Tax Evasion, Avoidance, Amnesty Flashcards
Commercial Tax Law Chapter 1
Tax evasion
use by the taxpayer of illegal or fraudulent means to defeat or lessen the payment of tax, AKA “Tax dodging”
Tax evasion is _________, subjecting the taxpayer to ______________
punishable by law, subjecting the taxpayer to civil and criminal liabilities
Tax avoidance
the use by the taxpayer of legally permissible alternative tax rates or methods of assessing taxable property or income, in order to avoid or reduce tax liability
the term may be extended to include situations where a person refrains from engaging in some activity or engaging some privilege in order to avoid the incidental taxation or to lower his tax bracket for a taxable year
Tax avoidance
Tax Evasion: Example
deliberate failure to report taxable income or property; deliberate reduction of income that has been received
Factors in tax evasion
- The goal is the payment of less than that known by the taxpayer to be legally due (or no payment at all)
- Having a state of mind that can be described as “evil,” “in bad faith,” “willful,” or “deliberate and not accidental.”
- A course of action (or failure of action) which is unlawful
Evidence to prove tax evasion
Since fraud is a state of mind, it need not be proved by direct evidence but may be inferred:
- failure of the taxpayer to declare his true and actual income for 2 consecutive years
- substantial underdeclaration of income for 4 consecutive years alongside intentional overstatement of deductions
tax avoidance schemes are not prohibited, tax laws _______________
cannot be circumvented in order to avoid payment of just taxes
Tax Amnesty
when the government intentionally decides not to impose penalties on those guilty of tax evasion or breaking tax laws.
(Tax Amnesty)
If established by statute, its terms must be interpreted __________ taxpayers and ________ for the government.
strictly against; favorably
