Tax Evasion

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 EvasionEconomics of Tax Evasion, Evasion of Customs Duty, Evasion of Value Added Tax (VAT) and Sales Taxes, Government Response, United States, See Also

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Famous quotes containing the word tax:

    As a Tax-Paying Citizen of the United States I am entitled to a voice in Governmental affairs.... Having paid this unlawful Tax under written Protest for forty years, I am entitled to receive from the Treasury of “Uncle Sam” the full amount of both Principal and Interest.
    Susan Pecker Fowler (1823–1911)