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The IUP Journal of Accounting Research and Audit Practices:
Tax Ethics and Tax Compliance: Exploring the Opinions
of Tax Professionals of India
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Direct taxation is a major instrument for revenue mobilization and becomes essential for sustainable economic development. India, being a large and rapidly emerging economy, has very strict laws regarding taxation. But still the government has to face a serious threat to revenue mobilization in the form of tax evasion and avoidance. Therefore, the government introduced some income disclosure schemes and, recently, opted for demonetization of larger denomination currency notes, to keep a check on tax evasion, and thereby on black money. Therefore, in the present paper research questions were raised to explore the awareness regarding tax evasion in India, its prevalent methods and the factors causing tax evasion in India. For that purpose, a purposive sample consisting of chartered accountants and article assistants was chosen. A structured pre-tested questionnaire was distributed to collect data. Apart from the methods of tax evasion in India, the respondents were also asked to show their agreement or disagreement on a five-point Likert scale regarding the ethical reasons given by tax evaders to justify their actions and to state their agreement or disagreement regarding the various perceptions on tax evasion. The findings reveal that although the respondents agreed that it is ethical to pay tax, their clients evade taxes due to bad governance and high level of tax-illiteracy to some extent. The existence of dishonest tax administrators within the system also contributed to tax evading.

 
 
 

Every nation requires a lot of revenue to be able to provide and maintain essential services for its citizen. One ready means of revenue for the government is through the imposition of tax. Tax administration, as an area of public administration, needs more moral competency. It is widely recognized that the development of professional ethics depends on social, economic, political and legal contexts, and that ethical factors have significant impact on economic development. Unethical behavior contributes to corruption, which has a negative effect on economic growth. Strict adherence to the codes of ethics fosters optimal productivity, reduces tension between administrators and taxpayers and enhances social harmony.

The government is vested with the power to administer the act and carry out the entire act which may be deemed necessary and expedient for the assessment and collection of tax. Many tax reforms were implemented to secure the targeted government revenue from tax sectors. Data reveals that the country truly relies on the tax revenue to cash its expenditures. Statistics shows that during 2012-2016, tax revenue was 85% and above. For the years, observed tax contributed most of the government revenue (see Figure 1).

India, being a large and rapidly emerging economy, has very strict laws regarding taxation. But still the government has to face a serious threat to revenue mobilization in the form of tax evasion and avoidance. Tax evasion is a deliberate attempt to reduce oneís tax liability through illegal practices, whereas tax avoidance implies reducing tax liability by taking advantage of loopholes in tax laws. Tax evasion is a criminal offence according to Indian law, though it is more prevalent in practice.

 
 
 

Tax Ethics and Tax Compliance, Revenue mobilization, Sustainable economic development,Tax Evasion in India.