A revenue stamp, tax stamp, duty stamp or fiscal stamp is a adhesive label used to collect taxes or fees on documents, alcoholic drinks and medicines, playing cards, hunting licenses, firearm registration, many other things. Businesses purchase the stamps from the government, attach them to taxed items as part of putting the items on sale, or in the case of documents, as part of filling out the form. Revenue stamps look similar to postage stamps, in some countries and time periods it has been possible to use postage stamps for revenue purposes. Revenue stamps are stamps used to collect fees, they are issued by governments and local, by official bodies of various kinds. They take many forms and may be gummed and ungummed, perforated or imperforate, printed or embossed, of any size. In many countries, they are as detailed in their design as banknotes; the high value of many revenue stamps means that they may contain security devices to prevent counterfeiting. The Revenue Society has defined revenue stamps as "...stamps, whether impressed, adhesive or otherwise, issued by or on behalf of International, National or Local Governments, their Licensees or Agents, indicate that a tax, duty or fee has been paid or prepaid or that permission has been granted."
In the Ottoman empire, Damga resmi was in use by the sixteenth century. Records of tax revenue from stamps for silk provide evidence of changes in silk production over time; the use of revenue stamps goes back further than that of postage stamps. Their use became widespread in the 19th century inspired by the success of the postage stamp, motivated by the desire to streamline government operations, the presence of a revenue stamp being an indication that the item in question had paid the necessary fees. Revenue stamps have become less seen in the 21st century, with the rise of computerization and the ability to use numbers to track payments accurately. There are a great many kinds of revenue stamps in the world, it is that many remain unrecorded. Both national and local entities have issued them. Governments have sometimes combined the functions of revenue stamps. In the former British Empire, such stamps were inscribed "Postage and Revenue" to reflect their dual function. Other countries have allowed revenue stamps to be used for postage or vice versa.
A revenue stamp authorized subsequently for postal use is known as a postal fiscal. Bhutan, for instance, authorized the use of revenue stamps for postal purposes from 1955 until the first proper postage stamps of the country were issued in 1962. In the Stanley Gibbons catalog, this type of stamp has an F prefix. While revenue stamps resemble postage stamps, they are not intended for use on mail and therefore do not receive a postal cancellation; some countries such as Great Britain have issued stamps valid for both postage and revenue, but this practice is now rare. Many different methods have been used to cancel revenue stamps, including pen cancels, inked handstamps, embossing, hole punching or tearing. From around 1900, United States revenue stamps were required to be mutilated by cutting, after being affixed to documents, in addition to being cancelled in ink. A class of office equipment was created to achieve this which became known as "stamp mutilators". Revenue stamps were once collected by philatelists and given the same status as postage stamps in stamp catalogues and at exhibitions.
After World War One, they declined in popularity due to being excluded from catalogues as the number of postage stamps issued rose and crowded revenues out. The lowest point in revenue philately was during the middle years of the twentieth century. A Stanley Gibbons children's stamp album from the 1950s warned in its introduction: "Since Philately is the collecting of stamps that are employed in connection with the Posts, do not put in your album fiscals, telegraph stamps, tobacco-tax labels and other such strange things as are found in some collections." This is not a definition of philately. More revenue philately has become popular again and now has its own FIP Commission and is an approved category in FIP endorsed stamp exhibitions. Many catalogues have been issued by specialist publishers and dealers but revenue stamps still do not feature in some of the most popular catalogues, for instance by Stanley Gibbons and Michel, unless they are revenue and postage stamps. However, both the standard Scott and the Scott Specialised United States catalogue feature US revenue stamps.
