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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

Theoretical solution to the phenomenon of


“tax evasion”

BY: AOUISSI AMINE; Researcher in CONSTANTNE University. ALGERIA.

Introduction:

Historic expansion of economic activity and expansion of trade make


the task of controlling these two variables by the authorities’
concerned (public sector) is difficult, which give rise to the
emergence of some phenomena that have had some negative effects on
economic and social system in the whole society.
Perhaps the most important of these phenomena is the phenomenon of
"tax evasion"; a phenomenon that accompanied the activity tax since
it (the emergence of tax) what is noteworthy is the different causes
of this phenomenon at the same time, forms and results are what we
will try to refer to them in this simplified approach.

I-Definitions :

1-A.MANGAINAZ

(1)
Use poor status than the one provided by the legal rules .

2-J.C.MARTINZ

Art avoid the attractiveness of the area of tax law(2).

3-LOUISSIAT MAHAL:

Is a circumvention of the tax law in order to get rid of taxation or


to reduce the tax base under(3).

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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

4-H.M.HOSSINE:

Escape from the tax imposed on it, by breaking the law, evasion may
occur when determining the tax base and that the concealment charge
of some of the taxable or a wrong report, may also be the occasion of
tax collection and as if the charge of concealing wealth(4).

5-M.DOUIDAR:

No material tax evasion charge when free legal tax burden in whole or
in part without the burden moves to another person(5).

6-K.ROZYF:

Are smuggled material and all accounting operations and all legal
proceedings and attempts and resorts in charge of arrangements, in
order to get rid of the tax due(6).

Can be concluded that they were driven through these definitions that
tax evasion is a set of actions and behaviors of others, whether
legal or monetary or material which is in charge of accounting for
the disposal of the tax evasion.

II-MOST ATTEMPTS TO ELIMINATE THE PHENOMENON:

(7)
II-1-Control :

Fiscal Control: The fiscal control of the most important actions


taken by management to preserve and maintain the treasury, and is a
means through which to ensure the accuracy of the information given
by the costly and forms are:
- The right information.
- The right to redress errors and guarantees for costly.
- The right of control.

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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

(8)
II-2-Tax investigation :

A) Investigation of accounting:

J.C.MARTINZ say that the fraud extended to reductions of petty


exaggeration of sales or import without a permit to the neglect of
recording all of inflating revenue through cost figures.
This type of investigation allows the management to ensure fiscal
health of the accounting literature and recordings and, through
review of all accounting books and documents into place.

B) Depth investigation of the overall fiscal situation:

and procedures based on this investigation to administrative


officers to the rank of investigator in this regard, they control the
compatibility and harmony entrances authorized by the party in charge
of financial and tax situation between the pattern of living and on
the other where the research of foreign accounts And the legislation
in this area to the observer right to communicate with financial
Companies with which the charge of "the banks to provide funds" as
the investigation was conducted in the documents based real estate
and built in the interest of registration, as well as documents
related to the costly and a wealth of quotas, bonds , Shares, loans,
cars, etc(9) ...

II-3-Amend the tax administration and improve(10):

A) - stability and justice legislation.


B) - streamline the tax system.
C) - improving the physical possibilities.
D) - Improving human potential.
E) - to improve the administration.

III-Theory attempt to address the phenomenon of tax evasion:

Tax evasion, the conflict between the Treasury -public authorities-


(that one of the most important sources of funding are taxes); and
Companies, which the most important things for them is maximize its
profits by minimizing taxes.
The first seeks to collect taxes, which constitute an important part
of their revenues, while for the second seeks to maximize profits and
consider this to happen and try to reduce the volume argues that
taxes in some cases, one of the reasons for bankruptcy, which is
therefore open to the phenomenon of tax evasion.
The Company’s expenses qualitatively are many, including what is
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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

within the cycle of exploitation (the purchase of raw materials and


supplies), some of which are outside the cycle of exploitation
(buildings, machinery and equipment).
How it dealt with expenses that are outside the cycle of
exploitation? Traditionally circumvent them in a legitimate (on the
basis that bear the expenses of each session) and add that fee to be
added to the mock sessions, followed by:

Depreciation: With regard to buildings and transportation.

Allowance: With regard to the expected hazards.

