DIFFERENCE BETWEEN TAX EVASION AND TAX AVOIDANCE
Tax Evasion and Tax Avoidance, are always used interchangeably with the misconception that both terms mean the same thing. But in context they do not mean the same thing.
DIFFERENCE BETWEEN TAX EVASION AND TAX AVOIDANCE
Deducting out a portion from your hard earnings at times is not a funny thing at all. Also, the Law makes it compulsory for everyone to pay tax and even provide penalties for non-compliance. Finding a number of people using the term 'tax evasion' and 'tax avoidance' is not uncommon.
Tax Evasion and Tax Avoidance, are always used interchangeably with the misconception that both terms mean the same thing. But in context they do not mean the same thing. They are both forms of tax noncompliance; but the major difference between them is the fact that tax avoidance, although morally dubious is legal, while tax evasion is illegal.
TAX EVASION
Tax Evasion is the use unlawful means to concealing taxable income from the tax authorities, so as not to remit taxes. It constitute an illegal practice, where a person, organisation or corporation deliberately evades paying their accurate tax liability. it could also mean the fraudulent and intentional means of not paying taxes. It has been explained to mean, an individual escaping the payment of tax.
When you under report or misrepresent your actual income to the government for the sole purpose of not paying tax, then you are evading tax. It is a criminal offence in Nigeria, punishable under the Federal Inland Revenue Service Act.
EXAMPLES OF TAX EVASION
Under Reporting Income
Taking Unearned Deductions: This is common when taxpayers claim expenses on their taxes that they did not incur
Failure to File Tax Return
TAX AVOIDANCE
Tax Avoidance is the use of legal means to avoid paying your taxes. The taxable individual or entity designs his businesses and affairs in a way that precludes him from paying the full amount of tax due. It is a legitimate way of avoiding tax by taking advantage of loopholes in the tax laws that actually allow you to reduce the amount of tax you are supposed to pay on your income.
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
WRITTEN BY CHAMAN LAW FIRM TEAM
EMAIL: chamanlawfirm@gmail.com
TEL: 08065553671, 08024230080