Tax Avoidance vs Tax Evasion

Payment of taxes is often a sensitive topic to discuss and everyone at some stage is obligated to pay their fair share.

For the sake of clarity please note the following:

Tax Avoidance is legal.
Tax Evasion is illegal.

Avoidance: it is reasonable to presume that anyone would want to pay less tax and therefore it is legal to implement ways in which to do so by use of mechanisms available under present laws and regulations.

Evasion: the principle of evading payment of taxes by use of illegal means is to be frowned upon and should not be condoned under any circumstances whatsoever. Tax evasion occurs when the taxpayer either evades assessment or evades payment.

For example, if someone transfers assets to prevent SARS from determining their actual tax liability, there is an attempt to evade assessment. However, if the assets are hidden after a tax liability has become due and owing, this is an attempt to evade payment.

Other examples of tax evasion:

  • Under-reporting income
  • Taking unearned deductions
  • Not filing tax returns
  • Deliberately underpaying taxes

With tax evasion comes major fines and possibly a prison term. It is best that we do the right thing and pay our dues before the taxman visits us for a full audit.

This article is provided for information only and does not constitute the provision of professional advice of any kind.

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