This is what led to improved the economic and financial situation of


the Company, through the inclusion of such expenses in the budget
accounting (or financial), they take into account when calculating
the tax and reduce it, though it shows the interest of one party only
if it included a few attendance at the Company Payment of taxes, and
this is what makes the public Treasury, in a kind of satisfaction
that it had secured a relatively access revenues and this is what we
will focus it (which is to ensure that revenue - taxes - for the
treasury and permanent manner as a positive in the first place).
Through this approach can point to two positive commensurate each one
particular interest of the parties to the conflict:

- For the Company: the quest to reduce taxes (expenses) in order to


maximize profits.
- For the public treasury: the quest to ensure that taxes (income)
and reduce tax evasion.

Note:
This study is based on postulate doomed taxes are part of the
expenses of the Company and not deducted from profits, the fact is
that what the Company see in taxes ;not as part of the distribution
of profits, which bring to the tax evasion.

III-1-Solution:

No doubt that taxes are additional expenses borne by the Company


(Major Postulate of this valuable trigger).

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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

III-2-The idea plenary

Why the taxes not be one of expenses which are outside the cycle of
exploitation, although it originally linked cycle of exploitation
(cuts in company profits during the exploitation)?
Expenses beyond the cycle of exploitation must be depreciated which
taxes must also be depreciated.
How:
Be a rate of depreciate and / or fixed-term legally depreciated it
(the cover), considering that taxes the first year of exploitation in
the years to cover the pro set a legal depreciations (Installments) and
the second year of the year after and so on.

And the following example illustrates the process:

Example:
Assume that an Company with a fixed profit per year (to facilitate
understanding of example only) equal to 100,000 MU1, and the rate of
tax on profits (IBS), equal to 30%, 10 year period of study.

III-3-Application:

III-3-1-The traditional way:


The amount of tax (IBS) = annual profit annual X 30/100 = 30000 MU.
The amount of tax for 10 years = amount of tax X 10 years = 300,000
MU.
Profits for 10 years = 100000 X 10 = 1000000 MU.
Profit after tax = 1,000,000 - 300,000 = 700,000 MU.

III-3-2-MODERN WAY:
Follow the pro schedule for the application of theoretical solution
on the basis that each year the tax paid depreciate value in the past
five pro,
that the duration of depreciation = 5 years ;and the rate of
depreciation = 20%.

1
MU : Monetary Unite .

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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

a)Table: 01:

Source: researcher

b)Interpretation of the table:

Trying to understand the table divided into two parts (to track the
different variables):

-Tracking the amount of tax with time:

Source: researcher

It is noted from the graph gradually decrease the amount of tax


during the first years and then back up slightly to settle at a
relatively almost 24,000MU after the fifth year.

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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

-Tracking the amount of accumulated Installments with time:

Source: researcher

Chart note the growing backlog in the amount of Installments up to


the maximum in the fifth year (with the end of fighting last
installment for the first tax) and then to settle down after that at
24,000 MU.
Important note: We note that the level of stability of the amount of
tax after the fifth year almost to the level of stability equivalent
amount of accumulated Installments and assume that the result of the
stability hypothesis annually the amount of profit, estimated at
100,000 MU; The reason for steadfastness after the fifth year due to
the depreciation, estimated at five years.

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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

Evaluate the solution:

Pros:

COMPANY THE GOVERNMENT SECTOR (THE


TREASURY)

The Company from the beginning 1 - including taxes on the


required paying tax; and the Company said, the government
Benefit of the proposed method is: has increased the proportion
1 - The restoration of expenses of guaranteed access to tax
spent on taxes even partially, even (murder tendency to evade
if it accounting. tax), in the event the
2 - most importantly, reduce taxes Government to maintain the
next year, making it the best same tax rate.
financial position and the actual 2 - taxes Regarded as
earnings (in the Hypothesis of: The expenses; and must be
government keeps the same tax depreciate by the Company
rate). because it will reduce taxes
next year; we find also that
statement in the interest of
the Company in real terms with
respect to its financial
position in order to attempt
to show the volume of taxes
(inflate taxes the first year
reducing taxes next year) are
already required to give These
figures (real) and have ruled
him somewhat to the idea of
tax evasion by even more than
the first, and it has ensured
that permanent income it
through taxes.

