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Tax evasion vs. tax planning/avoidance: knowing the difference is important
Last time, we began speaking about recent recommendations made by an international organization regarding tax avoidance which will reportedly make it harder for businesses to take advantage of tax law. As we noted, the recommendations raise the important question of the distinction between tax avoidance and tax planning.
While some argue that there is little difference in many cases between tax avoidance and tax evasion, it is important to realize two things. First of all, it is certainly important for businesses to have a clear understanding of tax law and work with experienced professionals to avoid illegal behavior on the tax front. Doing so is not only a matter of avoiding liabilities, but also of building a reputation for ethical business practices and a culture of honesty within a business.
That being said, careful tax planning is critical to ensuring a business runs as efficiently as possible from a tax perspective, taking advantage of benefits intentionally built-into tax law, and keeping up on the continual changes in this area of law. Whatever changes are to come in the area of tax law, companies have not only the legal right but also the business need to be aware of these changes and how they can minimize their tax burden.
All that being said, there can certainly be a fine line, at times, between what is illegal and what is legal in tax planning practice. Working with an experienced team of tax and legal professionals can help ensure that a business not only plans wisely around existing tax law, but also that a business steers clear of potential criminal liability.