The role of judicial cooperation in the fight against tax evasion and tax avoidance in the CEMAC zone

2- Causes of tax avoidance

The principal cause of tax avoidance high tax pressure or high tax rate. In France, income tax is calculated according to a progressive scale. Thus, a taxpayer's income can be taxed up to 45% when it exceeds 156,244 euros.On the contrary, income tax is not taxed in Dubai, in Bulgaria income tax rate is 10% and 15% on average in Mauritius.^101(*)

Secondly, weak tax system can be also considered as a cause of tax avoidance given that by its practice tax avoidance entail using the loopholes of the tax system to pay less tax. A weak tax system will therefore favour or create a suitable ground for people and business to avoid taxes thereby negatively impacting the revenues collected by the tax administration.

B: consequences of tax evasion and tax avoidance

The consequences of tax evasion (1) and tax avoidance (2) are numerous and are felt by countries in the short, medium and long run.

1- Consequences of tax evasion

The consequences of tax evasion can be national and international

a- On the national plan

- Decrease in government revenue

Indeed, the government suffers huge revenue losses due to tax evasion. These losses directly affect its level of indebtedness and influence it's ability to provide services and fund programs that meet the needs of our ever-changing society. In addition, the State to satisfy its regalian missions which is that of providing of satisfying general interest needs financial resources and tax evasion therefore acts like a barrier to the realisation of this mission. It compromises the budgetary balance of many States by reducing collective expenditure.^102(*)

- Threat of social justice

There are citizens who pay for others. Indeed, law-abiding individuals see their tax burden unfairly increased because they have to compensate for those who engage in fraud. This has the consequence of the breach of the respect of the principle of equality of all before the tax.^103(*)

- Undermines free competition

In a market economy, tax evasion undermines free competition. Indeed, there are companies that face unfair competition because they are law-abiding and aware of their social responsibilities. In addition, tax evasion distorts the structures of certain cooperate or physical persons just as it contributes to the survival of marginal businesses.^104(*)

b- On the international plan

In this case, tax evasion can:

- Increase animosity between, the States benefiting from the fraud on one hand and, on the other hand, those which bear the brunt of this phenomenon.

- Tax evasion can be at the origin of socio-political conflicts between several States.

- Allows the expansion of international economic structures.

2- Consequences of tax avoidance

By depriving States of essential financial resources to finance the fight against poverty and inequality, tax avoidance has a considerable human cost. By definition and because tax avoidance is an opaque practice, quantifying its amount is a complex exercise and there are therefore several estimates. In November 2020, researchers from the international Tax Justice network calculated that countries globally lose a total of more than $427 billion in taxes each year due to corporate and personal tax avoidance.^105(*)

a- Impact on financial resources

Concretely, taxes on corporate profits generate revenue for national budgets which, when invested in public services such as education, health, social protection, reduce inequalities. When large corporations and large fortunes do not pay their fair share of taxes, they deprive states of considerable financial resources.

b- Impacts on developing countries

Iftax voidance is rampant all over the world, it is developing countries that are proportionally the most impacted by it. With globalization, developing countries are concluding bilateral tax treaties with rich countries in order to attract foreign investment and multinational companies to their country. But due to the lack of international rules and due to unfair negotiations, developing countries are often forced to give up their rights to tax the activity of companies operating on their soil and to collect the revenue from these taxes. However, these countries, most of which are already heavily indebted, have very significant needs in terms of financing their public health or education services. Every penny diverted could be invested to improve the quality of life of thousands of people.

CONCLUSION OF CHAPTER I

Analysing how judicial cooperation can contribute to fight against tax evasion and tax avoidance in the CEMAC zone warranted a study of its political and legal dimension. The aim here was to better understand the forms, causes and consequences of the above mention tax malpractices. This state of things actually justify why the community legislator as well as the political actors of the sub region had to put in place strategies aimed at boosting administrative collaboration between the tax authorities of members states on one hand and on the other hand adopting an community norms defining the framework of judicial cooperation among member states.

* ¹⁰¹ https://www.capital.fr/votre-argent/evasion-fiscale-1351505 accessed on 06/03/2022.

* ¹⁰² Ghislain kavula Mwanangana, Op.cit.

* ¹⁰³Ibid.

* ¹⁰⁴IBId.

* ¹⁰⁵ https://www.oxfamfrance.org/inegalites-et-justice-fiscale/evasion-fiscale-definition-consequences-solutions/ accessed on 06/03/2022.