INTRODUCTION:
Ethics is the word derived from the Greek
word ethos – character, and from mores – customs. In the eyes of philosopher Aristotle
ethics was more than anything else (religious) because it reflects the whole
character of the person. Furthermore, he said the work that individuals
perform, must reflect the betterment for the others, and do not perform if
those works affect society negatively. Those who would be working for the
betterment of society they must possess three good characteristics: justice,
courage and temperance.
Ethics for tax legislators:
Legislators work is to collect revenue and
fairly distribute it among its people in order create the society a better
place to live at. Apart from revenue objectives, they must ensure to protect
the local industries from foreign, control the inflation, to grow in science
and technology and education.
Ethics and canons of taxation:
First of all tax is incumbent on every
citizen who lives there in. If anybody does not pay, then state has right to
get the tax by using a coercive means.
Canons of taxation:
Canons of taxation are the principles given
by the Adam Smith and are:
Canon of equity:
This canon suggests that, every citizen has equal
right to pay the tax according to their wealth, meaning-rich people have to pay
the more tax than poor. It is incumbent on them because they have been living
and enjoying within it under the protection of state.
Canon of certainty: According to this canon, the
tax payer must be certain in advance about the tax that he would have to pay at
the time and in the form through which he has to pay.
Canon of convenience: Tax
system must be convenient for the people so as they t must get the longer
space. of time for the
payment of tax.
Canon of economy: This
suggests that economic concept must be considered in the collection of the tax -
meaning- the cost of collection of tax should be lower than the tax collection.
Additional canons of taxation:
Canon of productivity: This suggests that state
should be able to collect the enough revenue but considering all the laws of
taxation.
Canon of elasticity: This suggests that tax system
should be elastic in nature – meaning - when the state have the lots of
problems like down fall in economy, then it must collect more revenue in order
to protect the state and its citizens from the crises.
Canon of flexibility: There must be capacity of
revising the tax system because the economy has been changing.
Canon of simplicity: The tax system must be easy so
that its results can be understandable and can be easily interpreted.
Canon of diversity: This suggests that state
should collect the taxes from all of the people in order to create the equality
among the people. It should collect the
tax from both rich and poor without considering the racial and ethnic factors.
Responsibilities of the tax
legislators:
This suggests that it is legislator’s duty
to bring the tax system that would promote the canons principles and they
should better serve the people through better services without keeping their
own interests. Furthermore, they should impose tax according to the ability of
the people (the wealth that they possess).
Ethics for tax administrators –
introduction:
Federal Board of Revenue has right to collect
the taxes but in condition, if any evades the tax system they have certain
authorities like to seize the property and attack the bank accounts. But if
misused these powers the tax payers have authority to do proceedings against administrators
and to make them imprisoned.
Pillars of tax administration:
The tax pillars have been formed for the
sake of protecting the rights of the common interests and they are followed as
fairness – making the laws without considering any specified individual or
group, transparency – the actions and proceedings must be fair enough, equity –
tax must be collected from all the people equally (according to their ability
to pay). Collecting more from the rich and less from poor according to their
capability and finally accountability – there must be strong system and some
authorities which can stand against the ethical violators like corrupts.
Under the four pillars some of
ethical issues faced by tax administrators:
Conflicts of interest, political
influence, acceptance of gifts corruption and lack of autonomy.
For avoiding these issues some
principles are given as:
Open policy statements, open rules, open
plans, open proceedings, open reasons, fair informal procedure and open
precedents.
Responsibilities of tax implementing
authorities:
They must obey all the laws and do no give
exemptions to specified parties, must be
honest and integrated in terms of giving respect to the individuals and groups,
must be fair and do not provide tax benefits to any racial or ethnic groups,
provide good service to the people, they must be avoiding politics, maintain
tax payers information, put their utmost efforts for collecting tax at low
cost, refunding tax to those who have remaining to them (in case of advance
tax) and finally awaring the tax payers about
their rights and responsibilities.
c
(principles of ethics for tax practitioners):
Integrity:
Tax practitioners must be honest and fair in all
the aspects of tax proceedings.
Objectivity: They should
not prefer their own interest above then the state and they should not be
protecting the interest of particular individuals (any ethnic or racial).
Professional competence and due care: They must possess the skills and capabilities regarding the tax so
that he can better deal and convince the individuals. Furthermore, he must
update and enhance his knowledge along with the changing pattern of tax system.
Confidentiality:
They must secure the information and data about
the taxpayers and do not reveal or disclose it to others because it would be
against the ethical values. So they must secure their confidential information.
Professional behavior: They should be respecting the
laws of the individuals where they work and furthermore, they must treat the
professionals with the courtesy and consideration in order to make them feel
safe and secure when they (professionals) would be complying with tax laws.
Three approaches of tax compliance:
Utilitarianism:
Focuses on the greater good of people, It priorities
the more than fewer and also focuses on maximizing the numbers of people
satisfaction.
Deontology:
It focuses on the ideas and actions to be
performed rather than what their consequences be.
Virtue ethics:
It focuses on generosity, courage, talent,
honesty and character.
Ethics and morality for taxation compliance:
The utilitarian view: The state must ensure that it
provides the goods and services to all of the people or at least the majority
of the people, and also encourages them to pay the taxes in order to make the
goods and services available more conveniently and for the sake of sustainability
and growth.
The deontologist’s view: The tax practitioners must
respect the businesses, properties and all the legal assets of the people and
they must encourage people for paying the taxes for their earnings because they
live in the state.
Virtue ethics view: This suggests that people can
save their money by avoiding it, like by giving money to charity, paying
donations and also giving services to the society. This also suggests giving
services to public like health care and education.
Conduct of tax payers:
Tax avoidance:
It is the legal form of avoiding the tax through
tax deductions or setting your business process outside the country
(offshoring). Utilitarian will not mind when one avoids the tax through legal
means because the wealth is not wasted in this case.
Tax evasion:
This is the illegal type of act practiced by the
tax payers for the sake of avoiding the tax which can be through representing
the wrong information and concealing the true information. A virtue ethicists
will mind in this case. And deontologists also will not like, may be because
majority of people are unaware of tax avoidance and just few people will enjoy
this benefit which looks like not good.
Whistle blower:
This is a person who tells the authority
about the concealment and misrepresentation of information about the people who
evade from paying the tax.