What’s the difference between tax avoidance and evasion, is tax avoidance legal and how do the schemes work?
Tax evasion and tax avoidance can be easily be confused - here are the differences and the implications if you avoid paying tax
THE publication of the Paradise Papers has raised serious questions about the tax affairs of the rich and powerful.
A staggering number of the super-rich have come under fire for channelling funds into offshore tax havens as avoiding tax through these schemes. Tax evasion and tax avoidance can be easily be confused - here are the differences and how they work:
What's the difference between tax avoidance and tax evasion?
The difference between tax avoidance and evasion is legality.
Tax evasion is the illegal practice of not paying taxes - by not reporting income, reporting expenses not legally allowed or by not paying taxes owed - and it is an offence.
In businesses, tax evasion can occur in connection with income taxes, employment taxes, sales and excise taxes, and other federal, state, and local taxes.
Meanwhile, tax avoidance involves legally bending the rules of the tax system to reduce current or future tax liabilities by means not intended by parliament.
Examples of tax avoidance are: tax deductions, changing one’s business structure through incorporation, or establishing an offshore company in a tax haven.
Is tax avoidance legal?
According to HM Revenue and Customs (.
