Many people have problems paying taxes and also many governments have problems setting the correct tax rates for their needs. Obviously the problems individuals often have with tax payments is that they think they are too high whilst the problems the governments have with the tax rates, is that they sometimes set the rates too low. When a government sets its taxation rates, it estimates that those rates will bring in enough revenue to pay for any plans on spending they may have. Sometimes, although a government may have made accurate estimates, a shortfall in actually collecting all that they should, can leave a government in debt. Usually any shortfalls that a government may experience is not from regular worker’s income taxes but more frequently from business taxes, especially where large multi-national corporations are involved. Although a large multi-national business may set up business in one country, it often only pays taxes in another, one which has lower tax rates. This is due to international agreements that state a company should not have to pay taxes in all countries in which it operates. Income tax does not usually present a government with so many problems and in fact, often a government will receive more than it expects in income tax payments.
The reason for this is that many workers do not fully understand all the exemptions that they may be entitled to. If someone does know all of the exemptions they are entitled to, they may well qualify for a tax refund but if they don’t know of the exemptions, they will never receive a refund. Any exemption which an individual is entitled to, must be stated on that person’s tax return in order for them to receive the refund. The tax refund solutions which many people are now pursuing is to have tax professionals fill in their tax returns for them. As professionals, these tax accountants are fully aware of all exemptions an individual may be entitled to and so ensures that they are adequately mentioned on the tax return, ensuring the refund is issued where applicable. Although these people that hire tax professionals have to pay them, often the refunds they receive for doing so, more than pay those fees. Getting large corporations to pay their full taxes though, does not have such an easy solution for most governments. Whilst wanting the multi-nationals to do business in their country as they bring with them added employment opportunities, governments also want them to pay their full dues and often rely on them doing so. The amount of taxes we talk about here are huge and so for a government to make up those shortfalls in income taxes, would mean a significant rise in the rate. It is therefore a government’s ability or inability to deal with these multi-nationals, which can determine their political futures. No one that pays income tax will want to see their rate rise due to a government not being able to obtain taxes from others.