The age-old adage "the rich get richer" has long been a subject of societal debate and scrutiny. In recent years, the discussion has gained renewed attention as accusations of wealthy individuals and corporations exploiting legal loopholes to avoid paying their fair share of taxes have surfaced. This controversial phenomenon suggests that the wealthiest individuals and entities are able to accumulate even greater wealth while evading their fiscal obligations, exacerbating economic inequality.
The rise of globalization and the increasing complexity of financial systems have undeniably facilitated the rich get richer phenomenon. With the ability to operate across borders and engage in intricate financial arrangements, affluent individuals and multinational corporations can strategically navigate tax laws and regulations to their advantage. Moreover, the advent of offshore tax havens has provided an avenue for the wealthy to shield their wealth from tax authorities, further exacerbating the issue, shedding light on the various factors and implications surrounding this contentious issue.
Tax evasion and tax saving are two distinct concepts with contrasting implications and legal standing. While both relate to the management of taxes, their approaches and outcomes are fundamentally different.
Tax evasion refers to the deliberate and illegal act of evading or avoiding the payment of taxes owed to the government. It involves dishonest practices such as underreporting income, inflating expenses, or concealing assets to reduce tax liability. Tax evasion is a criminal offense that can result in severe penalties, including fines, imprisonment, or both. It undermines the integrity of the tax system and is universally condemned.
On the other hand, tax saving is a lawful practice of utilizing legitimate strategies and provisions within the tax laws to minimize tax liability. It involves taking advantage of tax deductions, credits, exemptions, and incentives offered by the government. Tax saving is an accepted and encouraged practice that allows individuals and businesses to optimize their tax burden within the boundaries of the law. It involves careful tax planning, making informed decisions, and using lawful measures to minimize the amount of tax payable.
Many profound company like Starbucks, McDonalds are larger food companies but their main profit is from there real estate where their shop is located in, they all have their shops located in main areas and even billions of dollars as capital gain is in their pockets.
Most of the rich people just do real estate with good debt and gain only profits and it needs a lot of financial education to do so, Robert Kiyosaki the author of “rich dad poor dad “and the CEO of the rich dad company always in his podcast says about rich create cash flow by building up assets and owns over 7000 rental properties
The main reason they don’t pay taxes is that they don’t pay themselves first instead their companies hold all the money and they hold the company shares and every expense they make just get write off as company expenses and the system is constructed in a way that the rich stay richer and poor stays poorer, only the poor and middle class people pay taxes and even the government is okay with this as they get lot of tax from the employees created and at last it is the 80 percent of poor and middle suffer from this
For individuals, the income tax is levied on a slab basis, with different rates applicable to different income brackets. The tax rates may vary from year to year as per the budget announcements by the government. Additionally, various deductions and exemptions are provided to individuals to reduce their taxable income, such as deductions for investments in specified savings schemes, home loans, medical expenses, etc.
Corporates and businesses are subject to income tax on their profits. The tax rates for companies depend on their turnover, with lower rates applicable to small and medium-sized enterprises. The government has also introduced the concept of Minimum Alternate Tax (MAT) to ensure that profitable companies pay a minimum amount of tax, regardless of the deductions and exemptions availed.
Goods and Services Tax (GST) is another significant tax in India, which replaced multiple indirect taxes. GST is a consumption-based tax levied on the supply of goods and services. It has different slabs ranging from 0% to 28%, depending on the nature of goods and services.
The Indian tax system also imposes various other taxes such as customs duty, excise duty, and wealth tax. These taxes are levied on specific goods, services, or assets.
The tax administration in India is handled by the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC). These bodies are responsible for formulating tax policies, collecting taxes, and ensuring compliance with the tax law.
HOW INDIVIDUALS AND THE CORPORATES PLAY THE TAXING GAME
The issue of how some wealthy individuals and corporations exploit the tax system to minimize their tax liabilities is a complex and controversial topic. While it is essential to avoid generalizations, there have been instances where certain individuals and companies have taken advantage of loopholes within the tax code. This has allowed them to reduce their tax burden, sometimes to an extent that seems disproportionate or unfair.
As of the “Wall Street journal” one common strategy employed by the wealthy is tax avoidance, which refers to legal methods used to lower tax obligations. This may involve exploiting loopholes or taking advantage of tax incentives and deductions that are available within the law. For example, wealthy individuals might establish offshore accounts or shell companies in tax havens, where they can shift their assets and income to benefit from lower tax rates or even tax exemptions.
Corporations also engage in various tax planning strategies to minimize their tax liabilities. They may engage in transfer pricing, where they manipulate the prices of goods and services between their subsidiaries to shift profits to low-tax jurisdictions. Additionally, multinational corporations can establish subsidiaries in countries with favorable tax policies to take advantage of lower tax rates or tax incentives.
To prevent the wealthy from escaping tax paying, governments have implemented several measures. Firstly, they have strengthened tax laws and regulations, closing loopholes and introducing stricter penalties for tax evasion. Authorities have also increased the resources allocated to tax enforcement agencies, enabling them to conduct more thorough investigations and audits.
Furthermore, governments have enhanced international cooperation to combat tax evasion. They have established agreements and information-sharing frameworks with other countries to detect offshore accounts and undisclosed assets. This global collaboration helps track and recover hidden wealth.
Moreover, governments have introduced measures like wealth disclosure requirements, where individuals are obligated to report their assets and income accurately. These measures help identify discrepancies between reported and actual wealth, enabling authorities to take action against tax evaders.
It is evident that rich use various loopholes to avoid paying tax so I believe we should promote fair taxation policies to prevent legal loopholes for the wealthy, ensuring a more equitable distribution of wealth and discouraging the rich from accumulating disproportionate resources while maintaining legality.
REFERENCE
- RICH DAD POOR DAD – by Robert Kiyosaki
- THE WALL STREET JOURNAL
- THE FINANCIAL TIMES
- LOOPHOLES OF THE RICH
