Tax evasion is the term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means. 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 are unfavorable to a state's tax system, although such characterization of tax avoidance is suspect, given that avoidance is lawful, within self-creating systems.
Read more about Tax Evasion: Economics of Tax Evasion, Evasion of Customs Duty, Evasion of Value Added Tax (VAT) and Sales Taxes, Government Response, United States, See Also
Famous quotes containing the word tax:
“I have no doubt that it was a principle they fought for, as much as our ancestors, and not to avoid a three-penny tax on their tea; and the results of this battle will be as important and memorable to those whom it concerns as those of the battle of Bunker Hill, at least.”
—Henry David Thoreau (1817–1862)