere to be found. If such trace is found, it will be very difficult to identify the fault. Legal processes take so much time that there remains little possibility to find the right persons and penalize them in a proper way.

Money never sleeps.  CEOs of big enterprises are the biggest jerks there are. Why do they have to be so greedy? Why wouldn´t they want to live a prosperous life without the fear of going to jail? I personally have never had much money, but if I did, I think I would want the possibility to utilize it as thoroughly / wisely as possible.

 

Sources

http://www.taloussanomat.fi/jan-hurri/2013/05/22/nain-suomi-tienaisi-jos-kaikki-maksaisivat-veronsa/20137194/12

http://uk.businessinsider.com/explanation-of-hsbc-tax-evasion-scandal-2015-3

http://www.theguardian.com/technology/2016/feb/18/revealed-project-goldcrest-amazon-avoid-huge-sums-tax

https://www.theseus.fi/bitstream/handle/10024/48496/Anttila_Maarit.pdf?sequence=1

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8 Responses to Tax avoidance – a part of effective business strategy or a total misuse of legislation?

  1. piesnrol says:

    Interesting! A divisive and topical subject.

  2. minpar says:

    Good points!

  3. aripekks says:

    Very insightful post!

  4. sasupatrik says:

    Fascinating topic! Tax avoidance has become a real problem, I agree.
    Iiroten, what are your thoughts on tax havens? Do you think that there is tax avoidance in Finland?

    • iiroten says:

      Look at our prime minister and then you get my answer to that. He says he hasn´t avoided taxes but he “planned the taxes of his companies” and with that got (with the help of huge dividends) huge sums of money to share with his children.

      Think about that. 😀

  5. mustadiktaattori says:

    Very interesting topic, but I don’t see anything wrong with some tax planning or avoidance. Loop holes were meant to be used and be benefited from them.

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