The leading catalogue for revenue stamps of the United Kingdom, the British Commonwealth and several European countries is the Barefoot Catalogue. One of the earliest uses of revenue stamps was to pay Court Fees. Stamps were used in the Indian feudal states as early as 1797 50 years before the first postal stamps. Although India is only one of several countries that have used tax stamps on legal documents, it was one of the most prolific users; the practice is entirely stopped now due to the prevalence of forgeries which cost the issuing government revenue. The tax on documents commonly known as stamp duty, is one of the oldest uses of revenue stamps being invented in Spain, introduced in the Netherlands in the 1620s reaching France in 1651 and England in 1694. Governments enforce the payment of the tax by making unstamped documents unenforcable in court; the tax has been applied to contracts, tenancy agree
Tax resistance is the refusal to pay tax because of opposition to the government, imposing the tax, or to government policy, or as opposition to taxation in itself. Tax resistance is a form of direct action and, if in violation of the tax regulations a form of civil disobedience. Examples of tax resistance campaigns include those advocating home rule, such as the Salt March led by Mahatma Gandhi, those promoting women's suffrage, such as the Women's Tax Resistance League. War tax resistance is the refusal to pay some or all taxes that pay for war, may be practiced by conscientious objectors, pacifists, or those protesting against a particular war. Tax resisters are distinct from "tax protesters," who deny that the legal obligation to pay taxes exists or applies to them. Tax resisters may accept that some law commands them to pay taxes but they still choose to resist taxation; the earliest and most widespread forms of taxation were the corvée and tithe, both of which can be traced back to the beginning of civilization.
The corvée was state-imposed forced labour on peasants too poor to pay other forms of taxation. Low taxes helped the Roman aristocracy increase their wealth, which equalled or exceeded the revenues of the central government. An emperor sometimes replenished his treasury by confiscating the estates of the "super-rich", but in the period, the resistance of the wealthy to paying taxes was one of the factors contributing to the collapse of the Empire; because some believe taxation is oppressive, governments have always struggled with tax noncompliance and resistance. Indeed, it has been suggested that tax resistance played a significant role in the collapse of several empires, including the Egyptian, Roman and Aztec. Reports of collective tax refusal include Zealots resisting the Roman poll tax during the 1st century AD, culminating in the First Jewish–Roman War. Other historic events that originated as tax revolts include the Magna Carta, the American Revolution and the French Revolution. War tax resisters highlight the relationship between income tax and war.
In Britain income tax was introduced in 1799, to pay for weapons and equipment in preparation for the Napoleonic wars, whilst the US federal government imposed their first income tax in the Revenue Act of 1861 to help pay for the American Civil War. Tax resisters aims. For example, Henry David Thoreau and William Lloyd Garrison drew inspiration from the American Revolution and the stubborn pacifism of the Quakers; some tax resisters refuse to pay tax because their conscience will not allow them to fund war, whilst others resist tax as part of a campaign to overthrow the government. Tax resisters have been violent revolutionaries like John Adams and pacifist nonresistants like John Woolman. Leo Tolstoy, a Christian anarchist, urged government leaders to change their attitude to war and citizens to taxes: If only each King and President understood that his work of directing armies is not an honourable and important duty, as his flatterers persuade him it is, but a bad and shameful act of preparation for murder — and if each private individual understood that the payment of taxes wherewith to hire and equip soldiers, above all, army-service itself, are not matters of indifference, but are bad and shameful actions by which he not only permits but participates in murder — this power of Emperors and Presidents, which now arouses our indignation, which causes them to be murdered, would disappear of itself.
As an example of the numerous tax resistance methods, below are some of the legal and illegal techniques used by war tax resisters: A resister may lower their tax payments by using legal tax avoidance techniques. Some taxpayers include protest letters along with their tax forms. Others pay in a protesting form — for instance, by writing their cheque on a toilet seat or a mock-up of a missile. Others pay in a way that creates inconvenience for the collector — for instance, by paying the entire amount in low-denomination coins; this last method is less effective in countries where small coins are legal tender only in limited amounts, allowing the tax authority to reject such payments. Other tax resisters change their lifestyles. For instance. For example, UK citizens pay no income tax. In the US the equivalent tax-free annual income is the sum of the standard deduction and personal exemption, though many deductions and credits allow people to earn much more than this and still avoid income tax. Opposition to war has led some, such as Ammon Hennacy and Ellen Thomas, to a form of tax resistance in which they reduce their income below the tax threshold by taking up a simple living lifestyle.
