Many people don’t realize it, but there are infact two vastly different tax systems in this country…..no I am not talking about Corporate Tax and Individual Tax. I am talking about the 2 Tax systems that society has created for itself, both of which are perfectly legal. Let’s call them the ‘Educated Tax System’, and the ‘Uneducated Tax System’. The ‘Educated Tax System’ has been created by those who want to understand the tax system and want arrange their affairs so that they can minimise their tax. On the other side is the ‘Uneducated Tax System’, which was created by those that either don’t know or don’t care, for those that pay their taxes, this generally means they will pay more Tax than they need to each year. The difference is like night and day.

I want to stress here, that knowing about the Tax system does not necessarily mean that you will fill in your own forms, but it does mean that you have a choice as to who it will be done by. It also means that you will be able to detect mistakes before you give your retursn to the IRB. Failing to detect errors, no matter whether you filled in the return or not, can have dire financial consequences. It is therefore important that you understand exactly what you are putting your signature on when you sign your form. The IRB does not care about the person that filled in the form for you, they really only care that you signed it!

We sometimes make statements about how the Government may eventually tax us according to the air that we breathe. Ironically, for those that live within the ‘Uneducated Tax System’ this is not far from the truth. Infact, these people are usually taxed according based on their actions. These people will generally end up paying more tax simply because they fail to understand that the way that they approach and record every financial transaction will ultimately determine how much tax they have to pay at the end of the year!

It is interesting to note that we spend alot of time telling each other to be aware of how our decisions/actions impact the environment and our own well being. We understand these concepts as being important and so we educate ourselves and our families so that we can give ourselves a good life. Ironicallly, Tax works the same way, but many people choose to ignore it! Many of us choose not appreciate what our taxes do for us, they do not understand that paying our taxes is actually a way of the country sharing the load to make society a better place. Likewise, many people are completely oblivious to the fact that their lack of knowledge about Tax can be work against them and their families, so they end up paying too much Tax each year.

One of the reasons for this gap, is that for many, sitting down with a good Tax Book is like doing excerise; we always seem to have better things to do! We would much rather go to Genting, see a movie or go and have dinner with friends. The point is that we have many other things appear to have a higher priority. I guess that this can be understood, especially given that Tax is something that gets our attention only 8% of the year i.e. 1 month out of 12. As a result, when Tax time comes around we turn the house inside out looking for those ellusive receipts and trying to find the number of the kind Uncle (or Auntie) that helped us last year.

Another reason for the gap, is simply having access to Tax Information that has been distilled enough for the common man on the street. In general, no reputable Tax Book exists without a healthy dash of references to the Tax Act (ITA), or other legal documents. We are not trying to design the rocket ship here, we just want to know the buttons to press that will take me to moon! All that we want is something simple that turns all that legal mumbo jumbo into information into a form that ‘Joe Average’ can understand.

Awareness is the important first step in educating ourselves. Having an awareness of Tax means that we have an understanding of what tax is and how it affects us. Becoming aware does not mean that you force yourself to read over 700 pages of ‘The Master Guide’, but it does mean that you should learn the basics of Tax and understand the fundamentals so that you are able to ask the relevant questions.

Unfortuately most people believe that the Tax season begins only in April each year, simply because this is when they are supposed to declare their tax. They are completely unware that the tax season runs from 1st January through until 31st December each year, and therefore do not understand that they are able to influence the amount of tax that they have to pay each year.

Look at your situation and ask yourself the question: Which Tax system do you belong to now? If you consider yourself to be in the “Educated Tax System” then congratulations, you are in the minority. If you see yourself in “Uneducated Tax System” and want to move to the “Educated tax System”, then you should begin by signing up to www.taxkawan.com, its free! You will meet others in a similar situation along with people that can share their Tax Knowledge with you.