Tax Evasion & Tax Avoidance

Pritam Vats

What many understood is that they believe that tax evasion is the same as tax avoidance. Therefore, both are termed as illegal practices of bringing wealth offshore for tax benefits – among others.
Here's the whole truth: Tax evasion is not the same as tax avoidance. Tax evasion is illegal, but that's not the case with tax avoidance. Not only tax avoidance is legal, but it's also one of the methods that people do in their wealth building endeavors.
In essence, tax evasion means that you're underpaying taxes deliberately, which makes your endeavor an illegal one. Tax avoidance, on the other hand, means that you're using legal ways to reduce your tax liabilities.
But why knowing the difference matter? It's quite simple: Doing it in the right way can lower your taxes, but doing it in the wrong way can get you fined, even take you to prison.

The Difference Between the two is quite simple. Tax Avoidance is taking benefits of government sanctioned allowances & Relief to minimize your tax liability.
Tax evasion is main cheating on your true tax liability by hiding & routing the money through offshore scheme. And often it has been about coming up with ever-more elaborate mechanisms to take advantage of loop-holes in tax law

Our moral duty to pay tax
Civilized society should be built on a premise of those who have, helping those who have not. In a developed economy such as our own, the government is the primary mechanism for achieving that, however imperfectly.
Those of us with jobs and businesses pay tax on our income and profits which the government uses to provide welfare, hospitals, roads and security. Setting aside the often-inefficient bureaucracy which has been built to administer all this, we all benefit to a greater or lesser extent from our own tax money.
And because we benefit, we should gladly pay our share of tax to enable this to happen.

Use all legitimate means
But that is not to say that we should blithely pay more tax than we need to. There are many reliefs and allowances for saving tax, many of which go unclaimed. Often, these tax-saving incentives are designed to help the government achieve its aims of encouraging smaller businesses, or reducing the burden of welfare.
So we should definitely use all the legitimate means at our disposal to feather our own nests and in doing so we can rest in the knowledge that we are staying on the right side of both the spirit and the letter of the law.
Tax avoidance vs. tax evasion? It’s about intent.

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