- 5 Marks
Question
The Presidential Commission on Revenue Mobilization has indicated that tax evasion activities of some companies deny the state of its required revenue for development.
Required:
- Explain what tax evasion is, and
- Identify THREE ways by which companies evade tax. (5 marks)
Answer
- Tax Evasion: Tax evasion is the unlawful attempt to minimize tax liability through fraudulent techniques that circumvent or frustrate tax laws. These techniques include deliberate understatement of taxable income or willful non-payment of due taxes. Tax evasion involves misrepresentation of an individual’s or business’ income or assets to the Ghana Revenue Authority (GRA) to reduce the amount of taxes owed.
- Ways Companies Evade Tax:
- Underreporting income: Companies may fail to disclose all of their revenue.
- Inflating deductions or expenses: Companies may exaggerate business expenses to reduce taxable income.
- Hiding money: Companies may conceal earnings in undeclared accounts or offshore locations.
- Hiding interest in offshore accounts: Companies may fail to declare their interests or assets in foreign accounts.
- Tags: Corporate Tax, Tax Compliance, Tax Evasion
- Level: Level 3
- Topic: Anti-avoidance measures, Tax planning
- Series: NOV 2017
- Uploader: Dotse