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A Publication of WTVP

It's April-time for the IRS and the Illinois Department of Revenue to go to work-and time for ethical problems to develop in businesses that attempt to get around the obligations of paying taxes. No individual and no business I've ever known through the years want to pay taxes. None of my acquaintances has ever cried out, "I love paying taxes! I want to pay more!"

Nonetheless, paying taxes is a cost of doing business and a part of being a responsible individual in America. Our pooled tax resources have accomplished a lot through the years-creating the world's best highway system, efficient mass transit, building and funding the services of schools and libraries, assisting small businesses to develop and large businesses to invest in factories, worker training, and equipment acquisitions.

There have been plenty of times in history and many occasions today when tax dollars are wasted by our legislators and officials in government agencies. The vast majority, however, want to see tax dollars being put to good use. Some businesses, however, work diligently to avoid paying taxes and cross a line in unethical behavior.

One way, for example, is to reclassify employees as "project workers." In the eyes of the company, they suddenly become independent contractors. Not only does the company avoid an hourly minimum since people are paid by the project, but it also pays no benefits and no withholding taxes on the workers.

Even though the IRS has a clear set of criteria for who is and who isn't an independent contractor-and the employer is liable for the correct determination-company leaders still persist in trying to get away from the burden of maintaining a labor force, opting instead for a pool of contractors. The ethical challenge is not only whether workers are getting a raw deal for the time and effort they put into the work and value they add to the product, but also whether companies and businesses are trying to shirk the responsibility of being a good corporate citizen.

Another method companies use to evade taxes is to place the headquarters offshore in a "tax haven." The shell of a corporate office is maintained in the foreign location, while the "North American office" is where the leadership is located and where the business decisions actually are made. While it's true this arrangement is, for the most part, legal, the corporate leaders actually aren't paying to support the infrastructure where the business has primary operations. That's unethical, since it's an avoidance of responsibility and accountability for fiduciary activity.

Businesses also fudge on taxes when developing a number of holding companies, sometimes called "shell businesses," to shield the company from its tax responsibility. While Enron is a recent primary example of this unethical practice, it happens a lot in businesses that deal in commodity or trading because the desire is to be free of taxes on transactions. Yet this type of practice is a business and therefore has a duty to report its activity to taxing officials.

Individual business professionals and self-employed persons also avoid tax responsibilities by trying to manage a lot of activity in cash or in increments of financing that cause the business to fall below the tax thresholds. In this way, the employees seek to keep as much money as possible out of the reporting loop. Yet, as the Good Book says, we need to pay taxes to whom taxes are due. We make unethical decisions when we try illegally to evade tax responsibilities.

Please understand I neither rejoice that we have a taxing system, nor do I support unchecked tax rate and tax levy in-creases-and I say that as a trustee of a taxing body. Nonetheless, part of the social contract of living, working, and owning a business in this country is that we agree we should be taxed on the value we add. Fortunately, we don't live in a society that stresses that each person is on his or her own. We do have mutual responsibility to one another to build a strong social fabric.

So as you complete your individual tax returns this month, and as your business is in some stage of filing tax returns on its most recent fiscal year activity, remember that, while you should take advantage of every legitimate deduction to which you're entitled, you shouldn't cross that boundary where you begin to avoid or evade your tax responsibilities.

Taxes, while not popular, remain the best method we have to ensure we invest in the entire community-not only those who can fend for themselves. Much of our current deficit budgeting could be eliminated if we all would take the ethical approach to pay the taxes we owe and fulfill the responsibility of being a citizen of such a wealthy and powerful country. IBI

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