Effectiveness of Rwandan Law of Tax Administration in addressing Tax Offences

III.4. Consequences of Tax offences

According to Syed M. Ahsan^27(*), not only from the view point of financing public expenditure but also to reduce negative impacts of tax leakages, the control of tax evasion and avoidance is necessary. Negative impacts of tax evasion and avoidance on economy are as follows:

III.4.1 Cost of non compliance to evaders

Expenses incurred to carry out evasion activities and in follow-up efforts to prevent detection and conviction.

III.4.2 Cost of investigation to authorities

Resources cost on the enforcement side including investigation and punishment.

III.4.3 Additional Compliance cost to honest tax payers

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

III.4.4 Honesty loses and evader wins

Tax evasion may drive some firms out of business as they are unable to compete with owners that successfully avoid taxes such possibilities may be unwillingly aided by a deliberate government policy to lower taxes or no tax to small firms.

III.4.5 Increase in inequity

Tax avoidance and evasion increase inequity as opportunity of evasion and avoidance is not equally available to all.

* ²⁷ Study for Measures of Tax Compliance habit and leakage, Posh Raj Pandey