tax avoidance

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Tax Avoidance

The process whereby an individual plans his or her finances so as to apply all exemptions and deductions provided by tax laws to reduce taxable income.

Through tax avoidance, an individual takes advantage of all legal opportunities to minimize his or her state or federal Income Tax, gift tax, or estate tax. An individual may, for example, avoid federal income tax by investing a large sum of money in municipal bonds, since the interest on such bonds is not considered taxable income on which federal tax is due. Interest on the same amount of money placed in a savings account must be included as taxable income.

Tax avoidance must be distinguished from Tax Evasion, which is the employment of unlawful methods to circumvent the payment of taxes. Tax evasion is a crime; tax avoidance is not.

tax avoidance

legally reducing tax liability. Tax planning is the activity by which a taxpayer seeks to arrange his affairs so that his tax liability is minimized; avoidance of tax within the limits of tax law is perfectly legitimate. Some forms of avoidance are merely tax planning by using reliefs or exemptions, for example, by choosing tax-efficient investments. Others are convoluted and rather artificial. See TAX EVASION.
References in periodicals archive ?
The payment to Boswell is thought to be part of a legal tax avoidance procedure that uses interest-free loans instead of traditional salary payments to limit tax liabilities.
Catherine Bearder MEP and chair of the Liberal Democrat EU referendum campaign, said: "This is a gamechanger in the fight against corporate tax avoidance.
the international tax system and as a result countries across the world are now better equipped to deal with corporate tax avoidance.
7874, regardless of whether there is a principal purpose of tax avoidance.
He admitted taking tax avoidance measures "at the vanilla, bland, end of the spectrum", adding: "The expression tax avoidance is so wide that everyone does tax avoidance at some level.
I am against these aggressive tax avoidance schemes but I am not just against them - this Government has taken a huge amount of steps to legislate and toughen the laws and go after aggressive tax avoidance schemes for the very simple reason that if people go after these schemes and aggressively avoid tax they are making it the case that everyone else has to pay higher taxes as a result," he said.
It is difficult to accurately assess how much money the UK economy loses out on because of aggressive tax avoidance and evasion.
Mr Daly, a partner at Lodders Solicitors, said: "When asked, we advise clients that while heavily marketed highrisk tax avoidance schemes could technically work, they might be viewed by HMRC as aggressive, particularly where they rely on specific statutory exemptions and reliefs purely to avoid tax rather than the purposes which the legislation that introduced the exemptions and reliefs was intended to promote.
It is expected that the bank could be fined more than EUR150m in connection with an investigation of alleged tax avoidance by the lender's German clients.
A member of the influential Public Accounts Committee, Liberal Democrat Mr Swales has taken a leading role in its probe into corporate tax avoidance.
The "General Anti-Abuse Rule" (GR), part of a wider finance bill, would grant Her Majesty's Revenue & Customs - Britain's tax authority - additional powers to counter "abusive" tax avoidance But a sub-committee in the Lords, the upper house of parliament, examining the bill said GR would not tackle the practices used by companies such as Amazon and Starbucks to reduce their tax bill.
Summary: The Chair of the Public Accounts Committee, Margaret Hodge, says HMRC needs to adopt a stricter approach when dealing with tax avoidance.