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 ?
881-3(b)(1) provides that a "tax avoidance plan" is a plan one of the principal purposes of which is the avoidance of tax in, posed by IRC section 881.
For example, certain trust arrangements can provide you (and your spouse or other individual) with an income for life, a charitable income tax deduction, avoidance of tax on capital gains, and removal of assets from your estate, thus providing estate tax savings.
Xcel is expected to benefit from tax loss carry forwards or avoidance of tax payments of about $125 million per year through 2007.
Open procedure for the award of contracts for service management assessment of evasion and / or avoidance of tax revenue ICI-IMUTASI-TARSU-TARES-TARI, and the procedure for forcible collection of tax revenues and assets of the organization.
Not the actual avoidance of tax, just the reporting of it.
The Foreign Account Tax Compliance Act (FATCA) addresses the avoidance of tax by US persons overseas and places a heavy burden of tax reporting and compliance onto financial institutions.
2 billion) a year, after lawmakers alleged that multinationals were involved in "immoral" avoidance of tax.
He said: "Although the avoidance of tax is legal clearly it is not socially responsible.
It is possible to replace any existing share options with EMI options if the new grant is for the purpose of recruiting or retaining staff and provided one of the main purposes is not the avoidance of tax.
The avoidance of tax on interest on cash using stock lending arrangements or noncommercial terms.
These will be paid for from three main sources: tax payments by oil companies will be accelerated, avoidance of tax by companies and wealthy individuals will be targeted more robustly, and stamp duty relief on commercial property in disadvantaged areas will be abolished.
33) This rule is intended to prevent avoidance of tax on SPOCI or ICI that is attributable to such U.