Knowra Tax avoidance Tax avoidance Tax avoidance is arranging financial affairs to reduce tax liability while complying with applicable tax law. Some arrangements are challenged as abusive under anti-avoidance rules or judicial doctrines.
Tax planning : The organization of financial decisions to manage tax consequences within the law. Tax avoidance is one outcome of planning that uses available legal rules to reduce liability.
Tax evasion : The illegal concealment or misrepresentation of taxable income, transactions, or other facts to avoid tax. Unlike avoidance, evasion violates tax law through concealment or misrepresentation.
Transfer pricing : The pricing of transactions between related entities, especially across national borders. Multinational groups can use transfer-pricing choices to affect where profits are taxed.
Base erosion and profit shifting : The reduction of taxable profits or their relocation from jurisdictions where economic activity occurs. This broader problem includes cross-border avoidance strategies targeted by international reforms.
Tax shelter : A transaction or arrangement designed to reduce, defer, or eliminate tax liability. Shelters are specific structures that can produce tax avoidance, though some are challenged as abusive.
Tax compliance : The fulfillment of legal obligations to report, calculate, and pay taxes. Compliance is the broader legal framework within which avoidance operates.
Profit shifting : The movement of reported profits among jurisdictions to reduce a company’s overall tax burden. It is a prominent cross-border form of corporate tax avoidance.
OECD/G20 Inclusive Framework on BEPS : A collaboration of jurisdictions working on international tax standards and measures against base erosion and profit shifting. Its negotiations respond to avoidance strategies that exploit gaps between national tax systems.
Tax loophole : A gap or unintended effect in a tax law that allows a taxpayer to reduce liability. Avoidance can exploit gaps lawmakers did not intend to create.
Tax exemption : A legal provision that excludes specified people, income, property, or transactions from taxation. Using an expressly granted exemption reduces tax without relying on a disputed arrangement.
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