Tax evasion by corporations and its liabilities: a comparative analysis between Pakistan and United States of America.

Abstract

Tax evasion done by corporations is resulting in the loss of the revenue of almost every government. It is done by using different modes e.g. trade mispricing, money laundering which are very difficult for enforcement authorities to detect. Every government should work for deterring of the factors which motivate tax evasion. In past there was a problem with imposition of the criminal liability upon the corporations for the commission of tax evasion, due to the problem of the development of mens rea for corporations. But now this stance is cleared as mens rea can be established from the conduct of those working on behalf of the corporation and from the negligent and careless policies of the corporation. American model is the one of the best for the imposition of criminal liability upon a corporation. Tax evasion is not defined as a separate criminal offence in Pakistan and only concealing of assets, income and filing of false statements with tax return is considered as tax evasion which in USA is considered as a lesser included offence of tax evasion. There should be a standard corporate tax rate which should be applicable globally and it would be helpful for controlling tax evasion done through tax havens. Tax avoidance is similar concept to that of tax evasion but is not a criminal offence unlike tax evasion. Tax avoidance should be illegalized as it is morally wrong and one of the major factors which ultimately lead others to tax evasion.