Tax Evasion Vs Tax Avoidance

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Offline ummekulsum

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Tax Evasion Vs Tax Avoidance
« on: July 30, 2013, 04:15:02 PM »
Tax evasion
Tax evasion consists of seeking to mislead Tax Authorities by either:
     - Suppressing information to which Tax Authorities is entitled, for example by:
-   Failing to notify Tax Authorities of a liability to tax
-   Understating income or gains
-   Omitting to disclose a relevant fact
or
   Providing Tax Authorities with deliberately false information, for example by:
-   Deducting expenses that have not been incurred
-   Claiming capital allowances on plant that has not been purchased

Minor cases of tax evasion are generally settled out of court via the payment of penalties. However, there is a statutory offence of evading income tax that can be dealt with in a magistrate’s court.
Serious cases of tax evasion, particularly those involving fraud, continue to be the subject of criminal prosecutions which may lead to fines and/or imprisonment on conviction.
Furthermore, tax evasion offences will fall within the definition of money laundering and in certain cases individuals may be prosecuted under one of the money laundering offences. This includes both the under declaring of income and the over claiming of expenses.
If the assets of any clients were derived from illegal activities or if the client has committed tax evasion that considered under money laundering, a threat to compliance with the fundamental principles would be created. In such situations, the professional accountant may consider seeking legal advice and he should report this to the authorities.
          Tax avoidance
Tax avoidance is not defined, but is broadly any legal method of reducing the tax burden.
In recent years there has been a requirement for promoters of certain tax avoidance schemes to
disclose their schemes to Tax Authorities, and for taxpayers to disclose details of which schemes
they have used. This may enable Tax Authorities to take action more rapidly to close the
ambiguity.

Offline sakhawat

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Re: Tax Evasion Vs Tax Avoidance
« Reply #1 on: January 02, 2014, 01:11:10 AM »
Thanks for your valuable post. Actually Tax evasion is illegal and that's why it is a criminal liability of the tax payer. Intentional understating taxable income or overstating admissible expenses are fallen under  this category whereas Tax avoidance is meaningful and legal within the limit of income tax jurisdiction. An income tax payer can minimize his/her tax liability based on income tax laws such as he/she can get income tax rebate based on his/her investment allowance.
If you have investment in desktop computer you will get rebate (reduction in tax liability) which is legal.

So, the more you know income tax laws,the more you  have expertise to minimize your tax liability.
Mohammed Sakhawat Hossain, ACMA
Assistant Professor & Head
Department of Real Estate & Commerce
Faculty of Business & Economics
Daffodil International University
Cell: 01713-493090
E-mail: sakhawat@daffodilvarsity.edu.bd

Offline munna99185

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Re: Tax Evasion Vs Tax Avoidance
« Reply #2 on: January 13, 2014, 01:40:55 PM »
Tax evasion is the illegal evasion of taxes by individuals, corporations and trusts. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions. Tax evasion is an activity commonly associated with the informal economy. One measure of the extent of tax evasion (the "tax gap") is the amount of unreported income, which is the difference between the amount of income that should be reported to the tax authorities and the actual amount reported.
In contrast, tax avoidance is the legal use of tax laws to reduce one's tax burden. Both tax evasion and avoidance can be viewed as forms of tax noncompliance, as they describe a range of activities that intend to subvert a state's tax system, although such classification of tax avoidance is not indisputable, given that avoidance is lawful, within self-creating systems.   
[source: Wikipedia.com]

Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University

Offline ummekulsum

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Re: Tax Evasion Vs Tax Avoidance
« Reply #3 on: November 30, 2014, 12:36:52 PM »
Thank you sir for your valuable reply but to what extent general people understand the tax related law. I think it should be more simple than complicated.