Methods of Tax Evasion
Some common methods used for tax evasion are,
1. Underreporting Income: Presentation of income statements and sources of income is the most common method of tax evasion. Presenting lower income than actual income reduces the tax burden of the people.
2. Overstated Deductions: Taxpayers may state the false deductions to reduce their taxable income. This includes manipulating the nature of transactions, presenting fake investments, showing charitable transactions, etc.
3. Dealing in Cash: Businesses and individuals may purchase and sell products and services in cash without generating any bill. This creates no on paper records helping them to evade taxes on those transactions.
4. Employment Tax Evasion: employers may mispresent the number of employees actually working under them to avoid paying payroll taxes, social security contributions, or other employment-related taxes.
5. Transaction Laundering: Taxpayers may present the transactions in layers and in a complex manner to conceal the actual source of income. This is often termed transaction laundering.
6. False Documentation: Taxpayers may present false documents and bills to present high expenses and losses to reduce their taxable income intentionally.
7. Concealing Assets: Taxpayers may hide their ownership in relation to assets and properties to evade taxes on them. They may even present those assets at a lower value.
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