Q. I have yet to hear a sermon or read a message that Jewish people should pay their income tax honestly or be honest in business. Why is this so?
A. Personal honesty and integrity in business are so axiomatic that it is unthinkable that there should be the apparent conspiracy of silence implied in the question. Indeed, there is so much research, writing and teaching on modern Jewish ethics that the questioner must, by some mischance, have missed it. But to keep the present answer relatively brief we will deal only with the first issue – payment of taxes – and deal with business ethics in a later answer.
An important essay entitled “Payment of Income Taxes – Halachic Guidelines” published by Rabbi Ezra Bick in 1978 begins with the halachic principle, Dina d’malchuta dina – “The law of the government is law” (Gittin 10b etc.) and explains that though the full ramifications of this principle are a matter of debate, the Talmud explicitly applies it to taxation. The Talmudic principle is that the collection of taxes is lawful and proper and it is forbidden to deceive the tax collector. In addition to the prohibition of chillul HaShem, desecration of God’s name, the Shulchan Aruch states that the non-payment of taxes is stealing the government’s money (Choshen Mishpat 369:6).
Halachah therefore requires that tax returns be filled out honestly. Invalid deductions must not be claimed. Violations of this principle involve stealing, chillul HaShem and making a false statement. There is, however, no mitzvah to overpay one’s taxes, and therefore one may utilise loopholes so long as they are legal and facts are not being withheld.