Taxation
 
All citizens want to pay the lowest amount of tax possible. For most individuals who work as employees there is very little opportunity to do anything with their tax level. Income tax is deducted at source, sales taxes are deducted on goods and services being acquired and all the other fee-based taxes are levied based upon the action that we take. Some owner managers feel that because there is more latitude when you are running your own business that it is acceptable to deduct in the business expenses that are not appropriate or worse not report all income.
 
Most democratic countries have a system of taxation, which is based upon self-assessment. The government does not know how much money it is owed by you until you report it on your tax return at a fixed time each year. The self-assessment system requires that taxation be clear and easy to determine for all citizens and that the citizens feel that the system is fair. If a taxpayer takes advantage of the system and does not report all the income that they should then others bear the burden of making up the difference. To maximize the correct reporting of tax and minimize any attempts to not report the correct amount each tax department levies significant fines and penalties for any taxpayer found not correctly completing their tax filings. If they believe that the errors were deliberate then there are provisions to send the taxpayer to jail.
 
In addition to money penalties and potential jail time the tax payer who decides to not report income or fudge expenses incurs a lot of emotional energy dealing with the potential of being audited by the local tax authority. Tax cases that go to court are reported in the local media, which can lead, to embarrassment and potential loss of customers who prefer to deal with someone who is more honorable. The obvious message is do not cheat on your tax reporting - the cost can be onerous.
 
REDUCING TAXATION
 
There are many legitimate ways to reduce taxation with a little planning and effort.
 
The first step is to hire a great accountant who is familiar with your industry and can recommend ways to reduce your tax hit.
 
For many businesses, one way to reduce tax depends on the jurisdiction that is taxing you. Today many companies conduct business in more than one jurisdiction. Each jurisdiction has its own set of tax rules and regulations - some are much less expensive than other. By organizing your operations to conduct an active business in the less expensive location your firm can save enormous amounts of taxation. For example, one firm had its' head office in a high tax jurisdiction. However, it was able to organize its' business affairs in such a way that it separated its' service operations into separate legal entities which had their principal offices and operations in low tax jurisdictions - the result was a significantly lower overall tax rate.
 
The most common way to reduce the overall tax burden for entrepreneurs is their ability to decide how much income they take in their hands as personal taxable income. Most high net worth owner managers minimize the amount of income they take personally and maximize their own net worth. Most tax jurisdictions tax personal income at a progressive rate; the less income you have the lower your average tax rate.
 
All of this requires ongoing and effective tax planning. Your accountant should be reviewing your goals and your needs on an ongoing basis. It is important to meet with your accountant at least once a quarter to update him/her on your current situation.
 
Wealthy entrepreneurs understand the necessity to minimize overall tax burden while maximizing their wealth.
 
 
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