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Tax Evasion in Cyberspace

When a person or entity willfully avoids paying their true tax obligations, this is prohibited. People who are discovered evading taxes face serious penalties and criminal prosecution.. People or organization willfully not able to pay taxes is a federal offense under the Internal Revenue Service (IRS) tax code.[1] A long list of Tax scams has always been prepared by the government. Tax scams are not new for all of us. It is the only thing in Indians that they usually hesitate to pay their taxes, which lead them to do tax scams.

In this new era of technology is always given as a first preference for doing any type of cybercrime. Tax evasion in cyber space is also a theft from government being a citizen of a country it's the responsibility of each and every citizen to pay taxes. The thinking of most of the people is that why should we pay tax?

It's our money we have done hard work for that money, why should we give it to government? During this pandemic situation it is getting very difficult for businessmen, small businesses and other people to and other people to pay their taxes. During this pandemic use of technology has increased and tax payees are using online mode. If we say online that means a large cyberspace where clever people using technology and they help some of the tax payees to escape from paying taxes.

Every year on dark web financial and social security identity theft is becoming easily affordable for cybercriminals. This means cybercriminals can make tire new identity by just some couple of mouse clicks. It will become easy for cybercriminals to get their hands on documents and credentials needed for doing successful tax identity theft. Nowadays these cyber criminals are taking advantage of the current pandemic situation i.e. COVID-19.

How tax evasion is done in cyberspace?
These cyber criminals stole identities and use them to file tax returns to obtain refunds. According to research done by IBM X- Force[2] researchers says that there have been several tax-themed campaigns started by these cybercriminals which directly attacks to consumers and businesses. They mislead people by sending them messages that seem to be from well-known accounting, tax, and payroll firms, like ADP and Paycheques.

Alleged fake, a typical banking Trojan that infects devices and aids in data theft, is used by these attackers to steal the data in order to commit wire fraud from from the owner's account." These attackers just need a one person who started to believe a fake email and after that they are in with their malware to know the details of their targeted victims. The low cost of service data is another problem indicating towards that identity theft is not going away soon and is going to be get worse day by day.

Most taxpayers using mobile apps to pay their taxes has also been dangerous to tax payees as for the current situation China is becoming like danger for all of us. Users don't know about the apps they are using that is fake or original on which they are allowing app and giving all information to that fake app. As most of the e-filing apps for paying does not store information related to taxpayers.

But fake mobile apps imitate popular tax services to people to get their sensitive information. Most of these are hosted on third-party stores, Google and Apple app store. As I said earlier, that tax crime is not new but with the experience that cybercriminals are doing tax fraud in cyberspace has been increased from the past few years.

Technology getting advanced so cybercriminals are getting themselves advanced using new tools for doing tax crimes. Data breaches, intrusion, takeovers and compromises are the new or tools that cybercriminals use to commit crime. Most of the investors and their tax advisors have to be get taught on how to pay taxes virtually as most of them are not paying taxes virtually.

Cases related to tax evasion in Cyber Space
In 2018, Delhi Government had found around Rs.262 crores of tax fraud[3]. In this Tax evasion 8,700 traders caught showing fraudulent taxes deposits to almost 13 banks since 2013. A complaint has been filed by Delhi Police's Economic Offences Wing (EOW) by the trade and tax department for the FIR in this matter.

Another case is from Mehatpur area, Una District where transporters are caught for tax evasion.[4] The investigation was done Una Vigilance and Anti- Corruption Bureau. Some of the private transporters have done Passenger and Gods Transport Tax evasion. A cyber café named, Ratan Web Solution from where the team recovered 15 fake deposits challans. Some agents used to work on the behalf of some transporters, these 'agents' used to deposit a specific amount of tax in banks and later inflate the figures on the counter foils.

After, which they are handed back to agent by the banks for depositing the money in the treasury and the Excise and Taxation Department as the proof of having deposited the due tax. The tax, banks and treasury collection department could not able to get the money for nine years. And for about nine years, there is loss of crores of rupees in the revenue of state government.

Till 2016 all the taxes are being made offline but after 2016 in India taxes are started to been paid online through e-filing. In which there are so many loop holes as cyberspace is very vast and the large number of users. Having too many users is also problem as its very difficult to monitor each one of them on regular basis.

Most of them take disadvantage of technology and used it for doing malpractices. Doing these type of malpractices online is a serious crime in law. To be get aware from these types of tax evaders, tax departments regularly keep an eye on accounts from which large amount of digital transfer or any other transfer been done. They also check their old records to find any type of fraud being made.

If we talk outside India Internal Revenue Services (IRS) keeps track record of each and every digital payment made. They also take necessary steps for these cybercriminals. In one of their statement they said that tax evasion in cyberspace has grown up quickly in the recent years which is matter of seriousness. For many countries tax evasion has become a matter of concern. For most of the countries like Germany, US, UK and France, the MNCs like Google, Amazon, Facebook, Apple or we can say (GAFA) gang is a problem creator as they have not paying

  1. Internal Revenue Service (IRS)
    Internal Revenue Service (IRS), Investopedia (2020), (last visited Jul 2, 2020).
  2. Tax Hacks: How Seasonal Scams Cause Yearlong Problems
    Tax Hacks: How Seasonal Scams Cause Yearlong Problems, Dark Reading (2020), (last visited Jul 2, 2020).
  3. Team, T.
    Cyber Tax Evasion of Rs 262 crore detected in Delhi | Taxscan
    Tax Team, Cyber Tax Evasion of Rs 262 crore detected in Delhi | Taxscan Taxscan | Simplifying Tax Laws (2020), (last visited Jul 2, 2020).
  4. Fake Tax Deposit Challans Found At UNA Cyber Cafe
    Fake tax deposit challans found at Una cyber cafe, Tribuneindia News Service (2020), (last visited Jul 2, 2020).
Written By: Sanidhya Kulshreshtha

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