Researcher Tariq Samih Hanandeh
PhD Student in the Faculty of Economics and Muamalat, Universiti Sains Islam/ Malaysia
This study aimed to know the role of applying the principles of tax governance in reducing tax evasion in Jordan because of the effective role they play in formulating and addressing tax rules and legislation and controlling tax evasion processes, through the successful application of the principles with complete credibility and openness and because they will ensure tax collection and thus increase the state’s tax revenues Therefore, the problem of the study is that some companies try to evade all illegal methods and methods from paying the tax, and this is considered tax evasion. Hence the problem of the study came to know the positive effects of applying the principles of tax governance in reducing tax evasion in Jordan, so the importance of the study lies as it deals with a subject It is important with regard to the principles of tax governance, as companies resort to them to achieve the interests of all the different parties, and the importance of the study stems from the research of Jordanian companies in the application of the principles of tax governance, and this in turn will limit tax evasion, and what has a positive impact in increasing the tax collections of the state to cover its social needs There is a dispute over tax evasion that leads to the destruction of the state with its expenses and the lack of justice and equality The study also reached a number of results, the most important of which is the application of the principles of tax governance in the Income and Sales Tax Department, which limits tax evasion and increases tax collections. The study recommended the need to adopt the principles of tax governance and apply them in the Jordanian Income and Sales Tax Department because of its impact on improving the department’s performance in collecting taxes and building trust and transparency between taxpayers and the department, which is reflected in the increase in revenues for the state, and the researchers followed the descriptive approach to clarify the ideas put forward in Research by reviewing all previous studies related to the principles of tax governance in reducing tax evasion in Jordan, and then drawing conclusions and recommendations.
Keywords: Tax Governance, Tax Evasion, Principles of Tax Governance, Income and Sales Tax Department, Jordan.
دور تطبيق مبادئ الحوكمة الضريبية في الحد من التهرب الضريبي في الأردن
الباحث / طارق سميح حسين هناندة
طالب دكتوراه / كلية الاقتصاد والمعاملات تخصص محاسبة / جامعة العلوم الاسلامية
هدفت هذه الدراسة إلى معرفة دور تطبيق مبادئ الحوكمة الضريبية في الحد من التهرب الضريبي في الأردن لما تلعبه من دور فعال في صياغة ومعالجة القواعد والتشريعات الضريبية وضبط عمليات التهرب الضريبي, من خلال التطبيق الناجح للمبادئ بمصداقية تامة وانفتاح ولأنها سوف تضمن تحصيل الضرائب وبالتالي زيادة الإيرادات الضريبية للدولة, لذا تتمثل مشكلة الدراسة بقيام بعض الشركات في محاولة التملص بجميع الأساليب والطرق الغير قانونية من دفع الضريبة وهذا يعتبر تهرباً ضريبياً ومن هنا جاءت مشكلة الدراسة بمعرفة الآثار الإيجابية لتطبيق مبادئ الحوكمة الضريبية في الحد من التهرب الضريبي في الأردن, لذا تكمن أهمية الدراسة كونها تعالج موضوعاً مهماً فيما يخص مبادئ الحوكمة الضريبية حيث تلجأ لها الشركات لما يحقق مصالح جميع الأطراف المخلتفة, كما تنبع أهمية الدراسة بحث الشركات الأردنية في تطبيق مبادئ الحوكمة الضريبية وهذا بدوره سوف يحد من التهرب الضريبي, وما له أثر إيجابي في زيادة التحصيلات الضريبية للدولة لتغطية احتياجاتها الاجتماعية والاقتصادية خلاف على التهرب الضريبي الذي يؤدي إلى اهلاك الدولة بمصاريفها وعدم وجود عدالة ومساواة بين المكلفين, وايضاً توعية الشركات بمخاطر التهرب الضريبي وتأثيره على الاقتصاد وتعريفهم بالعقوبات المترتبة عليهم في حال التهرب الضريبي, وقد توصلت الدراسة من خلال الجانب النظري إلى مجموعة من النتائج أهمها تطبيق مبادئ الحوكمة الضريبية في دائرة ضريبة الدخل والمبيعات يحد من التهرب الضريبي ويزيد التحصيلات الضريبية للدولة, وأوصت الدراسة إلى ضرورة تبني مبادئ الحوكمة الضريبية وتطبيقها في دائرة ضريبة الدخل والمبيعات الأردنية لما له من اثر في تحسين أداء الدائرة من جمع الضرائب وبناء الثقة والشفافية بين المكلفين والدائرة مما ينعكس ذلك على زيادة الإيرادات للدولة, واتبع الباحثان المنهج الوصفي لتوضيح الأفكار المطروحة في البحث من خلال الاطلاع على كافة الدراسات السابقة المتعلقة بمبادئ الحوكمة الضريبية في الحد من التهرب الضريبي في الأردن, ومن ثم استخلاص النتائج والتوصيات التي تم التوصل لها.
