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.

1 July to 30 June | Australian Taxation Office

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 or tax abuse , 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.

In , Nobel laureate economist Gary Becker first theorized the economics of crime , [3] on the basis of which authors M.

Sandmo produced, in , an economic model of tax evasion. This model deals with the evasion of income tax, the main source of tax revenue in developed countries. According to the authors, the level of evasion of income tax depends on the detection probability and the level of punishment provided by law. The literature's theoretical models are elegant in their effort to identify the variables likely to affect non-compliance.

Alternative specifications, however, yield conflicting results concerning both the signs and magnitudes of variables believed to affect tax evasion. Empirical work is required to resolve the theoretical ambiguities. Income tax evasion appears to be positively influenced by the tax rate , the unemployment rate , the level of income and dissatisfaction with government.

Tax Reform Act of appears to have reduced tax evasion in the United States. Customs duties are an important source of revenue in developing countries. Importers purport to evade customs duty by a under-invoicing and b misdeclaration of quantity and product-description.

When there is ad valorem import duty, the tax base can be reduced through underinvoicing. Misdeclaration of quantity is more relevant for products with specific duty. Production description is changed to match a H.

Code commensurate with a lower rate of duty. Smuggling is importation or exportation of foreign products by illegal means. Smuggling is resorted to for total evasion of customs duties, as well as for the importation of contraband. A smuggler does not have to pay any customs duty since smuggled products are not routed through customs-tax compliant customs ports, and are therefore not subjected to declaration and, by extension, to the payment of duties and taxes.

During the second half of the 20th century, value-added tax VAT emerged as a modern form of consumption tax throughout the world, with the notable exception of the United States. Producers who collect VAT from consumers may evade tax by under-reporting the amount of sales. Canada uses both a VAT at the federal level the Goods and Services Tax and sales taxes at the provincial level ; some provinces have a single tax combining both forms.

In addition, most jurisdictions which levy a VAT or sales tax also legally require their residents to report and pay the tax on items purchased in another jurisdiction. This is especially prevalent in federal countries like the US and Canada where sub-national jurisdictions charge varying rates of VAT or sales tax. In liberal democracies, a fundamental problem with inhibiting evasion of local sales taxes is that liberal democracies, by their very nature, have few if any border controls between their internal jurisdictions.

Therefore, it is not generally cost-effective to enforce tax collection on low-value goods carried in private vehicles from one jurisdiction to another with a different tax rate. However, sub-national governments will normally seek to collect sales tax on high-value items such as cars.

Dennis Kozlowski is a particularly notable figure for his alleged evasion of sales tax. What started as an investigation into Kozlowski's failure to declare art purchases for the purpose of evading New York state sales taxes eventually led to Kozlowski's conviction and incarceration on more serious charges related to the misappropriation of funds during his tenure as CEO of Tyco International. The level of evasion depends on a number of factors, including the amount of money a person or a corporation possesses.

Efforts to evade income tax decline when the amounts involved are lower. Corruption by tax officials make it difficult to control evasion.

Tax administrations use various means to reduce evasion and increase the level of enforcement: Corrupt tax officials co-operate with the taxpayers who intend to evade taxes. When they detect an instance of evasion, they refrain from reporting it in return for bribes. Corruption by tax officials is a serious problem for the tax administration in many [ which? In Switzerland , many acts that would amount to criminal tax evasion in other countries are treated as civil matters.

Dishonestly misreporting income in a tax return is not necessarily considered a crime. Such matters are handled in the Swiss tax courts, not the criminal courts. In Switzerland, however, some tax misconduct such as the deliberate falsification of records is criminal.

Moreover, civil tax transgressions may give rise to penalties. It is often considered that the extent of evasion depends on the severity of punishment for evasion. Professor Christopher Hood first [ citation needed ] suggested privatization of tax enforcement to control tax evasion more efficiently than a government department would.

In Bangladesh, customs administration was partly privatized in Abuse by private tax collectors see tax farming below has on occasion led to revolutionary overthrow of governments who have outsourced tax administration. Tax farming is an historical means of collection of revenue. Governments received a lump sum in advance from a private entity, which then collects and retains the revenue and bears the risk of evasion by the taxpayers. It has been suggested that tax farming may reduce tax evasion in less developed countries.

This system may be liable to abuse by the "tax-farmers" seeking to make a profit, if they are not subject to political constraints. Abuses by tax farmers together with a tax system that exempted the aristocracy were a primary reason for the French Revolution that toppled Louis XVI.

However, PSI agencies have cooperated with importers in evading customs duties. Bangladeshi authorities found Cotecna guilty of complicity with importers for evasion of customs duties on a huge scale. In March , the Bangladeshi National Board of Revenue cancelled Cotecna's certificate for serious irregularities, while importers' complaints about the other three PSI companies mounted.

Bangladesh planned to have its customs department train its officials in " WTO valuation , trade policy, ASYCUDA system, risk management" to take over the inspections. Cotecna was also found to have bribed Pakistan's prime minister Benazir Bhutto to secure a PSI contract by Pakistani importers. She and her husband were sentenced both in Pakistan and Switzerland. Taking tax evasion into account increases the rise in inequality seen in tax data since the s markedly, highlighting the need to move beyond tax data to capture income and wealth at the top, even in countries where tax compliance is generally high.

We also find that after reducing tax evasion—by using tax amnesties—tax evaders do not legally avoid taxes more. This result suggests that fighting tax evasion can be an effective way to collect more tax revenue from the ultra-wealthy.

In , the Coalition government announced a crackdown on economic crime. It created a new criminal offence for aiding tax evasion and removed the requirement for tax investigation authorities to prove "intent to evade tax" to prosecute offenders.

