A tax crime is an act committed or omitted in violation of any tax law for which the punishment prescribed is the imposition of a jail term or fine upon conviction in a Court of Law. Hence, tax crimes are acts of commission or omission that violate any tax laws or regulations. It is important to note that all acts that result in tax evasion, according to the tax commissioner, can land a taxpayer in court.
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Whether a taxpayer is prosecuted for the crime in a court of law depends on the available admissible evidence. The amount of tax involved does not depend on the taxpayer’s prosecution. Information about what is considered a tax crime applies to all taxpayers, irrespective of whether they have evaded a significant amount of tax or not.
“Tax crimes result in tax evasion.”
Why Tax Crimes?
Tax crimes can be intentional or not. However, there are many reasons for tax crimes. The following are some reasons for tax crimes.
a. Lack of adequate and effective tax planning measures by the taxpayer:
When taxpayers do not plan their taxes properly, they may end up paying more taxes or make costly mistakes. Tax planning helps taxpayers find legal ways to reduce the amount of tax they owe by taking advantage of deductions, credits, and exemptions. With good tax planning, taxpayers can benefit from savings and avoid penalties for overlooking tax rules, regulations, and laws.
b. Inadequate tax knowledge:
Many taxpayers need to fully understand the tax rules, regulations, and laws that apply to them. Failure will lead to mistakes or missed opportunities for savings. Taxpayers need to learn how to file their tax returns correctly or what deductions they qualify for. Otherwise, they might pay too much or too little. A lack of tax knowledge increases the risk of breaking tax laws, which can lead to fines or audits.
c. Unrealistic perception of tax regimes:
Some taxpayers feel that the tax system is unfair or too complicated. They think the tax rates are too high or the tax rules do not match real-life situations. This perception can lead to frustration and make taxpayers less likely to comply with tax laws, as they might feel the system does not benefit them or needs to be designed with their needs in mind.
d. Low capacity in tax authorities:
Sometimes, the tax commissioner needs more resources or staff to do their job. The low capacity may result in mistakes, delays, and poor customer service. If the tax commissioner can’t help taxpayers or enforce tax laws correctly, it can lead to misunderstandings, errors in tax payments, and even opportunities for tax evasion.
e. Lack of self-discipline by taxpayers:
Paying taxes on time and correctly requires self-discipline and responsibility. Some taxpayers may lack self-discipline, leading them to procrastinate, miss deadlines, or try to cut corners. This Lack of discipline can cause fines, penalties, or legal issues if taxes are not handled properly.
f. Perceived benefits of tax evasion:
Some taxpayers believe that avoiding taxes will give them extra money to spend or invest elsewhere. They may perceive tax evasion to increase their income. However, tax evasion is illegal and risky. While it might seem beneficial in the short term, it can lead to severe consequences, including heavy fines and even jail time if the taxpayers get caught.
These are not the only reasons for tax crimes. There are many other reasons out there.
Actions Considered Tax Crimes
Various acts may be considered tax crimes in Kenya. In deciding whether a specific act is a criminal act, the intention is the key factor. However, every case is treated on its merit. The evidence is considered.
The following are some acts that may be considered acts of tax crimes:
1. Intentional failure to file tax returns when due:
Some taxpayers purposely avoid filing their tax returns by the due date, hoping to escape paying taxes. However, this act may be considered tax evasion. It can lead to fines or other legal actions if the tax commissioner is convinced it was a deliberate act of tax evasion.
2. Deliberate failure to charge, collect, and remit tax:
Some taxpayers refrain from collecting taxes by withholding income tax, and then fail to remit it to the tax commissioner. This deliberate action is illegal and can result in significant penalties. The tax commissioner relies on taxpayers to collect certain taxes on behalf of the government.
3. Deliberately preparing false tax returns:
Filing false tax returns means intentionally providing incorrect information to reduce the amount of tax owed. This will include false information about deductions, income, or expenses. If caught, taxpayers will face fines, penalties, and possible criminal charges.
4. Making false statements to tax officers:
Giving false information to tax officials is illegal. Whether it is lying about expenses, income, or other financial details, making false statements can result in serious legal consequences if the deception is uncovered.
5. Claiming fraudulent tax refunds:
Some taxpayers try to claim VAT or income tax refunds they are not entitled to by providing false information. This includes exaggerating expenses or fabricating business costs. Fraudulent refund claims can lead to audits, fines, penalties, and criminal prosecution.
6. Intentional under-reporting or omitting income:
This occurs when taxpayers knowingly fail to report all their earnings in a year of income to reduce their tax bill. It is a common form of tax evasion and is punishable by law. The tax commissioner may conduct audits to uncover unreported income and apply penalties.
These are not the only acts that may be considered tax crimes. There are many others out there.
Questions:
- What actions are considered tax crimes?
- What actions is the tax commissioner taking to minimise incidences of tax crimes?
