Value-Added Tax and Tax Morality: Legal Framework

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

In order for the concept of tax morality to be determined, it is essential to identify the legal framework for the flat tax that consumers pay once they purchase an item. Since this type of taxation is implied with every purchase, consumers cannot avoid it. Hence, the morality aspect becomes less significant for the customers. The monetary addition is the Value Added Tax (VAT), and it is present during the majority of transactions between a customer and an actor providing a service or selling a good. The Value Added Tax was issued in 2017 in the Federal Decree-Law No. (8). As a result, the rate of 5% added to the cost of goods and services can then be used by the government to improve the public sector.

VAT does not correlate with a presence on every step of the supply chain. Instead, the taxation is levitated on the consumer in the final stage of the transaction. The legal implementation that has created an environment in which service providers were reluctant is the fact that their new roles implied becoming agents in the tax collection process. Creating a legislative initiative was facilitated by multiple organizations, and multiple GCC states have joined the legal agreement to integrate a VAT system in 2016. As a result, UAE was one of the countries that followed through with the agreement relatively quickly and successfully. As a result, the system in which the state is able to access funds from transactions is not only beneficial in terms of a reduction of the oil industry on the financial potency of the country but also creates a basis for improved public services, infrastructure, and other essentials.

The legal framework regarding tax morality is tied to the country’s aim to minimize illegal activity and maximize lawfully and legitimized transactions backed up through legislative power. An outcome of low tax morality is tax evasion, which is an illegal act that is the result of improper taxation. Moreover, the legal punishment but such activities may not exceed a penalty constituting five times the amount of money that was deliberately withheld and would, otherwise, be added to the country’s funds. While legal repercussions regarding this subject are rare, the legislative basis for punishing low tax morality exists. This facilitates regulatory implications that create an environment in which tax morality od addressed on a state level. However, tax morality cannot be fully addressed through legal frameworks since the subject implies multiple different factors affecting the outcomes. Moreover, since the Federal Decree-Law mentioned prior has been integrated into the legislative system relatively recently, the level of tax morality is impacted by the population’s lack of experience and apprehension towards changing the standard business practices.

As a result, which the legal framework addressing tax morality exists, it may be less effective due to the nuanced approach which has been recently applied and the overall environment in which business owners have to take the role of government agents and collect the tax. Instead, a reasonable consideration would be looking at the complex process and mindset when it comes to an understanding of the purpose of applying VAT, the benefits correlating with such strategies, and the negative implications linked to illegal evasion of taxes. In this case, the legal framework becomes one of the many aspects which ultimately form societal tax morality and an agreement of consumers and business owners to only engage in ethical and lawful practices.