What is tax evasion
Tax evasion refers to any illegal attempts made by individuals or companies in order to evade tax. Businesses that deliberately engage in illegal activities to avoid paying the correct amount of tax is an extremely illegal act and can result in imprisonment.
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Tax evasion explained
Individuals and companies are given the opportunity to reduce the amount of tax they pay through effective tax planning. In contrast, tax evasion is the illegal and fraudulent efforts made by businesses to avoid paying the amount of tax that they are due.
The main businesses that evade tax are those which deal with cash transactions. This is because businesses that deal with cash only are able to declare whatever amount of income they wish, thus avoiding paying a higher income or corporate tax.
Other methods of tax evasion include, but are not limited to the following;
• Claiming deductions for expenses
• Not declaring cash wages
• Not lodging tax return to avoid a certain obligation
All of these methods contribute to tax evasion thus disadvantaging the community and government in terms of tax revenue. Therefore it is important to report any illegal or fraudulent efforts to avoid paying tax to the authorities.
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