[FOUNTAIN]Avoiding tax

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[FOUNTAIN]Avoiding tax

Tax evasion has been considered a shortcut to accumulate wealth in all ages and all places, under the assumption that one won’t be caught. Professor Chao Tiensheng of Renmin University in China introduced five traditional tax evasion methods in his book, “Chinese Merchants: The Wisdom of Four Millennia.”
The first is to manipulate a scale or a unit container, most frequently used by the chefs at restaurants.
The second ― jerry-building and hoarding materials away ― is widely used on construction sites.
People also charge several times the regular price by exploiting their superior status. That tactic is often used by professionals such as doctors and lawyers.
The next method is to collude with government agencies. A bribe to a revenue official is the safest way of tax evasion.
The last is to set aside a portion of income under someone else’s name. The family members or employers who lend their names are in cahoots with the tax evader.
When tax dodgers become rich, the country becomes poor. The ancient states knew this well and tax-dodging was punished as harshly as murder. Around 2100 B.C., under the reign of King Ur-Nammu, the Sumerians wrote the first legal code in history. Their clerks also worked as tax collectors. In a year of bad harvest or when an epidemic broke out, the tax was lowered according to the seriousness of the situation. However, the ancient Sumerian authority would punish the tax dodgers by cutting off their hands.
The first law that defined the rate of income tax was the Mosaic Law from 1500 B.C. One-tenth of earnings was to be offered to the state and the church. Tax evasion was considered taking away from God.
Recently, the National Tax Service investigated 422 self-employed high income earners, and revealed that they had filed only 43 percent of their actual earnings on average. One person who made 2.7 billion won ($2.8 million) claimed only 120 million won. The National Tax Service has promised to eradicate tax-dodging by second and third tax probes. However, it is doubtful whether their effort will be fruitful. When caught, the tax evaders only pay a small fine. When the benefit of tax evasion is much bigger than the risk, it is hard to resist the temptation of tax-dodging. Some jokingly say, “When I do it, it is tax saving. When someone else does it, it is tax dodging.”
There is a medieval European proverb that you cannot avoid tax and death, but it is a bygone saying. These days, only three groups of people pay tax properly ― honest men, fools and salaried workers.

by Yi Jung-jae

The writer is a deputy business news editor at the JoongAng Ilbo.
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