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Tax Law & Accounting - Research Paper Example

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This paper will address the objectives of modern income tax statutes, comparing and contrasting the GAAP and tax accounting, and finally how to differentiate between tax avoidance and tax evasion. Tax is considered as an enforced contribution to the government which can be direct or indirect. …
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Tax Law & Accounting
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Download file to see previous pages The main objective is to simplify the rulings of previous tax laws with a purpose that supporting government operations will remain. However, the emerging of additional objectives that deals with the unfair imposition of income tax, and specialized economic objectives have made the structure of modern tax laws complicated. Many have expressed amazement and frustration with regard to the substantial complexity of tax laws, particularly in the ambiguity of tax requirements to the taxpayer. Instead of creating a comprehensive system for people to be honest in their tax liability, the system has provided the people/entities an excuse not to be honest.
Tax is considered as an enforced contribution to the government which can be direct or indirect. Those taxes that are imposed to individuals with income and to legal entities like corporations are called direct tax while those that are financially charged through commodities are known as indirect tax. Taxes derived from income are determined through different effective rates which are imposed to all constituents throughout the world by subnational entities such as federal, state, and local governments. Based on the United States Constitution, the “power to lay and collect taxes, duties, imposts, and exercises, to pay the debts and provide the common defenses and general welfare of the United States” is vested to the Congress (“United States Constitution,” n.d.). Furthermore, tax statutes are created to make certain that U.S. tax setting and features will be in uniformed with other jurisdictions, and inequalities of tax burden will be avoided. The history of the U.S. tax system has marked significant changes just to make the system fairer, simpler, and more consistent to all American taxpayers. This is also to further restrict the old yet growing tax evasion and tax avoidance strategies. These problems have pushed the idea that tax statutes should be construed strictly such as the passage of the 16th Amendment in 1913 and the Tax Reform Act of 1986 (Webley et al., 1991, p. 135). These ratifications are the forerunners of modern income tax statutes which are said to be complicated and economically harmful to individuals and businesses (“Fact Sheets: Taxes,” n.d.). This paper will address the objectives of modern income tax statutes, comparing and contrasting the GAAP and tax accounting, and finally how to differentiate between tax avoidance and tax evasion. Objectives of Modern Income Tax Statutes U.S. tax system is said to be fairly well-defined when taxation of income has been modified. By using the ability tax theory, the government has given its constituents a practicable taxation system. However, modern income tax statutes enacted in 1913 appeared so highly complicated that cannot be understood by all taxpayers (Wilson, n.d.). According to Witte (1985), “the original modern income tax statutes passed in 1913 was a combination of earlier federal laws, state statutes, and the Britis income tax” (p. 246). Indeed, the scope has been broader and the degree of tax rates has increased wherein many have commented that this is the worst kind of tax. Many have asked if the objectives of imposing higher tax rates to low-income individuals and small business, reduction of exemptions, and continuing federal income tax, stipulated in modern tax laws are still constitutional. The government justified the scenario and said that there is no difference between modern tax laws and the earlier laws, because the former are seeking for the same objectives, and this is to raise government revenue to finance operations (Herrmann, 2002, p. 19). Despite of such argument, the economic objectives of modern laws are economically harmful not just to the employment of individuals but also to business operations. According to Webley et al. ...Download file to see next pagesRead More
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