To summarize the above article, it informs us that since the harmonize sales tax is now in effect since July 1, more people have been participating in the underground economy to dodge the increased tax of 12% to 13% than what they used to be paying: 5% of government sales and services tax. Now the underground economy has been flourishing and keeps increasing the amount of people who participate in it has been getting larger as the tax gets higher. As soon as tax surpass the level of 29% there will be no doubt as to how many people who start looking for ways to cheat the system.
Connection:
The connection made from the article and textbook mostly has to do with transactions, or rather lack there of. This is because the article explains that people have now been participating in the underground economy since the increase in tax via harmonized sales tax. The objective of the underground economy is to put down hard, cold cash in exchange for goods or services. It is especially effective and beneficial for people in this business (or so they would think) because there will be no way to track the exchange as there will not be any transactions or accounting activity to show any proof.
Reflection:
In my opinion and as I have learned from taking a class called Money Management 12 previous to Financial Accounting 12, when people try to cheat their way out of paying their taxes or by trying to outsmart the government they will soon have to end up paying more later on. This is because the government will need to generate more money for their expenses and if they are not receiving what they expect with the new taxes, then they will have to increase the tax again. It’s kind of like a cycle of adding on tax every now and then per se, yet some people don’t realize that their ignorance is what’s putting up the tax in the first place. And if this underground economy gets larger, I have a feeling the government will be more strict on regulating such behaviour.
