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A Critical Analysis of Effectiveness of Tax Offences Control Mechanisms Under Rwandan Law

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par Charles KABERA
Kigali Independent University - LLB 2008
  

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I.5. Negative impacts of Tax offences

I.5.1 Cost of non compliance to tax offenders and the government

Expenses incurred by tax offenders to commit tax offences are high. Also efforts to prevent detection and conviction are high and a burden to the government.

I.5.2 Honesty loses and offender wins

Tax evasion may drive some firms out of business as they are unable to compete with owners that successfully evade taxes.

I.5.3 Additional costs to honest tax payers

Additional compliance cost is borne by honest taxpayers in terms of record keeping etc in view of the possible investigation.

I.5.4 Loss of Government Revenue

Tax evasion deprives government of revenue for public expenditure.

Also Government revenue is spent on the enforcement side including investigation, prosecution and punishment of tax offenders.

I.5.5 Distortion of market prices

Goods sold by tax offenders are often sold a lot cheaper than goods brought onto market through the right procedures. Tax evasion therefore deprives traders of free competition.

I.5.6 Collapse of local industries

A country achieves better economic growth by developing its own industrial base. Tax evasion in form of Smuggling undercuts prices of the locally manufactured goods, thus destroying the market for local products. This leads to collapse of local industries.

I.5.7 Unemployment

When there is unfair competition in the market due to tax evasion and other related offences, compounded by the collapsing of industries, the labour market (employment base) is eroded. Many professionals, skilled and unskilled personnel remain jobless.

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