Tax Research Clinic – Tax Avoidance and Evasion

IntroductionThere is an inverse relationship between quantity and quality with respect to many things, including writing about tax avoidance. Everyone working in the tax area has views about tax avoidance and almost everyone, it seems, feels an irresistible urge to inflict these views on others. Most of the writing on tax avoidance is in the nature of fast food: quickly prepared, consumed, digested, and forgotten and, if consumed in excessive quantities, dangerous to your (mental) health. In a fast-food world, master chefs are revered and celebrated. Professor John Tiley is a master chef with respect to offerings about tax avoidance. His writings about controlling tax avoidance constitute the fine-dining experience, Continue reading Continue reading

MARKUS HENNJune 2013 Tax avoidance and tax evasion by transnational companies and the role played by tax havens have recently received much media attention when it transpired that prominent companies such as Starbucks and Apple pay virtually no income taxes on their massive international profits. The case of the world’s largest commodity trader, Glencore, demonstrates that tax evasion by multinationals also affects developing countries. Tax issues and the detrimental role played by tax havens are now firmly on the international policy agenda, for example at the G20. Transnational companies employ a number of techniques to benefit from the cross-country nature of their transactions, as well as from… continue reading Continue reading

Jane G. GravelleSenior Specialist in Economic PolicyJanuary 23, 2013 SummaryRecent actions by the Organization for Economic Cooperation and Development (OECD) and the G-20 industrialized nations have targeted tax haven countries, focusing primarily on evasion issues. The HIRE Act (P.L. 111-147) included a number of anti-evasion provisions, and P.L. 111-226 included foreign tax credit provisions. Some of these proposals, and some not adopted, are in the American Jobs and Closing Loopholes Act (H.R. 4213); the Stop Tax Haven Abuse Act (S.506, H.R. 1265); draft proposals by the Senate Finance Committee; two other related bills, S. 386 and S. 569; the BipartisanContinue reading Continue reading

1. IntroductionMost developed countries are characterized by a broad base for direct and indirect taxes with tax liability covering the vast majority of citizens and firms.Developing countries, in contrast, are confronted with social, political, and administrative difficulties in establishing a sound public finance system. As a consequence, developing and emerging countries are particularly vulnerable to tax evasion and avoidance activities of individual taxpayers and corporations.This can be considered one of the primary reasons for large differences in the ability to mobilize its own resources between developed and developing countries.While tax revenues in OECD-countries amount to almost 36 percent of gross national income in 20071, the share continue reading Continue reading

JOEL SLEMRODThe University of Michigan SHLOMO YITZHAKIThe Hebrew University of Jerusalem AbstractTax avoidance and evasion are pervasive in all countries, and tax structures are undoubtedly skewed by this reality. Standard models of taxation and their conclusions must reflect these realities.This paper first presents theoretical models that integrate avoidance and evasion into the overall decision problem faced by individuals. Early models of this area focused on tax evasion, modeled as a gamble against the enforcement capability of the state.More recently, the literature has examined more general models of the technology of avoidance, with the additional risk bearing caused by tax evasion either being a special case of continue reading Continue reading ?

Working Paper Number 129Tax evasion, tax avoidance and development financeAlex Cobham*1Domestic revenue mobilisation is key to sustainable developmentfinance – only self-sufficiency will allow the development offully-functioning states with flourishing systems of politicalrepresentation and economies reflecting societies’ expressedpreferences in regard to, for example, inequality. Tax evasionand tax avoidance are important insofar as they affect both thevolume and nature of government finances. This paper estimatesthe total cost to developing countries of these leakages asUS$385 billion annually, dwarfing any potential increase in aid.An additional result suggests that doubling aid to low incomecountries may have little positive revenue effect but damage thestrength of politicalContinue reading Continue reading ?

By Skanda Kumarasingam   Introduction There is a clear-cut difference between tax avoidance and tax evasion. One is legally acceptable and the other is an offense. Unfortunately however many consultants even in this country do not understand the difference between tax avoidance and tax evasion. Most of the planning aspects that have been suggested by these consultants often fall into the category of tax evasion (which is illegal) and so tends to put clients into a risky situation and also diminish the value of tax planning. This may be one of the prime reasons where clients have lost faith inContinue reading Continue reading ?