In the United States of America, Federal tax evasion is defined as the purposeful, illegal attempt to evade the assessment or the payment of a tax imposed by federal law.

Conviction of tax evasion may result in fines and imprisonment. The Internal Revenue Service IRS has identified small businesses and sole proprietors as the largest contributors to the tax gap between what Americans owe in federal taxes and what the federal government receives.

Small businesses and sole proprietorships contribute to the tax gap because there are few ways for the government to know about skimming or non-reporting of income without mounting significant investigations.

As of [update] the most common means of tax evasion was overstatement of charitable contributions, particularly church donations. From Wikipedia, the free encyclopedia. Not to be confused with tax avoidance. Government revenue Tax revenue Non-tax revenue Tax law Tax bracket Tax threshold Exemption Credit Deduction Tax shift Tax cut Tax holiday Tax advantage Tax incentive Tax reform Tax harmonization Tax competition Double taxation Representation Unions Medical savings account Tax, tariff and trade.

Price effect Excess burden Tax incidence Laffer curve Optimal tax Theory Optimal capital income taxation. Revenue service Revenue stamp Tax assessment Taxable income Tax lien Tax refund Tax shield Tax residence Tax preparation Tax investigation Tax shelter Private tax collection Tax farming. Tax avoidance Tax evasion Tax resistance Tax haven Smuggling Black market Transfer mispricing Unreported employment Tax shelter. Tax rate Progressive Regressive Proportional.

Gold and forex smuggling go up, jewellers under scanner for tax evasion : Business, News - India Today

Direct Indirect Per unit Ad valorem In rem Capital gains Carbon Consumption Dividend Ecotax Excise Fuel Georgist Gift Gross receipts Income Inheritance estate Land value Payroll Pigovian Property Sales Sin Single Stamp Steering Turnover Value-added VAT Corporate profit Excess profits Windfall profits Negative income Flat Wealth.

Financial transaction tax Currency transaction tax Tobin tax Spahn tax Tax equalization Tax treaty Permanent establishment Transfer pricing European Union FTT. Custom Duty Tariff Import Export Tariff war Free trade Free trade zone Trade agreement. Church tax Eight per thousand Teind Tithe Fiscus Judaicus Leibzoll Temple tax Tolerance tax Jizya Kharaj Khums Nisab Zakat.

Tax evasion and corruption in Greece. Tax evasion in the United States. Global Forum on Transparency and Exchange of Information for Tax Purposes History of tax resistance Informal sector Land value tax Social inequality Tax amnesty Tax avoidance Tax haven Tax information exchange agreements Tax noncompliance Tax resistance Taxation as slavery Taxation as theft U.

Journal of Applied Psychology: When taxpayers try to find loopholes with the intention to pay less tax, even if technically legal, their actions may be against the spirit of the law and in this sense considered noncompliant. CESifo Working Paper Series No. An Economic Approach" PDF. The Journal of Political Economy. Measuring the Size, Growth and Determinants of Income Tax Evasion in the U.

Tax Evasion

A Brief Introduction to Czech Law. The American Institute for Central European Legal Studies AICELS Archived from the original PDF on September 3, A Radical Solution for Developing Country Tax Problems? D Introduction of PSI system in Bangladesh: Facts and Documents, Desh Prokashon, Dhaka.

Retrieved August 12, Media New Age Ltd, Dhaka. Archived from the original on November 20, Retrieved 3 January Bhutto Sentenced In Switzerland". Advance-fee Lottery scam Bank Bankruptcy Chargeback Cheque Credit card Forex Insurance Mortgage Securities Tax. Electoral Medicare Visa Welfare. Affinity fraud Charity Confidence trick Counterfeiting Faked death Forgery Hoax Impersonation Mail and wire honest services Scientific Spyware White-collar crime.

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Privacy policy About Wikipedia Disclaimers Contact Wikipedia Developers Cookie statement Mobile view. An aspect of fiscal policy. Policies Government revenue Tax revenue Non-tax revenue Tax law Tax bracket Tax threshold Exemption Credit Deduction Tax shift Tax cut Tax holiday Tax advantage Tax incentive Tax reform Tax harmonization Tax competition Double taxation Representation Unions Medical savings account Tax, tariff and trade.

Economics Price effect Excess burden Tax incidence Laffer curve Optimal tax Theory Optimal capital income taxation. Collection Revenue service Revenue stamp Tax assessment Taxable income Tax lien Tax refund Tax shield Tax residence Tax preparation Tax investigation Tax shelter Private tax collection Tax farming. Noncompliance Tax avoidance Tax evasion Tax resistance Tax haven Smuggling Black market Transfer mispricing Unreported employment Tax shelter.

Distribution Tax rate Progressive Regressive Proportional. Types Direct Indirect Per unit Ad valorem In rem Capital gains Carbon Consumption Dividend Ecotax Excise Fuel Georgist Gift Gross receipts Income Inheritance estate Land value Payroll Pigovian Property Sales Sin Single Stamp Steering Turnover Value-added VAT Corporate profit Excess profits Windfall profits Negative income Flat Wealth.

International Financial transaction tax Currency transaction tax Tobin tax Spahn tax Tax equalization Tax treaty Permanent establishment Transfer pricing European Union FTT.

Tax evasion - Wikipedia

Trade Custom Duty Tariff Import Export Tariff war Free trade Free trade zone Trade agreement. Religious Church tax Eight per thousand Teind Tithe Fiscus Judaicus Leibzoll Temple tax Tolerance tax Jizya Kharaj Khums Nisab Zakat.

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