THE ROLE OF FISCAL BUDGETARY POLICY IN REDUCING TAX EVASION

Countries all over the world suffer from incidents of tax fraud and money laundering. It has been established that tax evasion is one of the worse offenses associated with tax fraud and money laundering. In their bid to curb tax evasion, most countries have introduced laws and legislation that make the practice punitive with the aim of serving as deterrent to others. This approach has however failed to a large extent as the practices continue to be on the rise. This study investigates and advocates for a change in approach that prioritizes prevention over punishment. There may be several modalities to executing the preventive approach to tax evasion. In this study, the use of fiscal budgetary policy that lessens the economic burden of citizens has been recommended. Three main outputs of fiscal budgetary policies have been examined against the levels of tax evasion in South Africa, U.S.A., U.K, China, and Brazil. These are tax burdens, unemployment rate, and inflation rate. Secondary data was collected from the five countries, after which quantitative analysis was performed involving both descriptive and inferential statistics. Results have showed that the preventive approach is also not statistically significant in reducing tax fraud if fiscal budgetary policies target reducing tax burden, unemployment and inflation. Governments aiming to use the preventive approach should therefore research into other economic indicators and policies rather than these three if they want to achieve significant impact