2. Define Tax evasion
An illegal practice where
a person, organization or
corporation intentionally
avoids paying his/her/its
true tax liability. Those
caught evading taxes are
generally subject to
criminal charges and
substantial penalties.
3. Reasons for Tax Evasion
• Weak Surveillance System
• Rampant Corruption in Tax Department
• Complicated Tax Laws and Filing Mechanism
• Tax Deductions offering loopholes to Tax Evaders
• Absence of Social security system
• Tax rates are too high
• Lack of Transparency in Government Expenditure
4. Tax Evasion Practice
• Under-reporting,
• Bribery of Tax Officials,
• Refusal to pay
• Lobbying of Governments to reduce tax
liability or effective incidence of Tax system
• Lobbying via international Institutions (IMF,
World Bank, World Trade Organization) to
achieve effects
5. Tax Avoidance
• Tax avoidance is the legal utilization
of the tax regime to one's own
advantage, to reduce the amount of
tax that is payable by means that are
within the law. In other words
• The use of legal methods to modify
an individual's financial situation in
order to lower the amount of income
tax owed. This is generally
accomplished by claiming the
permissible deductions and credits.
6. Examples of Tax Avoidance
1) Tax planning that may result in tax
postponement & Avoidance in Legal
manners
2) Tax Deductions (80 CC)
3) Charitable contribution
etc
7. Difference b/w Tax Evasion &
Tax Avoidance
• Tax evasion: the reduction of tax liabilities by not
informing the Revenue of all relevant facts. Tax
evasion is illegal and criminal penalties apply,
hence, if caught evading tax the director/s of the
company will be fined and even imprisoned.
• Tax avoidance: the reduction of tax liabilities
within the framework of the law. Tax avoidance
may not always succeed, but is legal; tax evasion
is never legal.
