Reference no: EM13176502

Problem 1 (Limit your answer to no more than two single-spaced pages)

One day as you were talking with an acquaintance, he said, "I hear you're taking a class in tax fraud. We wouldn't have individuals committing tax fraud if we had a flat tax with a $5,000 exemption for each person and no deductions instead of the progressive tax system we now have. All the government has to do is make this one change and its problems would be solved.

"Required:

a. Respond to your acquaintance. Consider your friend's suggestion only with respect to individual taxpayers (i.e., exclude corporations and other non-individual entities such as trusts). Is your friend correct? In your answer, discuss whether you think there are ways to cheat on taxes under your friend's proposal and, if there are ways, how this would be accomplished.

b. Instead of a flat tax, assume that your friend proposes a national sales tax. Under this tax, certain necessities such as groceries are exempt from tax. Furthermore, the sales tax rate on luxuries such as yachts and airplanes are taxed at a much higher rate. Discuss possible ways that a taxpayer could cheat on taxes under this proposal.

Problem 2 (Limit your answer to one single-spaced page)

Required: Discuss the applicability of the following two ethical theories to tax evasion: Procedural justice and rights.

Problem 3 (Limit your answer to one single-spaced page)

Recall that Abraham Lincoln believed that the main reason persons perform most acts is that they believe there is a personal benefit to them as a result of performing the acts.

Required:

a. Do you think that Abraham Lincoln was correct? That is, do persons perform seemingly altruistic acts with the hope (either consciously or subconsciously) that they will experience a benefit?

b. Assume for a moment that Lincoln is correct. Discuss the implications with respect to tax evasion.