الكلمات المفتاحية: الحوكمة الضريبية, التهرب الضريبي, مبادئ الحوكمة الضريبية, دائرة ضريبة الدخل والمبيعات, الأردن.
Tax governance occupies great importance in the world, in light of the transition the world is witnessing to a capitalist economic system, in which institutions and companies play an influential and significant role, including the need to follow up and monitor this role in enacting legislation and laws, and governance allows stakeholders within companies to play A larger and more effective role in oversight, as it controls the undisciplined behavior of the board of directors, which would waste the accounting profit of these companies, and thus increase profits, Tax governance also aims to increase profits and attract investments to the state, and this is due to the fact that governance, whether corporate or tax governance, is the main researcher in investor confidence in investing in the state, as investors now depend in their investments on the need for tax governance and its application in companies. properly, and therefore it is no longer a matter of tax incentives or not, and taxes are considered one of the most important main sources of financing the state treasury to meet its economic, social and political expenditures, and they also contribute to economic recovery and development in underdeveloped countries, which allows them to implement economic reform programs and deal with organizations International, As a result, the level of interaction and dedication determines the concept’s viability and continuity depends on the extent of the taxpayers’ commitment to pay the tax legally, but there is an old problem between countries and taxpayers, where taxpayers resort to fraudulent methods and also exploit legal loopholes to evade tax, in order to increase their profits , and this, in turn, will drain the state by not achieving its public expenditures through its investment in state investment projects (Qaydom, 2019) Hence the role of applying the principles of tax governance in reducing tax evasion in the Jordan due to its active role in formulating and addressing tax rules and legislation and controlling operations Tax evasion, through the successful application of the principles with complete credibility and openness, and because they will ensure the collection of taxes and thus increase the tax revenues of the state.
Problem of the study:
The problem of the study is that some companies try to evade all illegal methods and methods from paying the tax, and this is considered tax evasion and will affect the country’s economy, Hence the problem of the study came to know the positive effects of applying the principles of tax governance in reducing tax evasion in Jordan and increasing tax revenues.
The importance of the study:
The importance of the study lies in the fact that it deals with an important issue regarding the principles of tax governance that companies stray from in order to achieve their interests, The importance of the study also stems from educating Jordanian companies in applying the principles of tax governance, and this in turn will limit tax evasion, and what has a positive impact on increasing the tax collections of the state to cover its social and economic needs. It also educates companies about the dangers of tax evasion and its impact on the economy, and informs them of the penalties incurred in the event of tax evasion.
Objectives of the study:
1- Getting to know the concept of tax governance, its importance, its parties, and the principles in applying tax governance in the Income, Sales and Corporate Tax Department.
2- Explanation of the role of tax governance in increasing tax revenues.
3- Clarify the concept of tax evasion, its causes and penalties, and its extent and impact on the state budget.
4- To highlight the effective role that the principles of tax governance play in reducing tax evasion in the Jordanian state.
The researchers relied on the theoretical side related to previous books and studies that talked about the role of tax governance principles in reducing tax evasion, Therefore, the descriptive approach was relied on to draw conclusions and ideas that prove the role of applying tax governance principles in reducing tax evasion in Jordan.
The first step is tax governance
Concept of Tax Government:
Belhadi and Abd Al-Majeed (2018) define it as new tasks and obligations for tax administrations in terms of tax administration solidity, solidity, transparency, and training in transmitting tax information to taxpayers. Tax governance has also been defined as “a set of foundations, principles, executive rules and regulatory procedures that enhance performance monitoring in the tax system by defining the roles of the relevant independent parties” (Al-Momani and and Al- Abini, 2018).
Bukhlov (2017) defines tax governance according to European Commission Economic and Financial Affairs as: “a set of regulations, rules and procedures that influence budget policy, planning, approval, implementation and control.
