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.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

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.
Collins Dictionary of Law © W.J. Stewart, 2006
References in periodicals archive ?
It added: "The UK with its corporate tax haven network is by far the world's greatest enabler of corporate tax avoidance and has single-handedly done the most to break down the global corporate tax system, accounting for over a third of the world's corporate tax avoidance risks.
France's action to put a lid on tax avoidance follows by just two weeks widespread media reports confirming ( Amazon will pay zero in federal taxes on its taxable income of $11.2 billion for 2018 due to the company's use of tax avoidance.
Tax avoidance is the arrangement of one's financial affairs to minimise tax liability within the law while tax evasion is the illegal non-payment or underpayment of tax.
When firms have weak governance mechanisms, corporate tax avoidance is likely to coincide with more opaque information environments in which entrenched managers divert firm resources for their own private benefits, manipulate earnings, and hoard bad news about the firm (Lev and Nissim, 2004; Hanlon, 2005; Hanlon and Heitzman, 2010).
Tax avoidance is about arranging your affairs in such a way that you pay as little tax as possible.
Why ever do people think a Tory Government will do anything meaningful about tax avoidance when their MPs benefit and their party receives millions of pounds from super-rich donors?
The newspaper pointed out Wednesday's treaty was part of an initiative launched by the G20 group of leading nations to tackle base erosion and profit shifting, that is tax avoidance strategies involving the shifting of profits to low or no-tax jurisdictions.
HMRC has stepped up its investigations after several public figures, including actors, musicians, sports stars and comedians, were named as benefi-ciaries of tax avoidance measures.
IRS May Allow a Transaction That Does Not Have a Principal Purpose of Tax Avoidance Under Sec.