What is the difference between tax avoidance and tax evasion?
Answer and explanation
Correct answer: B. Avoidance uses legal means to reduce tax; evasion is illegal and involves hiding income
- Step 1: Tax avoidance arranges affairs to reduce tax within the law.
- Step 2: Tax evasion deliberately conceals information or lies to pay less tax than due, which is a crime.
Answer
Avoidance uses legal means to reduce tax; evasion is illegal and involves hiding income.
Why not the others: This reverses the definitions. Evasion is illegal whatever the amount. Both can apply to individuals and companies.
Practise more Accounting, regulation and financial crime.
Free questions with an explanation for every one, and full timed ACCA Applied Knowledge (BT, MA, FA) mock tests.
More Accounting, regulation and financial crime questions
- Which of the following is a function of the treasury department of a large company?
- What is the key difference between internal and external audit?
- Which three stages make up the process of money laundering?
- An accountant discovers that a client may be laundering money. What should the accountant NOT do?
- Which fraud-risk element means that a person can see a chance to commit fraud because controls are weak?
- The financial statements of a company are published each year. Which of the following is the main reason that external users, such as lender…