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The difference between the terms tax evasion and tax avoidance is a simple one. Tax evasion is escaping payment by illegal means and is usually a criminal offence, whereas tax avoidance is the legal use of the tax system to reduce one’s taxes.
tax evasion
tax avoidance
More information on the words discussed in the video, including sound files, examples of usage, common mistakes and encyclopaedic information, can be found in TransLegal's Legal English Dictionary.
Hi, I'm Jonathan. Welcome to TransLegal's lesson of the week.
Today I'm going to be talking about the difference between the terms tax evasion and tax avoidance.
Now tax evasion is escaping payment by illegal means. This is obviously unlawful and is usually a criminal offence and is subject to a prison term or a fine if one is guilty of it.
The person guilty of such offence is referred to as a tax evader.
An example sentence where you can use this is "It is likely that he will go to prison if convicted of tax evasion".
Now tax avoidance on the other hand is perfectly legal within the ambit of the law and is the legal use of the tax system to reduce taxes.
This can take many many different forms.
Typical examples are where an individual changes their tax residence to a country which has a lower income tax rate, for example the Cayman Islands and a country like that. These sort of countries are known as tax havens. An individual might also want to transfer assets to a company, which the individual indirectly owns or directly owns and this would also be a way of minimising the tax bill. A lot of business transactions are also set up in a way so as to avoid paying too much tax.
An example sentence of where the term tax avoidance is used is "The law firm set up a scheme that was aimed primarily at tax avoidance".
There is also another term which is used, tax mitigation.
Now this is avoiding tax legally, but it's more in the context of typical family tax planning where, for example, you move assets to your spouse in order to minimise your personal tax bill and make use of their tax allowances.
So bear in mind that there is often a fine line between avoiding tax which is legal and tax evasion, evading tax, which is illegal. As a tax lawyer you should be very careful to make sure that your clients do not cross that line.
Thank you for listening today. If you have any comments please provide them in the comments section below and we'll be happy to look at them.
thanks
well done
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Aída Pacheco
http://www.translatorit.com
Caracas-Venezuela
Hello, Jonathan !
This is a really good explanation. Very clear and not long. Straight to the point.
I am a Legal English teacher in Brazil and I also have a Law degree. I have been enjoying very much this area of teaching, and these brief presentations are really helpful.
Congratulations.
Best regards,
Tania Mazzillo
Rio de Janeiro – Brazil
I have found this video very useful in differentiating between tax avoidance and tax evasion.
However, as a language instructor, I believe some exercises to test students understanding the difference between these two terms, though tax mitigation is also mention, will be very useful. This could take the form of a number of scenarios and students will determine whether each scenario is tax evasion, tax avoidance or tax mitigation.
Dear TransLegal Team,
I very much appreciate you for the sacrifice you always do for us. I owe you a lot because every day you offer a lesson I receive something new. I thank you very much.
Regards,
Abdirahman H. Nur
Hargeisa, Somaliland.
Well I do agree with Goma Ahmad Mosbah. Some scenarios will help our students to clarify the differences. Tks!
Thank you very much. I am always searching your site for new legal words. I am a legal English translator in my country of residence. Regards.