Wesley Snipes and Richard Hatch should be happy they don't live in China.
A federal jury last month ordered actor Snipes, who paid no federal taxes from 1999 to 2004, to pay up to $17 million in back taxes plus penalties and interest. Hatch, who failed to pay taxes on his $1 million in winnings from the first "Survivor" show in 2000, last week lost an appeal of his tax-evasion conviction and is serving four years and three months in federal prison.
Paying big dollars is one thing, serving time in jail is another; but in China, those punishments are mere slaps on the wrist. According to The Economist, China may lead the world in economic growth rates, but it's also a leader in use of the death penalty and the number of crimes - 60 - that it considers capital offenses. The list includes murder and other violent crimes, right along with taking bribes, embezzlement, and tax evasion.
The Economic Times of India calls tax evasion a "global scourge," which has reached 10 percent of gross domestic product in some advanced counties and 70 percent in developing countries, by some estimates.
Various methods of cracking down are being tried. In addition to stick method (the threat of death), the Chinese are trying the carrot approach. The newspaper said tax authorities encourage customers to request official receipts by issuing receipts that double as proof of payment and a scratch-off lottery ticket. Records of the printed receipts are automatically sent to the tax authorities.
In Canada, a tax evasion conviction can mean big penalties, daily interest, and a possible jail term of up to two years. Jose Rocha, a masonry company owner in Kitchener, Ontario, failed to report almost $1 million in income from 1998 to 2004. Rocha was fined $112,216. He must pay the full tax he owes, $172,639, plus interest and penalties, according to The Record. Federal prosecutor Steve Dollar told the newspaper that Rocha will likely pay four times what he should have paid in taxes in the first place. "People caught doing this will face significant financial consequences . . . it's just not worth it."
Mexico, which collects far too little in taxes, has passed legislation that aims to collect more taxes and crack down on evasion "from blue-chip companies that use multiple tax loopholes to the hundreds of thousands of street vendors who crowd city streets," The New York Times reported. The measure is expected to raise $10 billion next year.
The Wall Street Journal reported Monday that many developing countries are struggling with ways to collect more income taxes, with corruption being a major impediment. In Russia, massive tax evasion led President Vladimir Putin to implement a 13 percent levy on income in 2001. Former Russian oil tycoon, Mikhail Khodorovsky, a convicted tax evader, was sentenced in 2005 to eight years in jail.
The Journal reported that in Indonesia, which has 240 million people and one of the lowest tax-collection ratios in Asia, only 3.5 million individuals were registered as taxpayers at the end of 2006. In the Philippines, sales tax was raised in 2005 because income taxes are ineffective. More than two-thirds of self-employed people in the Philippines - from doctors to hairdressers - pay less tax than they should, Reuters reported.
In China, tax revenues are surging, but not because of individuals paying income taxes. Most taxes are paid by big companies. Most of China's 1.3 billion people have never filed a tax return, the Journal reported.