Difference between tax evasion and avoidance

It can be said that tax evasion and avoidance are two similar terms that can also be called tax evasion and avoidance. In this aspect, both refer to the non-payment of taxes by taxpayers and usually carry certain types of sanctions depending on the seriousness of the fault.

Therefore, in this article we intend to point out the differences between tax evasion and tax avoidance based on their definitions.

Tax evasion

Basically, tax evasion consists of reducing or completely eliminating the payment of taxes and duties through illegal methods. Tax evasion, in general, involves the falsification or concealment of the true nature of a business, the amount of profits or guarantees that it generates or even the identity of the people responsible for it, with the aim of reducing their responsibility. tax and tax.

In general, it can be said that taxes are the benefits in money that the State requires in the exercise of its power of empire by virtue of a law and to cover the expenses that the fulfillment of its purposes demands. Likewise, the essential element of the tax is the obligation, which is essentially manifested in the -disregard- of the will of the obligor regarding the creation of the tax that is due.

In this sense, failure to pay taxes carries criminal sanctions according to the seriousness of the offense and are established in different legal, legal and regulatory instruments, that is, the person or company that fails to pay taxes incurs the crime. of tax evasion, which is considered a punishable act, therefore, you must assume the legal consequences of said act.

Tax Avoidance

Tax avoidance is the act that consists of reducing the payment of taxes and duties that a taxpayer has to pay during their stay in a given country and within the limits defined by law. This means that tax avoidance consists of reducing their payment through certain legal mechanisms to avoid paying a large amount of taxes or delay their payment. That is why, in order to avoid paying taxes, some companies or individuals resort to mechanisms such as legal loopholes or loopholes (absence of legislative regulations on specific matters) to postpone payment or significantly reduce them.

Another way of incurring in tax avoidance is through the so-called tax havens, which are countries with favorable tax regimes for non-resident citizens and companies that are domiciled for legal purposes in that country, offering advantages such as bank secrecy, a total exemption or a very significant reduction in the payment of the main taxes.

Taking into consideration the previous definitions, it can be said that the most outstanding differences between tax evasion and tax avoidance are:

Tax evasion Tax Avoidance
Tax evasion is the total or partial failure to pay taxes or tributes illegally. Tax avoidance is the total, partial or delayed payment of taxes through legal mechanisms.
Tax evasion is a punishable act. Tax avoidance is not a punishable act.
To incur tax evasion, fraudulent acts are used such as falsification of identities, documents or declaration of assets. To incur tax avoidance, legal mechanisms such as legal loopholes or tax havens are used.

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