These individuals believe that their government is engaged in immoral, unethical or destructive activities such as war, paying taxes funds these activities. These methods differ from tax evasion in that they stay within the tax laws, they differ from tax avoidance in that the goal is to pay as little tax as possible rather than to keep as much post-tax income as possible. A resister may decide to reduce their tax paid thro
Double Irish arrangement
The Double Irish is a base erosion and profit shifting corporate tax tool, used by US multinationals since the late 1980s, to avoid corporate taxation on most non–U. S. Profits, it is the largest tax avoidance tool in history and by 2010, was shielding US$100 billion annually in US multinational foreign profits from taxation, was the main tool by which US multinationals built up untaxed offshore reserves of US$1 trillion from 2004 to 2018. Traditionally, it was used with the Dutch Sandwich BEPS tool. Despite US knowledge about the Double Irish for a decade, it was the EU who forced Ireland to close the scheme in October 2014, starting January 2015. However, users of existing schemes, such as Apple, Google and Pfizer, were given until January 2020 to close them. At the announcement of the closure it was known that Ireland had replacement BEPS tools, the Single Malt, the Capital Allowances for Intangible Assets: US tax academics showed as far back as 1994, that US multinational use of tax havens and BEPS tools had maximised long-term US exchequer receipts.
They showed that multinationals from "territorial" tax systems, which all but a handful of countries follow, did not use BEPS tools, or tax havens, including those that had switched, such as Japan, the UK. By 2018, non–US tax academics showed US multinationals were the largest users of BEPS tools and Ireland was the largest global BEPS hub or tax haven, they showed Ireland was exclusively a US corporate tax haven, that US multinationals represented the largest component of the Irish economy, that Ireland had failed to attract multinationals from "territorial" tax systems. US tax academics advocated the US switch to a "territorial" tax system in the December 2017 Tax Cuts and Jobs Act, as a result, forecast the demise of Irish BEPS tools, Ireland as aUS corporate tax haven. However, by mid–2018, other tax academics, including the IMF, noted technical flaws in the TCJA had increased the attractiveness of Ireland's BEPS tools, the CAIA BEPS tool in particular, which post-TCJA, delivered a total effective tax rate of 0–3% on profits that can be repatriated to the US without incurring any additional US taxation.
In July 2018, one of Ireland's leading tax economists forecasted a "boom" in the use of the Irish CAIA BEPS tool, as US multinationals close existing Double Irish BEPS schemes before the 2020 deadline. Under OECD rules, corporations with intellectual property, which are technology and life sciences firms, can turn this into an intangible asset on their balance sheet, charge it out as a tax-deductible royalty payment to end-customers. Without such IP, if Microsoft charged a German end-customer, say $100, for Microsoft Office, a profit of circa $95 would be realised in Germany, German tax payable. With such IP, Microsoft can additionally charge Microsoft Germany $95 in IP royalty payments on each copy of Microsoft Office, ensuring that its German profits are zero; the $95 is paid to the location in which the IP is housed. Microsoft would prefer to house this IP in a tax haven, higher-tax locations like Germany do not sign full tax treaties with tax havens, would not accept the IP charged from a tax haven as deductible against German taxation.
The Double Irish fixes this problem. The Double Irish enables the IP to be charged-out from Ireland, which has a large global network of full bilateral tax treaties; the Double Irish enables the hypothetical $95, sent from Germany to Ireland, to be sent-on to a tax haven like Bermuda, without incurring any Irish taxation. The techniques of using IP to relocate profits from higher-tax locations to low-tax locations are called base erosion and profit shifting tools. There are many types of BEPS tools, however, IP-based BEPS tools are the largest group; the Double Irish is an IP–based BEPS tool. As with all Irish BEPS tools, the Irish subsidiary must conduct a "relevant trade" on the IP in Ireland. A "business plan" must be produced with Irish employment and salary levels that are acceptable to the Irish State during the period the BEPS tool is in operation. Despite these requirements, the effective tax rate of the Double Irish is 0%, as the EU Commission discovered with Apple in 2016. Most major U.
