Tax evasion is the conduct of the citizen taxpayer aimed at circumventing the tax rules of the state. Tax Evasion can be realized in different ways, not by invoicing the sale of goods or services, carrying out an economic activity without any regularization, drafting false tax returns to omit the payment of taxes due, deducing in the tax declaration stage, costs that do not exist or are not incurred and not paying taxes or mandatory taxes.
Tax evasion constitutes damage because it produces a reduction in tax revenue and therefore a deterioration of services. This is a crime that directly poses the threat to you, society, and your country.
How are they categorized?
Evasion implies significant negative economic effects in different ways. It determines distortive effects on the allocation of resources, interferes with the normal functioning of the market, and is synergistic with corruption and organized crime. The term tax evasion is often referred to as tax optimization or tax fraud. The three are related but cover different realities.
It is the case for a taxpayer, an individual, or a company to voluntarily circumvent the tax laws by illegal means. Fraud exposes those who practice it to legal sanctions. Examples include VAT fraud, corporate tax fraud, bank accounts hidden abroad, and the use of a false identity or false documents.
It is the fact of escaping the tax by legal means with the help of tax loopholes or derogations for example. If optimization is legal it can be legally considered illegal to the extent that it constitutes an abuse of rights and injustice.
This is the case when individuals or companies declare their income or profits in a country different from the one where they have their economic activities and where the tax rates are very low or even zero.
It is a gray area that is both optimization and fraud. It covers all the behaviors of individuals or businesses that aim to reduce the amount of taxes they should normally pay. If the means used are legal the escape then enters the category of optimization. On the other hand, if the means are illegal, the escape is akin to fraud.
Conclusion: Good to know
The wide spread of this problem has generated many others which ultimately leads to the fact that the modern tax system of the country does not meet the existing socioeconomic needs. Tax evasion is contrasted with specific rules and specific sanctions, including criminal penalties.
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The most common methods for evading the tax are related to the sale of goods or provision of services without issuing an invoice or receipt or through a declaration of false income. Tax evasion essentially concerns VAT.