LAW OF TAXATION-I

IMPACT OF TAX EVASION AND TAX AVOIDANCE

ABSTRACT

INTRODUCTION
Everyone who receives income shall be liable to pay tax. Tax itself is considered as a burden to
the individual, though it is a vital element of an economy, everyone tend to avoid it. A planning
made to reduce tax burden without infringement of the legislature is known as Tax avoidance. An
unlawful act, done to avoid tax payment is known as Tax Evasion. Tax avoidance and tax evasion
both are meant to reduce the tax liability, ultimately but what makes the difference is that the
former is justified in the eyes of law as it does not make any offence or breaks any law. However,
it is biased as the honest tax payers are not fools, but they can also make arrangements for
postponing unnecessary tax. If we talk about the latter, it is completely unjustified because it is a
fraudulent activity, because it involves the acts that are forbidden by law.
Hence the study tries to come up with the causes, effects and the perpetrations of tax evasion and
avoidance and their economic and social effect. It was therefore found that tax loopholes and
taxpayers interference with revenue agents through corruption and bribery are the major
problems and the best way of curbing this problem is to be adopted. Also, coming up with
stringent strategy is likely to consider those activities as felony and a very serious crime that
carries penalties and fines.
Research objective
To understand the impact of taxation and its evasion and avoidance.
To analyse the impacts of tax avoidance and tax evasion caused in comparison with
Indian economy and tax free economy like UAE.
To determine whether the strategy adopted to curb this activities, is working effectively.

Research question
1. How do we distinguish tax evasion, tax avoidance, tax mitigation and tax planning?
And why is the term needs more attention?
2. What are the major reasons for tax evasion and tax avoidance by which our economy
continue to lose its revenue?
3. What are the impacts of tax evasion and avoidance in our economy, in comparison
with UAE- a tax free economy?
4. What are the remedies provided for?
Literature review
1. The Direct Tax Laws by Manoharan
The direct taxation laws are more stringent and amoral. A strict interpretation is observed
in reading the statute. So tax avoidance, tax planning, are the tools that cannot be
mitigated to make the assesse liable under. This evasion and avoidance makes a huge
impact on our economy, as the revenue lacks to the suitcase of the government. The
author has a clear idea about the direct taxation laws, so that he has given a good obvious
work to the readers.
2. The World Economy by Paul Jacobinte
The article details the policy adopted in major economies to avoid these practices are
envisaged that provide for clear analogy between tax free economy and other economy.
3. General Anti-Avoidance Rules, Ministry of Finance, Government of India.
The Indian governments strategy to circumvent the tax avoidance practices are given.
The ideas of general rules that are speculated to be reluctant where it can even over turn
the purpose of benefits conferred, guides the readers to step in carefully in framing
strategies.
4. The Concept of Taxation
Tapiwa Dalu, the author who is a Revenue Officer in UK, currently holds a BSc Honours
on Economics. His area of speciality is taxation. The article gives a wide explanation on
the concept of tax and how it is being used. The economy is an anatomy that lives on the
meal of tax. His idea on tax policies are thought provoking and helps for a better research
understanding.