Last Updated: November 5 2013 Article by Greg DelBigio Thorsteinssons LLP It is almost always the case that criminal charges for tax evasion are accompanied by a civil assessment or reassessment of taxes. Often, the fact situation is straightforward. The person earned more income than was declared. The failure to declare the income is the basis of the tax evasion charge and the Minister reassesses taxes based upon the undeclared income and imposes gross negligence penalties. Several recent cases have illustrated the importance of being forward looking when providing advice on whether a client who is charged with tax evasionContinue reading Continue reading ?

  Everything you need to know about tax. by Willard Foxton Published 21 June, 2012. Police guard the entrance to HMRC during a demonstration against corporate tax avoidance in 2011. Photograph: Getty Images I must confess, I am a tax-dodger. As I am a Tory, and you are a New Statesman reader, this may come as no surprise. My sin was grave – last night, on my way home from work I bought some biscuits on a two for one deal, thus avoiding several pennies of VAT. We all avoid tax to a certain extent; many people continue reading Continue reading

Tax avoidance is generally the legal exploitation of the tax regime to one’s own advantage, to attempt to reduce the amount of tax that is payable by means that are within the law whilst making a full disclosure of the material information to the tax authorities. Examples of tax avoidance involve using tax deductions, changing one’s business structure through incorporation or establishing an offshore company in a tax haven. By contrast tax evasion is the general term for efforts by individuals, firms, trusts and other entities to evade the payment of taxes by illegal means. Tax evasion usually entails taxpayersContinue reading Continue reading ?

Author: Professor Peter Surtees & Andrew Wellsted On 11 July 2013 South Africa and Gibraltar signed an exchange of information agreement relating to tax matters. This is part of a growing practice, in which South Africa is an active participant. It reflects a global policy between fiscal authorities to address perceived tax avoidance by multi-national corporations. Share

In certain circumstances, the provisions of an agreement for the avoidance of double taxation may be applicable. Most countries impose income tax both on the worldwide income derived by the residents of the country and on income derived by non-residents in that country. The effect of such a system is that income derived by a resident of one country from a source in another country is subject to tax in both countries. As this position discourages foreign investment, countries that have trade relationships entered into agreements for the avoidance of double taxation. Such agreements provide that income of a particularContinue reading Continue reading ?

Introduction A new General Anti-Avoidance Rule (GAAR) has been introduced and is applicable in respect of any transaction or any step therein or part thereof entered into on or after 2 November 2006 (the effective date). This means that if an arrangement was entered into before the effective date and a step therein or part thereof is entered into after the effective date, the new GAAR will not apply. The motivation cited by SARS for the introduction of the new GAAR is the fact that, as a result of the increasingly sophisticated forms of tax avoidance implemented by taxpayers andContinue reading Continue reading ?

Defining GAAR Anti-avoidance rules are divided into two main categories: “general” and “specific.”A general anti-avoidance rule (GAAR) is aset of broad principles-based rules within a country’s tax code designed to counteractthe perceived avoidance of tax. GAAR is aconcept within law that provides the taxingauthority a mechanism to deny the tax benefits of transactions or arrangements believed not to have any commercialsubstance or purpose other than to generatethe tax benefit(s) obtained. Tax law designed to deal with particulartransactions of concern are termed as eitherspecific  anti-avoidance rules (SAARs) or, lesscommonly, targeted anti-avoidance rules (TAARs).   DOWNLOAD FULL ARTICLE : GAAR rising MappingContinue reading Continue reading ?

The tax debate, internationally and in South Africa, is progressively focusing on closing perceived tax loopholes (in order to boost collections) and increasing self-assessment through vigorous auditing by the tax authorities. In pursuing this goal, Finance Minister Pravin Gordhan has appointed Judge Dennis Davis as the chairman of the Davis Tax Committee. Davis has been quoted as saying that the challenge for the committee is to design a tax system that, among other things, achieves “the spending needs of the government and its distributional ambitions”.  The collection of taxes is important but addresses only one part of the equation. Share

Author: Matthew Hodkin – Norton Rose Fulbright LLP Tax has been much in the news recently. This is not the first time that tax has risen to the top of the political agenda but now public mood has shifted towards the idea that people should be paying more tax. Historically, tax has caused all manner of protests, uprisings and even wars but there has also previously been sustained public outcry that people just aren’t paying as much tax as they ought. This developing perception of tax as a moral or ethical obligation creates difficulty with which existing corporate processes are notContinue reading Continue reading ?