Government levied taxes, were invented when society was invented. As society progressed more taxes were introduced to pay for Government programs. But, you as an individual or business! Why should you pay taxes and how much is enough?
I’ve been a tax lawyer for 23 years now and since 2009 I have a small practice. I’ve seen all kinds of clients. From Government bodies, to the largest multinationals, to national players, to non-profit organizations, middle market business, small business, private individuals with a job or pension and even homeless individuals.
What almost all of these organizations and people have in common is that they want to limit their tax burden as much as possible without getting fines or sent to prison.
A small percentage of private individuals (usually well off) have the attitude that they want to pay their fair share of taxes and not try anything “crazy” or creative. The thought they have is that they are very happy with their position in life, feel obliged to contribute to society and also want to sleep well at night.
Business has a somewhat different attitude to taxes in our competitive world than private individuals. Taxes are seen as a cost and that means that the more taxes a business pays the less competitive the business is in the market place. This means it is very understandable that business has the attitude that they want to limit the tax burden as much as possible. In our capitalistic society, that has spread around the globe, business is in essence forced to try and minimize the tax burden. This is systemic!
For private individuals taxes have a direct influence on potential spending that an individual has and therefore taxes hurt. Since most people are busy getting more and more in life, the focus of most people is to minimize the tax burden as this leaves more money for private spending. Also, due to communication in the media etc. and the focus on spending, many people are unsatisfied with their current life and money situation, dream and work to improve this. Once they reach a new plateau of wealth, there unhappy with the new plateau and focus on the next level. In essence this is the created rat race that many people are suffering from.
So, back to taxes. The reason why you should pay taxes is that you are part of a society, for example, a country and this country does a lot for every individual in the country that you benefit from. In essence it is everybody’s obligation to contribute to this. However, most people agree less or more with their State and this influences tax behavior. This leaves the most important reason to pay taxes and that is to escape from more taxes, fines and prison.
In our society it is very healthy and generally accepted that individuals try to limit their tax burden. This shows the people are smart. However, Government is also smart, maybe smarter. So, when are you being too smart.
In essence when you start breaking the law your becoming too smart. The way taxes generally work around the world is that each tax is embedded in a tax law and this law dictates how you should comply and pay your taxes. However, life is complicated and tax laws are open for interpretation. That means that if you read a tax law carefully you might find a justifiable interpretation that is in your benefit. It is very understandable that business and private individuals try to take advantage of interpretations of the tax law that are in their benefit and this is generally legal too.
Right or wrong the norm around the Western world is to interpret tax laws to your advantage in order to minimize the tax burden. In essence this is a protest vote in my opinion. If we all loved what the State did, we would all comply with taxes as they are intended by the law making bodies. However, most people are more or less fed up with the system, and therefore choose more for themselves.
Business to lower the cost of taxes and private individuals to improve spending.
That’s important and justifiable. Also generally accepted behavior!
I LOVE TAXES! DO YOU?