The difference between tax avoidance and tax evasion

Tax avoidance is generally the legal exploitation of the tax regime to your own advantage. This is done in an attempt to reduce the amount of tax that is payable by means that are withing the law whilst disclosing material information to SARS.

Tax evasion is the general term for when individuals, firms, trusts and other entiteis trying to evade the payment of their taxes by illegal means. This is characterised by deliberately misrepresenting or concealing the true state of their affairs to the tax authorities (SARS.) They do this in order to reduce their tax liability and it includes dishonest tax reporting. Mainly it consists of underdeclaring income, profits or overstating deductions.

Tax avoidance may be considered as the immoral dodging of your duty to society, part of a strategy of not supporting the government or just a right of the people to avoid paying too much tax. Tax evasion is a crime in almost all countires and the guilty parties pay either hefty fines or they are imprisoned. One exception in tax evasion is Switzerland. Tax fraud in considered to be a crime but tax evasion is not.

On that note, we have covered two of the three definitions. Tax resistance might be a part of either one or on its own but it will be explained.

Tax resistanceis the refusal to pay tax for diligent reasons and they sometimes break the law in order to do so. Some donate their unpaid taxes to charity while others (in the US) refuse to pay certain amounts in order to help a part of the governments budget. These individuals typically are more concerned about paying for things on the budget that they dislike and keep more of their money. In this sense, this type of crime if often characterised by both tax avoidance and tax evasion.