Causes of Tax Evasion

Tax evasion can occur due to a variety of reasons and factors, including the following:

A lack of stringent penalties for individuals who evade tax obligations.
The weakness of institutions in enforcing the rule of law has contributed to the growth of the informal economy, which lacks regulations governing tax collection processes.
Insufficient or overly complex tax regulations can also lead to tax evasion.
The absence of a comprehensive database tracking the activities of taxpayers, including professionals such as engineers, doctors, and lawyers.
Insufficient oversight by tax investigation and collection agencies, primarily due to limited financial resources allocated to revenue collection and enforcement departments.
A perception of high tax rates relative to the benefits received from government services, leading taxpayers to feel they do not see the value of the taxes they pay.
Rising general prices contribute to an increased cost of living.
Economic conditions within the country can adversely or favorably affect tax revenues; increased prosperity usually results in higher tax returns, whereas economic downturns and crises tend to increase tax evasion.

Understanding Tax Evasion

Tax evasion refers to the act of a taxpayer failing to pay or unlawfully reducing their tax liabilities due to their income or wealth as required by law. It is important to differentiate tax evasion from tax avoidance; while both approaches aim to lower tax dues or avoid payment, tax evasion is illegal and punishable under the law, whereas tax avoidance, by contrast, is deemed a legal practice and is not subject to prosecution.

Methods of Tax Evasion

Individuals and companies may employ various tactics to evade tax obligations. Some common methods include:

Failing to report all sources of income.
Inflating expenses to reduce taxable income.
Mixing personal expenses with business expenses.
Submitting false invoices to customs authorities to minimize tax and customs duties on imported goods, either by manipulating import values or by providing inaccurate product specifications.
Not disclosing sales transactions by companies to decrease reported income.
Failing to remit tax withholdings for wages paid to employees in certain factories and businesses.

Punishments for Tax Evasion

Tax evasion is regarded as a serious financial and economic crime. According to the Jordanian Income Tax Law of 2014, the penalties for tax evasion are as follows:

Compensatory fines equivalent to the tax amount evaded by the offender, as well as any individuals who assisted or encouraged the evasion.
Increased penalties for repeat offenders, which may include imprisonment for four months to one year for a second offense.
A one to two-year imprisonment term for individuals who evade taxes three times.
For those who evade taxes four or more times, imprisonment may range from two to three years.