Illegal practices in entrepreneurship

Illegal practices in entrepreneurship

The following are some of the illegal practices done by some entrepreneurs:

1. Tax evasion: This is an illegal way in which entrepreneurs avoid paying taxes by not disclosing the place where a business item is produced. This allows them to provide to authorities false information on the magnitude of their business. Some entrepreneurs collude with dishonest employees of the Tanzania Revenue Authority (TRA) to avoid paying the correct taxes. Tax evasion is a serious offence all over the world because it denies a nation of the expected revenue, thus, hindering the country's economic growth. In many countries, it is associated with "economic sabotage". When a country's income is denied by entrepreneurs, it affects the government's capacity to provide essential social services such as infrastructure. It also has a significant social, economic and political impact. Many countries have enacted strict penalties for tax evasion and malpractices in business. Thus, in order to support the collection of government taxes, buyers are advised to claim receipts for all payments they make.

2. Selling expired products: Some unfaithful entrepreneurs sell expired products. This is dangerous to the consumer since that may cause health risks. Expired products can even cause death. For example, a patient who takes expired medication may get seriously harmed or remain uncured by the medications. Expired drugs may become poisonous to the consumers. It is therefore important for the entrepreneur to observe quality specifications and standards of their products. The user is also advised to check the expiry date of any product they wish to buy.

3. Running a business without permits: In order for a business to be legal, an entrepreneur must have all required permits. Such permits include Taxpayer Identification Number (TIN), business license, tax assessment or identity cards for small entrepreneurs. Business permits are issued by the respective government authority to any entrepreneur who wants to do business in the country. Some entrepreneurs do business without required permits from the relevant government authorities. This situation affects the country's economy.

4. Cheating in weights and measures: Some entrepreneurs cheat on measurements of products they sell or produce. For example, an entrepreneur may pack sugar in a package that shows the weight of one kilogram, but in reality, it is less than one kilogram. This situation affects the consumer by getting less value for the paid amount. At the same time the entrepreneur is earning an illegal profit. It is the entrepreneur's responsibility to ensure that he or she submits the weighing tools to an agency responsible for inspection and approval at least once a year. Also, the entrepreneur should use standard volume packaging, for example avoiding over loading bags.

5. Sale of substandard products: Some entrepreneurs sell substandard products which can cause negative impact to the user. Entrepreneurs must submit samples of their products to the Tanzania Bureau of Standards (TBS) for quality assurance. They then may be licensed to use the TBS mark of quality. An entrepreneur who buys a product and sells it to a customer should ensure that the product has required quality standards approved by TBS.

6. Sale of illegal products: It is important to be aware that, not all products in the market are legal. Some entrepreneurs sell illegal products to earn money which is not good practice. For example, there are products that are prohibited in the country such as cosmetics that contain poisonous ingredients. But there are dishonest entrepreneurs who sell these products and expose their consumers to serious health risks. Entrepreneurs are advised to avoid engaging in illegal trade.

Impact of illegal practices on entrepreneurship

There are many economic and social consequences resulting from illegal practices in entrepreneurship as follows:

1. Loss of government revenue: A large portion of government revenue or Gross Domestic Product (GDP) is obtained from tax. Tax evasion by some entrepreneurs denies the nation of its revenue. This situation hinders development activities by the government, including infrastructure development and improvement of social services. Entrepreneurs need to be honest in order to facilitate national development.

2. Harmful effects to consumers: Consumers have experienced harmful side effects from using expired products such as food and medicines. The expired products are often sold by dishonest entrepreneurs and purchased by unsuspecting customers. There has also been use of products without adherence to quality standards. Low quality products include building materials, cosmetics, and clothes. These products have been dangerous, poisonous or harmful to consumers. For example, use of sub-standard construction materials have led to construction of low quality buildings. Consequently, such buildings may develop faults or even collapse in a short time.

3. Closure of entrepreneur's business: When inspection by the responsible authority discovers that a business is run on unlawful means that business may be shut down. Also, the business can be shut down if it is found to have caused harm to the community. Similarly, an entrepreneur can be prosecuted and severely punished. Illegal and unlawful business activities are a challenge to the government and pose a serious threat to the country's economy and environment. Many countries, including Tanzania, have enacted strict laws aimed at controlling entrepreneurs who violate business ethics by engaging in illegal business practices. Closure of a business tarnishes the image of an entrepreneur to the community, relatives and family.

Ways to control illegal practices in entrepreneurship

1. Educating the community: The community should be educated on the need to observe quality standards. Everyone should avoid buying and selling illegal, substandard and expired products. This knowledge will help consumers to observe carefully all relevant issues, including products expiry dates. In so doing, they can avoid health problems which could be experienced after using such products.

2. Educating entrepreneurs: Entrepreneurs should be educated on the importance of doing business in accordance with the laws, regulations and procedures of the country. This education will help them to follow the rules and regulations of the business and avoid doing illegal businesses. It will also help entrepreneurs to operate their businesses efficiently and freely. Furthermore, it will enable them to obtain various instructions and permits from the government regulatory agencies before starting a business or distributing goods.

3. To enact and implement laws to control illegal business practices: These laws will help entrepreneurs to do legal businesses and avoid penalties for not following the required procedures in the businesses. The laws will help entrepreneurs plan and strategize improvement of their businesses by selling and buying quality products. This will increase income and promote business growth. Necessary legal actions should be taken to entrepreneurs and their business partners, who violate the country's laws and regulations. The punishment will be a lesson to all entrepreneurs and customers of illegal products. These punishments will help them change and realise the importance of doing legal business for economic development of their families and the community at large.

4. Controlling the use of products obtained from illegal practices: This strategy will cause entrepreneurs and partners who are involved in such illegal businesses to lose customers. The entrepreneur may, thus, realize the need for lawful business practices. If product consumers provide necessary cooperation, it will help contain illegal and unlawful business practices in the country.