S. technology and life sciences multinationals have been identified as using the Double Irish. By 2010, US$95 billion of U. S. profits were shifted annually to Ireland, which increased to US$106 billion by 2015. As the BEPS tool with which U. S. multinationals built up untaxed offshore reserves of circa US$1 trillion from 2004 to 2017, the Double Irish is the largest tax avoidance tool in history. In 2016, when the EU levied a €13 billion fine on Apple, the largest tax fine in history, it only covered the period 2004–14, during which Apple shielded €111 billion in profits from U. S tax; the earliest recorded versions of the Double Irish-type BEPS tools are by Apple in the late 1980s, the EU discovered Irish Revenue tax rulings on the Double Irish for Apple in 1991. Irish State documents released to the Irish national archives in December 2018 showed that Fine Gael ministers in 1984 sought legal advice on how U. S. corporations could avoid taxes by operating from Ireland. The former Irish Taoiseach, John Bruton, wrote to the Finance Minister, Alan Dukes saying: "In order to retain the maximum tax advantage, US corporations will wish to locate FSCs in a country where they will have to pay little or no tax.
Therefore unless FSCs are given favourable tax treatment in Ireland, the
Tax law or revenue law is an area of legal study which deals with the constitutional, common-law, tax treaty, regulatory rules that constitute the law applicable to taxation. Primary taxation issues facing the governments world over include. Taxation of capital gains versus labor income. Ecotax refers to taxes intended to promote environmentally friendly activities via economic incentives. Tax evasion and avoidance leading to reduced government revenue. Due to an Inefficient tax system in many underdeveloped countries, the majority of small businesses are not taxed. In law schools, "tax law" is a area of specialist study. U. S. law schools require 30 semester credit hours of required courses, 60 hours or more of electives and a combined total of at least 90 credit hours completed. Law students must choose available courses on which to focus before graduation with the J. D. degree in the United States. This freedom allows law students to take many tax courses such as federal taxation and gift tax, estates and successions before completing the Juris Doctor and taking the bar exam in a particular U.
S. state. Master of Laws programs are offered in Canada, United States, United Kingdom, Netherlands and an increasing number of countries. Many of these programs focus on international taxation. In the United States, most LL. M. Programs require that the candidate be a graduate of an American Bar Association-accredited law school. In other countries a graduate law degree is sufficient for admission to LL. M. in Taxation law programs. The Master of Laws program is an advanced legal study. General Requirements J. D. or First degree in law. An English proficiency test score for students with a native language besides English; the Juris Doctor program is offered by only a number of countries. These include, United States, Canada, Hong Kong, Philippines and the United Kingdom; the courses vary in duration of years and whether or not further training is required, depending on which country the program is in. General Requirements A bachelor's degree. Law School Admission Test - Required for law school admission in United States, Canada and a growing number of countries.
