TaxationLesson 2 of 5 in the course Corporate tax and planning

Tax Avoidance: Principles, Anti-Avoidance Rules, and Public Debate

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

Tax avoidance describes ways taxpayers use tax rules to reduce the amount of tax they owe. This lesson introduces the distinction between avoidance and evasion and explains why legal tax arrangements can still be controversial.

Tax avoidance is the legal use of a tax regime to reduce tax payable. It can involve choosing among options the law permits or arranging transactions to obtain a tax advantage. A tax shelter is an investment or arrangement that allows or claims to allow a reduction in tax liability. A tax haven is a jurisdiction associated with low taxes or arrangements that facilitate reduced taxation.

All flashcards

Tax avoidance
The legal use of tax rules or arrangements to reduce tax payable.
Tax evasion
Efforts to evade tax through illegal means, such as concealing taxable income.
Tax planning
Using tax provisions in ways generally intended by the government.
Tax shelter
An investment or arrangement that allows, or claims to allow, a reduction in tax liability.
Tax arbitrage
Taking advantage of differences in tax rates or rules.

Quiz questions

  1. How does a General Anti-Avoidance Rule (GAAR) differ from a Specific Anti-Avoidance Rule (SAAR)?Answer: A GAAR is broad; a SAAR targets a particular avoidance technique.
  2. What does the judicial principle of substance over form emphasize?Answer: The economic reality of an arrangement, not just its legal form.
  3. Which measure in the EU Anti-Tax Avoidance Directive is intended to deter profit shifting to low- or no-tax countries?Answer: Controlled Foreign Company rules
  4. What is the purpose of a double taxation treaty?Answer: To reduce or resolve cases where the same income may be taxed in two countries.
  5. What is the aim of the OECD's work on base erosion and profit shifting?Answer: To address arrangements that move profits away from where economic activity occurs.

Based on the Wikipedia article Tax avoidance, licensed CC BY-SA 4.0. Adapted into a summary, flashcards and quizzes.

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