Tax is one of the responsibilities that any citizen should pay and it is one of the main sources of revenue for the government too. However, not all citizens are willing to pay taxes fairly. Instead of hiring a good accountant to help them with their tax planning, some of them prefer to do tax evasion or tax avoidance to reduce or dismiss the amount of their taxes. Unfortunately, doing tax evasion or tax avoidance will cause you with some effects which may be bad for your track record or worse, it may lead you to jail. Therefore, here are some explanations about tax evasion and tax avoidance that you should know.
Tax evasion is done by a tax payer to escape from a legal tax obligation. Usually, it is done through failing to report a source of income or seeking to reduce their tax liability by understanding the source of income to the tax authority in a willful and deliberate violation.
On the other hand, tax avoidance is a situation when a tax payer wants to pay less tax than he ought to have paid by taking advantage of the weakness or loopholes in the tax system.
Some of us may have read about the effects of tax avoidance and evasion in the news. Many companies are caught-red handed doing these and being accused and charged of engaging in unacceptable practices of tax scheming which results in the shutting-down of these companies.