What is the difference between tax avoidance and tax evasion?
Answer and explanation
Correct answer: B. Avoidance uses the tax rules to reduce a liability within the law
- Step 1: Evasion is illegal, avoidance is not necessarily illegal.
- Step 2: The General Anti-Abuse Rule can counteract abusive avoidance.
Answer
Avoidance uses the tax rules to reduce a liability within the law.
Why not the others: This reverses the two. Evasion is unlawful whatever the amount. Claiming allowances to which one is entitled is legitimate planning, not evasion.
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