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 ?
Tax avoidance is about arranging your affairs in such a way that you pay as little tax as possible.
Until we elect a Government that will change the laws on tax avoidance and the use of offshore tax havens, the UK will continue to be an unfair society split between the riches of the wealthy and the austerity and foodbanks of the poor.
Penny Ciniewicz, Director General of HMRCs Customer Compliance Group, said: This is a great victory that sends a clear message to tax avoidance scheme promoters that we will pursue you if you dont play by the rules.
Strong evidence that IFRS adoption may have affected tax avoidance levels can thus be identified via the indirect relationship between these two variables; IFRS adoption has reduced required levels of book-tax conformity and lower book-tax conformity is associated with greater tax avoidance.
Increased efforts to crack down on corporate tax avoidance have come in the wake of a public backlash over dubious practices by the likes of Amazon, Apple and Google.
Paul Noble, tax director at Pinsent Masons, said: "HMRC has had a number of high-profile wins in tackling tax avoidance, with some of the UK's most famous faces suffering intense public scrutiny for their supposed involvement.
7874, regardless of whether there is a principal purpose of tax avoidance.
And earlier this month, Kellogg's became the latest American-owned giant to become engulfed in controversy over its tax avoidance in Britain.
Mr Miliband intervened yesterday in the escalating row over alleged tax avoidance activities linked to HSBC's Swiss subsidiary by naming Lord Fink - under the cloak of parliamentary privilege - as one of the UK citizens listed as having an account at the bank's Geneva branch and accusing Mr Cameron of being "a dodgy Prime Minister surrounded by dodgy donors".
In a report by MPs, accountancy company PricewaterhouseCoopers (PwC) has been accused of promoting tax avoidance, the BBC reported on Friday.
It sets out the risks that wealthy individuals or business people face when they sign up to a tax avoidance scheme.