Importance of Tax Governance:
Tax governance requires the regulation of communications between all parties involved in the process, including taxpayers, individuals, and corporations. As a result, rational tax administration leads to the creation of disclosure, transparency, fairness, objectivity and no evasion in the application of the law and executive instructions, which gives each individual his right, and thus preserves the state treasury from the revenues due without extravagance. Or legal abuses on the one hand, while respecting the rights of taxpayers and protecting their interests on the other hand, in addition to preventing financial and administrative corruption, improving tax performance, facilitating work in the tax authority, and preventing crises(Al-Momani and and Al- Abini, 2018).
Tax Governance Parties:
Tax governance is represented by several parties to form the tax system (Qaydom, 2019), which consists of:
1- Tax legislation: It is a term that refers to all laws, instructions and regulations imposed for imposing, limiting and collecting taxes, as well as those that govern the work of the tax administration and its clients.
2- Tax administration: It is all departments that work to implement and apply income and sales tax laws through auditors and all their employees through inventory and tax examination and linking with other government departments to collect taxes due from taxpayers and taxpayers (Al-Momaniand and Al- Abini, 2018).
3- The tax community: It consists of all taxpayers, companies and individuals (Abu Nassar, 2021).
4- “Chartered Accountants” (Ibrahim and Jaafar, 2017).
Tax Governance Principles:
– Among the most important principles of tax governance that are derived from the principles of public governance are the following (Tawaiteh and Ma’amari, 2019):
1- Independence: It is the process that prevents the occurrence of a conflict of interest, such as the issuance of a decision by a major stakeholder in the company or a person who has authority over the company’s actions. company decisions.
2- An effective tax governance framework: The corporate governance framework should seek to increase openness and efficiency while adhering to the provisions of the rule of law and clearly distributing responsibilities among the responsible parties.
3- Disclosure and transparency: By providing a reporting system that achieves transparency for shareholders and management, the corporate governance framework must ensure accurate disclosure of all information related to the establishment of the company, including position, ownership and performance, as well as providing correct and clear information about the company’s performance.
4- Equal accountability: The availability of accountability systems, in line with the tasks and capabilities provided to the employee of the financial authority, helps to raise the employee’s performance while limiting financial and administrative corruption. (Qaydom, 2019).
5- The role of the board of directors: It covers the structure of the board of directors and legal responsibilities as well as how to select its members, their basic responsibilities and their role in monitoring the executive management. (Qaydom, 2019).
Part Two – Tax Evasion:
First: The concept of tax evasion: the failure of the taxpayer to issue a partial declaration of the source of his wealth or income with the intention of reducing the value or unintentionally such as forgetting (Awadiya, 2021).
Benaouda et al.(2019) defined it as a taxpayer who uses illegal methods and exploits legal loopholes with the intention of not paying or reducing the tax.
Hadidi and Hamouda (2019) define tax evasion as the violation by the taxpayer of the law in order to reduce or eliminate the payment of tax.
Second – Reasons for tax evasion:
The study of the Jordanian Economic and Social Council (2014) indicated that among these reasons we mention the following:
The complexity and volatility of the tax system has increased as a result of frequent amendments to the texts of the law, making it difficult for taxpayers to read, understand and comply with legal documents, which has led to increased tax evasion by taxpayers.
– Not tightening the application of the tax evasion penalty, which led to taxpayers evading taxes, due to comparing those charged with the fine due on the money they will receive as a result of their evasion, and thus the taxpayer evades because the penalty is few. .
– “There is a lack of data and information related to the various industries in the country such as doctors, engineers and other professionals.”
– Weak efficiency and oversight by the tax administration bodies and the lack of interest in tax reforms that facilitated tax evasion operations.
– “The rise in the cost of living as a result of the rise in the general level of prices.”
Weak tax awareness among taxpayers.
Taxpayers’ sense of tax injustice.
All taxpayers and corporations perceive the state’s high tax rates.
Third: Acts that are considered tax evasion:
Article No. (55) of Income Tax Law No. 38 of 2018 regarding defining acts that are considered tax evasion, as paragraph (a) of the same article stipulates the following (Income Tax Law, 2018):
- “Submitting the tax return based on forged records or documents, or including data that contradicts what is established in the records or documents that he concealed with his knowledge.”
- “Submitting the tax return on the basis that there are no records or documents, and that it includes data that conflict with the records or documents that he specified.”
