Difference Between Tax Avoidance and Evasion

It has been wisely said that in this world nothing is certain except death and taxes. However, many companies around the world have hired resourceful accountants with the goal of minimizing tax payments to the government. Some opt for tax evasion and others for avoidance. But what really is the difference between tax avoidance and tax avoidance? This has been a question that many people have asked themselves for a long time, some even think they mean the same thing, but there is a big difference between these terms. So big that it could mean going to prison or not. It is for this reason that we have decided to clarify the meaning of these words. Difference Between Tax Avoidance and Evasion

TAX AVOIDANCE    Difference Between Tax Avoidance and Evasion

Tax avoidance is an attempt to reduce the payment of taxes that a taxpayer has to pay during their stay and within the limits defined by law. When mentioned tax avoidance, we refer to the reduction of taxes WITHOUT VIOLATING THE LAW . In most cases clever accountants take advantage of so-called “loopholes” and tax havens to avoid paying a large amount of taxes.

These cases have been presented in both small, medium and even giant companies such as Google, Microsoft and many others. In fact, one of the most famous circumvention practices is the “double Irish with a Dutch sandwich.”

TAX EVASION

On the other hand, tax evasion consists of reducing or completely eliminating the payment of taxes through illegal methods . Tax evasion generally involves falsifying or concealing the true nature of a business, with the aim of reducing your tax liability. Some of the most used practices to evade taxes are the payment of accrued interest through an account abroad or by sub-declaration of the real income obtained.

What is the main difference between avoiding and avoiding taxes?

Tax avoidance is seen as a way to reduce tax liability through unethical methods that can be considered amoral, but without violating the law. On the other hand, tax evasion is a crime that is paid with jail or in the best of cases a fine.

It is worth mentioning that most businesses resort to “tax planning”, the result of which is consistent with what the law establishes, but when such “planning” minimizes taxes through ways that are incompatible with the law, then it is evasion.

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