tax evasion


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Tax Evasion

The process whereby a person, through commission of Fraud, unlawfully pays less tax than the law mandates.

Tax evasion is a criminal offense under federal and state statutes. A person who is convicted is subject to a prison sentence, a fine, or both. The failure to file a federal tax return is a misdemeanor, but a consistent pattern of failure to file for several years will constitute evidence that these failures were part of a scheme to avoid the payment of taxes. If this pattern is established, the violator may be charged with a felony under section 7201 of the Internal Revenue Code.

The U.S. Supreme Court, in Spies v. United States, 317 U.S. 492, 63 S. Ct. 364, 87 L. Ed. 418 (1943), ruled that an Overt Act is necessary to give rise to the crime of Income Tax evasion. Therefore, the government must show that the taxpayer attempted to evade the tax rather than passively neglected to file a return, which could be prosecuted under section 7203 as a misdemeanor. A person who has evaded taxes over the course of several years may be charged with multiple counts for each year taxes were allegedly evaded.

According to the Supreme Court in Sansone v. United States, 380 U.S. 343, 85 S. Ct. 1004, 13 L. Ed. 2d 882 (1965), a conviction under section 7201 requires proof Beyond a Reasonable Doubt as to each of three elements: the existence of a tax deficiency, willfulness in an attempted evasion of tax, and an affirmative act constituting an evasion or attempted evasion of the tax.

An affirmative act is anything done to mislead the government or conceal funds to avoid payment of an admitted and accurate deficiency. Affirmative behavior can take two forms: the evasion of assessment and the evasion of payment. Affirmative acts of evasion include evading taxes by placing assets in another's name, dealing in cash, and having receipts or debts paid through and in the name of another person. Merely failing to pay assessed tax, without more, does not constitute tax evasion.

The keeping of a double set of books or the making of false invoices or documents can be proof of tax evasion. In some cases the mailing of a false return may constitute the overt act required under section 7201.

Further readings

Mertens, Jacob, Jr. 1996. Mertens Law of Federal Income Taxation. Rochester, N.Y.: Clark Boardman Callaghan.

Cross-references

Taxation; Tax Avoidance.

tax evasion

n. intentional and fraudulent attempt to escape payment of taxes in whole or in part. If proved to be intentional and not just an error or difference of opinion, tax evasion can be a chargeable Federal crime. Evasion is distinguished from attempts to use interpretation of tax laws and/or imaginative accounting to reduce the amount of payable tax.

tax evasion

any act or omission which results in a person paying less tax than is legally due by, for example, concealing or understating a source of income, overstating expenses, making false claims to reliefs or failing to disclose chargeability. It maybe criminal, as opposed to the prudent arrangement of affairs to minimize a tax burden: See TAX AVOIDANCE.
References in periodicals archive ?
Unfortunately, like in the previous administration and probably in all governments, politics can determine who among the high-profile individuals or corporations will be charged tax evasion cases.
Exchange of information and new tax systemsThe measures that effectively helped fight tax evasion can be divided into two groups: those based on the collection and exchange of information and those aimed at changing the taxation method, according to Marcinin.
The undersecretary said the Bureau of Internal Revenue (BIR) would be the agency tasked under the DOF to file the tax evasion cases.
Small trades and craftsmen will be exempted from the control operations, since the brigade will be in charge of the big files of tax evasion, in coordination with the Central Bank of Tunisia, the Customs and the police in order to unveil and to investigate this issue, in order to protect the national economy and ensure the collection of tax revenues.
Firstly, there must be a criminal tax evasion by a taxpayer (either an individual or a legal entity) under the existing criminal law;
It has been told if the inquiry into tax scam is conducted in respect of this firm for the last 15 years then tax evasion over Rs 60 billion would come to open.
Fighting against and preventing tax evasion represents every state's strategic objective.
Moreover, to the extent that opportunities to evade differ by occupation and/or sector of the economy, tax evasion also distorts labour supply decisions as well as allocation of resources.
The information sharing scheme was already in the works when Panama came under pressure after the leak of thousands of confidential documents from a Panamanian law firm in April showed their failure to cooperate in global efforts to clamp down on tax evasion by the rich and powerful.
Luxembourg-based Nordea Bank, considered to be the largest financial services group in Northern Europe, has rejected reports that it had helped customers in offshore tax evasion.
The report found that the 11 prosecutions which it had brought in relation to offshore tax evasion since 2010 had resulted in a collective total of just 15 years jail time.
1574, Senator Juan Edgardo Angara noted that the Philippines is one of three countries that still provide bank secrecy as far as tax evasion cases are concerned.

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