The difference between tax avoidance and tax evasion and the different instruments government might use to combat these
Taxation is everywhere in our daily life. People cannot always evade taxes. For instance, we pay tax when we buy goods therefore it is impossible to escape this kind of ‘included tax”.
Tax avoidance and tax evasion are determinant for tax burden because they are one of the factors that fix the burden for taxpayer.
Individuals who work have to declare their income. Hereby they are confronted with their future taxes they have to pay. Tax avoidance and tax evasion are different by their legality. Taxpayers are free to be honest in their tax return and contribute to the revenue of the Government. That is why it is interesting to define tax evasion and tax avoidance in the first part. It will lead the essay to the analysis how an individual decides to avoid income or to reduce taxes. The last part will shed some light on the instruments used by the Government to combat that.
[...] Moreover, the environment and the experiences of people are determinant as well in order to avoid taxation. evasion is easy: it involves breaking the law. By tax avoidance OECD means unacceptable tax planning. What is critical is transparency.” Donald Johnston, Secretary-General of the OCED. Bibliography 1. Cullis, J., Jones, P., Public Finance and Public Choice, (New York, 1998) 2. Fortin, B., Lacroix G., Villeval, M.-C., Tax Evasion and Social Intereaction, (Montréal, December 2004) 3. Kirkpatrick, J., Le régime fiscal des sociétés en Belgique, (Bruxelles, 1995) 4. [...]
[...] It is a king of cheating. According to Andreoni et al (1998), the tax evasion might be affected by social norms and social interactions. Erard and Feinstein (1994) claim the role of the guilt and shame in tax compliance behavior. Gordon (1989) and Myles and Naylor (1996) present the importance of the influence of a group of people on psychic payoff; it is the social conformity effect. The social learning effect points out that the taxpayer may think that it is cheaper to underreport income owing to the experience of his peers. Conclusively individuals are influenced by these ideas, therefore their tax evasion decisions as well. [...]