What is the difference between Tax Evasion and Avoidance?

Tax avoidance is a strategy usually employed by individuals and businesses to reduce the amount they are expected to pay as a tax without breaching any law. This is not always considered as a crime as long as businesses comply by revealing all necessary information to the relevant authorities in charge of tax collection.

On the other hand, tax evasion is an attempt by businesses or individuals to avoid paying the right amount of money they ought to pay as tax. This involves a deliberate attempt by businesses to conceal or misrepresent their actual revenues so as to reduce the taxes that would be imposed on them. This is usually considered to be illegal.

If a company is caught in this act, the government has the right to impose any form of penalty as stipulated by the law. Tax avoidance is usually a result of tax planning, and the law doesn't see it as a crime.

Foremost, note that tax avoidance and tax evasion are two major methods for minimizing your tax. Now, if your choice is tax avoidance, that means you are trying to reduce the tax amount that you are originally required to pay, and still, you do not go down beyond the limit requires by the law. That's not all; you also declare your material properties to the tax authorities that might be concerned.

This is a law that is even recognized by the Canada Revenue Agency (CRA). On the other hand, tax evasion is just like the opposite of tax avoidance. This simply means you are evading your tax through means that are considered illegal.

Tax evasion typically means that you are concealing or misrepresenting the true nature of your affairs so as to reduce your overall tax liability. If you do this as an individual or organization, that means you are intentionally hiding parts of your income or possession, such that tax would not be required on them.