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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

Negatives:

COMPANY THE GOVERNMENT SECTOR (THE


TREASURY)

-1 download - the second year actual income decreased from


and beyond expenses accounted year to year
budge even more confidence
with the client because of
positive accounting
phenomenon.
2 - lack of profits to
shareholders in the years
after the first, loading the
years because of expenses
resulting from extinguishing
the amount of tax for the
first year.

In light of this assessment we believe the most affected party is the


government sector; which we treat as follows:

a) With respect to the government sector, there are two


possibilities, the first to sacrifice so much financial authorities
in order to stimulate the missing holders to pay taxes, the precedent
solution(the new method) is in favor of the former; or government
must find a tax rate which guarantees regular income natural
(traditional method), which we will discuss:

- Use the tripartite way to find new rate which guarantees access
to public sector tax dues as follows:

(1-0.3) 746346.12

(1-x) 700000

X=0.3434≈34.34%

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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

- we find that the appropriate tax rate: 34.34%, a rate which is


garnet revenues of the government sector from taxes while maintaining
the modern way;
- for generalize this solution in the form of general solution; we
choose one of these laws:

…………..(01)

Or

……………..(02)

-Where the first law (No: 01), we find that:

Z: is the value of the taxes collected for n years.


Xi: how much profit it received each year i, = i from 1 to n.
Y: is the rate to be applied.

-In the second law (No: 02) is the same with the previous variables:

Yi: is the tax rate imposed on annual basis to a variable rate (in
the case of the government sector discuss the balance between taxes
early years with the last close any Installments).

B) the Company sector (in charge of tax):


Companies bear a fake burden (accounting) increased over the years,
but the fact of the matter is not bear any burden as the installment
should be paid to the government sector (part retained by the tax
imposed to pay) and the lifting of whatever the government sector,
the tax rate in the Interests of the Company; the amount of tax paid
from the first year decreases the amounts of taxes paid for the
coming years.
In addition to the Company to maintain its financial position, even
if imposed by the retention of those Installments not to mention the
possibility of investing those Installments to buy shares in the
medium term or deposited in banks on deposits for the (average).

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AOUISSI Amine theoretical solution to the phenomenon of “tax evasion”

Conclusion:

With this, we have made an effort to find a theoretical solution to


the phenomenon of conflicts has constantly occur between the two
sectors, namely, what was important in economic and social life
alike, and most of the results of that conflict was serious and at
the level of the two parties, many Companies went bankrupt because of
arbitrary tax imposed, The majority of public coffers bled by the
phenomenon of tax evasion.

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‫‪AOUISSI Amine‬‬ ‫”‪theoretical solution to the phenomenon of “tax evasion‬‬

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‫‪1) A.MARGAIRAZ « LA FRAUDE FISCAL » 2EME ÉDITION ET SUCCES ANNEE 1977 P125.‬‬

‫‪2) J.C MARTINZ « la fraude fiscal » PU .PARIS 1984 P43.‬‬

‫‪3) L.MECHLE « SCIENCE ET TECHNIQUE FISCAL » PU France 1959 TOME 2 P733.‬‬

‫‪ )4‬د‪.‬حسٍه مصطفى حسٍه"اقتصادٌاث المالٍت العامت" دٌوان المطبوعاث الجامعٍت‪-‬جامعت وهران‪ 1992 -‬ص ‪.58‬‬

‫‪ )5‬محمذ دوٌذار "دراست االقتصاد المالً" دار المعرفت الجامعٍت ‪ 1996‬ص‪. 229‬‬

‫‪)6‬د‪.‬عبذ المىعم فوزي "الىظم الضرٌبٍت "الذار المصرٌت ‪ 1971‬ص‪.223‬‬

‫‪")7‬دلٍل المكلفٍه بالضرٌبت الخاضعٍه للرقابت "طبعت ‪ 2006‬ص‪.15‬‬

‫‪8) J.C.MARTINZ « SOURCE PRECEDENT » PU.F PARIS 1990 P74.‬‬

‫المادة ‪ 131‬مه قاوون الضرائب المباشرة‪)9 .‬‬

‫‪ )10‬عبذ الكرٌم صادق بركاث "تىظٍم الىظم الضرٌبٍت" الذار الجامعٍت بٍروث ‪ 1986‬ص‪.210‬‬

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