THE EFFECT OF TAX AVOIDANCE IN ECONOMY Essay Example | Topics and Well Written Essays - 2000 words

THE EFFECT OF TAX AVOIDANCE IN ECONOMY - Essay Example Therefore, the study of tax avoidance is important in the implementation of a couple of constitutional loopholes upon which tax payers evade taxation for their own advantages. Tax Avoidance Tax avoidance is a subject concerned with the identification of the various legal loopholes surrounding taxation. The purpose of the study is to implement the various ways through which individuals benefit from the avoidance approach. Further, concerns rise as to whether the approach is ethical and of equal importance to the general economy. Studies reveal that mitigation and evasion of taxes differ from tax avoidance as they present a subject of illegality in the taxation clause. Tax avoidance is a legal taxation approach upon which the beneficiaries acquire a constitutional right to avoid taxes (Brooks & Dunn, 2010, p.56). The study reveals the implications emanating from tax avoidance, examples of tax avoidance in relation to the benefits cheat, the ethical issues arising thereof, and a compari son of the ethical issues to the subject of legality. ... However, the dream may be short-lived because of malicious proprietors who sought to identify loopholes in the taxation system and eventually avoid the taxes. Such acts may result in unhealthy competition in a country’s business economy and income imbalances (Ferrell, Fraedrich & Ferrell, 2011:36). In the long-run, the business abiding by the set taxing criterion may suffer unhealthy competition from malicious competitors, thus resolving to exit the market. Global economies perceive taxation as the key to growth and implementation of adequate consumer and producer policies. As governments impose taxes to limit consumption of health hazardous products, the businesses involved in production and selling of the products will extend the total amount of the imposed tax to the final consumer. This approach will serve to reduce the consumer’s income as he tries to maintain marginal consumption of the restricted product. The eventual outcome is that the reduced income of the con sumer will injure the purchase of vital commodities as the addicted consumer maintains consumption of the restricted product (Moffat, Bean & Dewar, 2005, p.48). At this level, tax avoidance by the producers shall lead to reduced incomes among the consumers and increased poverty levels. Ethical Concepts in Tax Avoidance and Related Cases In accordance to taxation theorists, tax avoidance would pose a fair reflection whenever meant to imply the positive use of money. Authorities may assess different business entities and establish those which should avoid taxes and those that should remit through a constitutional approach. The business will eventually evade taxation but through