- “Deliberate destruction of records or documents related to tax before the expiry of the period specified for keeping them in accordance with the provisions of this law.”
- “Forging or modifying purchase or sale invoices or other documents in order to delude the management of lack of profits or increase of losses.”
- “Concealing a taxable activity or part of it.”
Fourth: The penalty for tax evasion:
The Jordanian legislator dealt with tax evasion from Article 66 of the amended Law No. 38 of 2018 in terms of “Tax Evasion Law and Article (2) of using fraudulent methods involving fraud and deception, forgery, concealment of data, providing fictitious data, or deliberately participating in any of them.” With the intention of not paying the tax or declaring it on our behalf in whole or in part, or reducing it in accordance with the limits of this law.The Jordanian legislator imposed from the Income Tax Law Amendment Law No. (38) of 2018 (Article 66, Paragraph A) a compensatory fine equal to the tax difference for those who evaded tax or Attempt to evade, aid or abet others. To evade tax by committing any of the following acts” (Abu Nassar, 2021):
1- “He submitted the declaration based on fabricated records or documents, or included data that contradicts what was proven in the records or documents that he hid with his knowledge of that.”
2- “He submitted the declaration on the basis that there were no records or documents and within data that contradicted what he had of records or fixed documents that he had hidden.”
3- Deliberately destroys records or documents related to tax before the expiry of the period specified for keeping them in accordance with the provisions of this law.
4- “Change the purchase or sale invoices or other documents to it in order to delude the department of less profits or an increase in losses.”
5- “He concealed an activity or part of it that is subject to tax.”
6- “Withholding the amount of tax in accordance with the provisions of this law and not submitting it to the department within thirty days from the date of its payment.”
7- “No original invoice was issued.”
Paragraph (b) of Article 66 of the Law Amending the Income Tax Law No. (38) of 2018, indicated that in the event that any of the seven acts specified above are repeated, the taxpayer shall be charged, in addition to a financial fine (compensation fine equal to the tax difference) and the following penalties:
1- “Imprisonment for a period of no less than four months and not more than a year in case of committing any of the crimes for the second time.”
2- “Imprisonment for a period of not less than one year and not more than two years in case of committing any of the crimes for the third time.”
3- “Imprisonment for a period of no less than two years and not more than three years in case of committing any of the offenses for the fourth time and beyond.”
After identifying the principles of tax governance in enacting legislation and laws and issuing penalties and identifying the causes of tax evasion and tax management methods in combating it, we came to a set of conclusions and recommendations that we believe are required, To work on placing it as a means to reduce the phenomenon of tax evasion.
1- The application of the principles of the tax government increases the trust and credibility between the Income Tax Department and the taxpayers, and consequently an increase in tax revenues will limit tax evasion.
2- The lack of credibility and trust between the taxpayer and the tax administration creates a kind of gap between them, which helps in tax evasion
3- The absence of applying the principles of tax governance in companies helps in tax evasion.
4- Tax governance works to provide an environment conducive to achieving tax justice.
5- Taxpayers, as individuals and companies, are subject to tax evasion because they do not touch tax services
6- Taxpayers enjoy tax evasion to increase their profits.
7- The lack of deterrent laws when companies and taxpayers evade tax for the first time.
8- Tax evasion is the failure of the taxpayer to declare part of his income or wealth, whether or not unintentionally, such as forgetting or with the intention of reducing the declared value.
1- The necessity of adopting and applying the principles of tax governance in the Jordanian Income and Sales Tax Department because of its impact on improving the performance of the department in terms of tax collection and building trust and transparency between taxpayers and the department, which is reflected in the increase in revenues for the state.
2- The necessity of adopting the principles of tax governance because of their positive impact in protecting the interests of the parties related to the Income Tax Department (the taxpayers and companies), achieving justice and ensuring accountability and transparency.
3- The necessity for the Income and Sales Tax Department in Jordan to abide by the government’s tax principles.
4- The need for the tax administration to make amendments to the penalties imposed on evaders and to intensify the penalties to reduce tax evasion.
5- The need for the tax administration to publish periodic reports on total tax revenues to enhance confidence and transparency between it and the taxpayers and companies.
6- The tax administration educates taxpayers through its electronic platforms about the risks of tax evasion and the penalties imposed on perpetrators.
7- Work to establish training courses for employees in the tax administration on the principles of the tax government because of their effective role in raising tax revenues and reducing tax evasion
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