Tax Evasion

Tax evasion is using illegal means to avoid paying taxes—for instance, by underreporting income from self-employment or exaggerating claims for expenses.

Tax evasion is different from tax avoidance, which is legal, and it is defined by the change of decisions and the reorganization of economic [Page 1563]activity in order to reduce the tax payment. However, the borderline between tax avoidance and tax evasion is not clear. An example of tax avoidance is fringe benefits or all do-it-yourself work and neighbor help.

The main consequences of tax evasion are related to the erosion of tax base, and so it results in a less fair or an unfair distribution of domestic income and public benefits. Tax evasion is not innocuous to the economy and the social cohesion of a ...