Taxes, government way of generating income for themselves from citizens who make money in the country so as to pay public civil servants, fund projects and create social and public amenities for the general public. If you ask what is our tax being used for, then I will tell you that your tax is used to pay your president, and other political leaders in office, your tax is used to construct roads, pay salaries of other civil servants as well as to sort other government related financial problems.
A lot of people around the world have complained about the same thing all the time, why income taxes are higher than other taxes and how they can pay little or zero tax legally without getting into trouble of evading taxes. Tax evasion is a very big issues in so many countries, its punishment can vary from monitory fines, jail terms or the both. This should tell how important paying taxes are to the government. “No matter how many page the tax law of a country is, there is always a way to pay less or zero percent in tax.
As important as taxes are, business entities and management of businesses try as much as possible to give the government their 15%, 25%, or any amount expected to be paid as tax back to the government. Business owners have over the years find people who will help them escape paying taxes, In fact, there are businesses that pay auditors, attorneys and accountant very good money so they can find loopholes in the tax laws.
In reality, owning a business should mean you are paying a whole lot of tax from personal tax, sales tax, excise tax, property tax, investment tax, value added tax, and so on but why will you as a business owner pay this large number of taxes when you started the business without the help of the government? This is where business owners do their best to eliminate taxes. How do you pay up to 0% in tax even when you are making up to $1 billion in revenue?
The first way to avoid paying taxes legally is Letting your business pay Your Expenses. Most expenses that involves your business, like the car you drive to work, home, the lunch at work, stationaries, and other day to day activities which could be linked to the business directly or indirectly should be written off as tax so as to avoid paying for them personally and in doing so increase the expenses of a business so its tax can be reduced. Unlike income tax, corporate taxes isn’t based on revenue but rather on profit since businesses are always opened to expenses, then there will be chance to tax the profit and not the income.
Another way to reduce taxes is by diversifying money into other businesses and investment. Just like you see that Amazon keeps growing its business empire, the government will not be able to tax the company. The company therefore can claim that no profit was made as the profit made were used to create another business which will provide employment opportunities for people in the country. Diversifying funds into other investments and businesses is a very good way to avoid paying taxes.
Tax havens are another method of avoiding taxes. Taken revenues to countries which do not pay taxes and allowing the government understand that the company in the country where taxes are mandatory have to finance the company in the countries with tax havens.
Conclusion
Paying tax is mandatory, but for most business owners, there are periods required for a company to start turning profit and this period is determined by the writings on paper. If a company is still not making profit, taxes would either be reduced to a very little amount or to zero. Also, companies can decide to pay its stakeholders in shares rather than cash. With this, the company do not pay tax for it. When stocks are issued, they are regarded as expenses for the company even when the company is not paying anything to issue stocks.
Being able to reduce taxes paid as a business entity is a very good way to have enough cash to be able to fund the business over a long period of time as well as keep a large portion of the business funds at hand rather than in the hands of the government.
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