Tax avoidance also helps some companies to achieve an unfair competitive advantage and some people to avoid paying their taxes. As a result, other law-abiding taxpayers bear the brunt of those who want to avoid paying taxes. Failure to report assessable income is an example of tax evasion. Have a look at
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Taking deductions for costs that you didn’t incur or that aren’t technically deductible? Obtaining input credits for products that have not been subjected to Value Added Tax (VAT)? Failing to pay PAYE (pay as you receive, a type of withholding tax) instalments deducted from a bill, such as tax deducted from a worker’s wages?
Attempting to stop taxes by failing to file tax returns. The following are some indicators that an individual or company is attempting to avoid paying taxes: Failure to apply for VAT despite having clearly exceeded the threshold? Not charging the right rate of VAT? You don’t want to give a receipt? Creating fictitious invoices? Using a fictitious company name, address, taxpayer identification number (TIN), or VAT registration number? Keeping two sets of financial records, and? Payment summaries are not sent to employees.
Aspects of Tax Avoidance and Evasion from a Legal Perspective Tax evasion and avoidance can be divided into two categories. To begin with, tax avoidance or evasion exists across the board and is not limited to specific tax types such as import taxes, stamp duty, VAT, PAYE, or income tax. Second, laws addressing avoidance or evasion must be imprecise by definition. There are no prescriptive guidelines for deciding whether a specific arrangement is tax avoidance or evasion. This lack of accuracy causes confusion and increases enforcement costs for both the Department of Inland Revenue and the taxpayer. Tax Mitigation Avoidance and Evasion Definitions It is difficult to define a specific test for determining whether taxpayers have diverted, evaded, or simply reduced their tax liabilities.