Generally, a Layman psychology says that “when there are rules of the law and provision for the compulsory outflow of the funds, then expenses is going to be incurred”. But when a person has done the detailed analysis of Finance, Commerce, management and money, then we will understand that, sometimes probable outflow of the funds can become our savings. For earning our living, we need some sort of regular income. “We” means the General public. We live in the society and in the society, we live inside the four walls of our house. When we think earning income and living our livelihood, we think about the fulfilling the wishes of the people those are living with us inside the four walls of houses. When it came to the society, who will fulfil the wishes of the society. Now here comes the role of Government. For fulfilling the wishes of the society, Government has taken the role of the administrator. Here comes the role of the Tax. Tax is the major source of the income of the Government. Government cannot impose the tax on ad hoc basis. There are certain rules, based on which the tax is imposed. Rules of Law and its provision always have the loop holes. There is one saying given by Picasso- “You should learn the rules like a pro, so that you can break the rules like an artist”. Here, breaking rules is relating with taking benefit of the rules of law, not by evading it but by the loopholes that has been left by the rule maker”.
Technically, a tax loopholes is a provision that the drains money from the government. Loopholes are often thought of as the domain of corporations and the business world, but there are quite a few available to individual taxpayers as well. They’re perfectly legal—they’re just little, interesting gaps in the tax code, things that might seem black and white on the surface but they’ll make you go “Hmm… I should dig this.” when you take a closer look. As a taxpayer, it’s up to you to identify and use them. The Internal Revenue Service is not going to tap you on the shoulder and whisper, look how much you’ll save in taxes if you take advantage of this provision!”. Tax loopholes are generally can be taken as a gift but not a curse. It’s been a significant asset to corporations.
Now describing another aspect of tax relating it to be the gift that the government has given to us. If all income earners will pay the right amount of tax, the government can collect more money to support its objectives such as building roads, schools, better government salaries and improve government services. These factors can help attracting more investors and job in the country. More people having jobs, means more people having money to spend which will directly or indirectly improve business as well. On the opposite, if all income earners will illegally reduce the amount of tax obligation, the government will have no fund on hands and will resort to availing private and foreign loans in order to govern the country. There will be lesser funds to build roads, schools, infrastructure, lower wages, that decreases morale that which leads to poor government services. In this scenario, the cycle of poverty will continue because investor may cease from investing in the country which will reduce job and increase in the poverty. With the less jobs in the country, people will have less money to spend and less potential customer to the business. Crime will increase which may also directly or indirectly affect family and business. Paying the right amount of tax is social responsibility to the country. The taxes will go to the government funds that will be used in the developing and improving the government facilities and the life of people in the country, inside and outside the country.
Paying right amount of tax provides good credit rating to financial institution and agencies. Higher the amount of taxes we declare, the higher the credit rating. We can use our credit rating getting loan for additional funds for the expansion of our business or other purposes. Maintaining a truthful and accurate accounting and tax records will boost confidence of investors. On the other hand, fraudulent and inaccurate will create an impression that the company is not trustworthy to invest with.
At last, but not the least, ultimate satisfaction of earning revenue is “Peace of mind”. Being audited by different regulatory authorities may cause high amount of stress especially to tax payer who intentionally or illegally, decreases their tax payments. Sometimes it can affect even our personal life which gives you sleepless night and anxieties. If we pay right amount of tax, we can eliminate these stress and anxieties, we will have more peace of mind and we can focus in growing our investment portfolio, business and livelihood.