Tax Evasion

“The Wikipedia of Law”

Tax Evasion

Tax evasion is when someone has deliberately misled us about their activities to reduce their tax liability, or have not paid tax that is due.
tax evasion is escaping payment by illegal means. This is obviously unlawful and is usually a criminal offence
Tax evasion is when a person or a company purposefully underpays its taxes

Tax Evasion and Tax Avoidance

In a legal sense, tax avoidance must be distinguished from tax evasion. Tax avoidance means using whatever legal means possible to reduce the amount of money that a company or individual pays in taxes.

A taxpayer commits tax evasion, for example, when he or she:

  • Knowingly does not keep the books and documents required to be kept by a tax law; or
  • Knowingly does not provide information (including tax returns and tax forms) to the Commissioner or any other person when required to do so by a tax law;

and this taxpayer does so:

  • Intending to evade the assessment or payment of tax by the person or any other person under a tax law; or
  • To obtain a refund or payment of tax in the knowledge that the person is not lawfully entitled to the refund or payment under a tax law; or
  • To enable another person to obtain a refund or payment of tax in the knowledge that the other person is not lawfully entitled to the refund or payment under tax law.

Criminal Offence

“Tax evasion” in this sense, in some countries, is therefore tantamount to fraud. It is, in such countries, a criminal offence. Further, as is to be expected in the case of a criminal offence, the legal standard for what will constitute “tax evasion” is reasonably clear. For example, in the United States, tax evasion is a criminal offense, a felony, under federal (Section 7201 of the Internal Revenue Code) and state legislation.

Error and Threshold

However tax evasion may be generally defined, in some countries, as any act designed to defraud the tax system, a simple error does not mean to be convicted for tax evasion. In general, the tax authorities must show that the taxpayer deliberately tried to underpay the taxes to start a criminal trial. In many countries, there is a threshold of tax fraud in order to become a criminal offense.

Some texts are extracted from “Improving the Operation of New Zealand´s Tax Avoidance Laws”

See Also

General Anti Avoidance Rule
Tax Avoidance
Financial Crime
Tax Fraud
Criminal Charges
Penny and Hooper case
Trust Taxation
Rule of Law
General Agreement on Tariffs and Trade
What is a Section 645 election?
Charity Trusts
Law binding
List of Tax Acronyms and Abbreviations
Trust Registration

Further Reading

Harry Ebersohn “Tax Avoidance and the Rule of Law” (paper presented to Legal Research Foundation Tax Avoidance Symposium, Auckland, April 2011).

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