Tax evasion

Alternative specifications, however, yield conflicting results concerning both the signs and magnitudes of variables believed to affect tax evasion.

[11] In a 2017 study Alstadsæter et al. concluded based on random stratified audits and leaked data that occurrence of tax evasion rises sharply as amount of wealth rises and that the very richest are about 10 times more likely than average people to engage in tax evasion.

This is especially prevalent in federal countries like the United States and Canada where sub-national jurisdictions charge varying rates of VAT or sales tax.

[citation needed] The level of evasion depends on a number of factors, including the amount of money a person or a corporation possesses.

[29] Tax evasion is a crime in almost all developed countries, and the guilty party is liable to fines and/or imprisonment.

In Switzerland, many acts that would amount to criminal tax evasion in other countries are treated as civil matters.

Governments received a lump sum in advance from a private entity, which then collects and retains the revenue and bears the risk of evasion by the taxpayers.

[citation needed] Pre-shipment inspection agencies like Société Générale De Surveillance S. A. and its subsidiary Cotecna are in business to prevent evasion of customs duty through under-invoicing and misdeclaration.

Bangladeshi authorities found Cotecna guilty of complicity with importers for evasion of customs duties on a huge scale.

In March 2008, the Bangladeshi National Board of Revenue cancelled Cotecna's certificate for serious irregularities, while importers' complaints about the other three PSI companies mounted.

Bangladesh planned to have its customs department train its officials in "WTO valuation, trade policy, ASYCUDA system, risk management" to take over the inspections.

[32] Cotecna was also found to have bribed Pakistan's prime minister Benazir Bhutto to secure a PSI contract by Pakistani importers.

[33] In early October 2021, 11.9 million leaked financial records in addition to 2.9 TB of data was released in the name of Pandora Papers by the International Consortium of Investigative Journalists (ICIJ), exposing the secret offshore accounts of around 35 world leaders in tax havens to evade taxes.

One of the many leaders to be exposed was the ruler of Dubai and prime minister of the United Arab Emirates, Sheikh Mohammed bin Rashid al-Maktoum.

Sheikh Mohammed was identified as the shareholder of three firms that were registered in the tax havens of Bahamas and British Virgin Islands through an Emirati company, partially owned by an investment conglomerate, Dubai Holding and Axiom Limited, major shares of which were owned by the ruler.

[37] As per the leaked records, the Dubai ruler owned a massive number of upmarket and luxurious real estate across Europe via the cited offshore entities registered in tax havens.

[38] Additionally, the Pandora Papers also cites that the former Managing Director of IMF and French finance minister, Dominique Strauss-Kahn was permitted to create a consulting firm in the United Arab Emirates in 2018 after the expiry of tax exemptions of his Moroccan company, which he used for receiving millions of dollars worth of tax free consulting fees.

[39] A network of banks, stock traders and top lawyers has obtained billions from the European treasuries through suspected fraud and speculation with dividend tax.

[42][43][44] A paper by economists Annette Alstadsæter, Niels Johannesen and Gabriel Zucman, which used data from HSBC Switzerland ("Swiss leaks") and Mossack Fonseca ("Panama Papers"), found that "on average about 3% of personal taxes are evaded in Scandinavia, but this figure rises to about 30% in the top 0.01% of the wealth distribution...

[47] In 2015, Chancellor of the Exchequer George Osborne promised to collect £5 billion by "waging war" on tax evaders by announcing new powers for HMRC to target people with offshore bank accounts.

Small businesses and sole proprietorships contribute to the tax gap because there are few ways for the government to know about skimming or non-reporting of income without mounting significant investigations.

Shell companies have historically been utilized as vehicles for tax evasion and other illicit financial activities due to their opaque ownership structures.

Recognizing the vulnerabilities posed by such practices, the United States enacted the Corporate Transparency Act (CTA).

By requiring comprehensive reporting of beneficial ownership information (BOI), the CTA seeks to mitigate the misuse of shell companies for tax evasion purposes and bolster efforts to combat financial crimes within the U.S.

[56] Even though there is high diversity among people who evade taxes, there is a higher probability among the highest wealth group.

The ratio of German assets in tax havens in relation to the total German GDP, 1996–2008. [ 3 ] The "Big 7" shown are Hong Kong, Ireland, Lebanon, Liberia, Panama, Singapore, and Switzerland.
U.S. Treasury Department estimates of unpaid taxes indicate that over half of all unpaid taxes are attributable to the top 5% of earners. [ 13 ]
Tax campaigner Richard Murphy 's estimate of the ten countries with the largest absolute levels of tax evasion. He estimated that global tax evasion amounts to 5 percent of the global economy. [ 17 ]
The size of the shadow economy in Europe, 2011
An apartment building closed for property tax evasion.
A "Lion's Mouth" postbox for anonymous denunciations at the Doge's Palace in Venice, Italy. Text translation: "Secret denunciations against anyone who will conceal favors and services or will collude to hide the true revenue from them."
Propaganda poster issued by the British tax authorities to counter offshore tax evasion