Credit requirements. A list of tax faculty ranked by publication downloads is maintained by Paul Caron at TaxProf Blog. AfricaTaxation in South Africa Taxation in TanzaniaAmericasTaxation in Argentina Taxation in Canada Taxation in Colombia Taxation in the British Virgin Islands Taxation in Peru Taxation in the United StatesAsiaTaxation in China Taxation in India Taxation in Iran Taxation in the Palestinian territories Taxation in the People's Republic of ChinaEuropeTaxation in the European Union Taxation in Azerbaijan Taxation in Bulgaria Taxation in France Taxation in Germany Taxation in the Republic of Ireland Taxation in the Netherlands Taxation in Poland Taxation in Portugal Taxation in Russia Taxes in Spain Taxation in the United KingdomOceaniaTaxation in Australia Taxation in New Zealand Corporate law Corporate tax
Base erosion and profit shifting
Base erosion and profit shifting refers to corporate tax planning strategies used by multinationals to "shift" profits from higher–tax jurisdictions to lower–tax jurisdictions, thus "eroding" the "tax–base" of the higher–tax jurisdictions. The Organisation for Economic Co-operation and Development define BEPS strategies as also: "exploiting gaps and mismatches in tax rules". Corporate tax havens offer BEPS tools to "shift" profits to the haven, additional BEPS tools to avoid paying taxes within the haven. BEPS tools are associated with U. S. technology and life science multinationals. Tax academics showed use of the BEPS tools by U. S. multinationals, via tax havens, maximised long–term U. S. exchequer receipts and shareholder return, at the expense of others. Initiatives to curb BEPS by the OECD, by the Trump Administration have failed. A January 2017 OECD report estimates that BEPS tools are responsible for tax losses of circa $100–240 billion per annum. A June 2018 report by tax academic Gabriel Zucman, estimated that the figure is closer to $200 billion per annum.
The Tax Justice Network estimated that profits of $660 billion were "shifted" in 2015. The effect of BEPS tools is most felt in developing economies, who are denied the tax revenues needed to build infrastructure. Most BEPS activity is associated with industries with intellectual property, namely Technology, Life Sciences. IP is described as the raw materials of tax avoidance, IP–based BEPS tools are responsible for the largest global BEPS income flows. Corporate tax havens have some of the most advanced IP tax leglislation in their statutate books. Most BEPS activity is most associated with U. S. multinationals, is attributed to the historical U. S. "worldwide" corporate taxation system. Pre the Tax Cuts and Jobs Act of 2017, the U. S. was one of only eight jurisdictions to operate a "worldwide" tax system. Most global jurisdictions operate a "territorial" corporate tax system with lower tax rates for foreign sourced income, thus avoiding the need to "shift" profits. U. S. multinationals use tax havens more than multinationals from other countries which have kept their controlled foreign corporations regulations.
No other non–haven OECD country records as high a share of foreign profits booked in tax havens as the United States. This suggests that half of all the global profits shifted to tax havens are shifted by U. S. multinationals. By contrast, about 25% accrues to E. U. countries, 10% to the rest of the OECD, 15% to developing countries. Research in June 2018, identified Ireland as the world's largest BEPS hub. Ireland is larger; the largest global BEPS hubs, from the Zucman–Tørsløv–Wier table below, are synonymous with the top 10 global tax havens: Mostly consists of The Cayman Islands and The British Virgin Islands Research in September 2018, by the National Bureau of Economic Research, using repatriation tax data from the TCJA, said that: "In recent years, about half of the foreign profits of U. S. multinationals have been booked in tax haven affiliates, most prominently in Ireland and Bermuda plus Caribbean tax havens. One of the authors of this research was quoted as saying: “Ireland solidifies its position as the #1 tax haven.”.
S. firms book more profits in Ireland than in China, Germany, France & Mexico combined. Irish tax rate: 5.7%.” Research identifies three main BEPS techniques used for "shifting" profits to a corporate tax haven via OECD–compliant BEPS tools: BEPS tools could not function if the corporate tax haven did not have a network of bilateral tax treaties that accept the haven’s BEPS tools, which "shift" the profits to the haven. Modern corporate tax havens, who are the main global BEPS hubs, have extensive networks of bilateral tax treaties; the U. K. is the leader with over 122, followed by the Netherlands with over 100. The blacklisting of a corporate tax haven is a serious event, why major BEPS hubs are OECD-compliant. Ireland was the first major corporate tax haven. An important academic study in July 2017 published in Nature, "Conduit and Sink OFCs", showed that the pressure to maintain OECD–compliance had split corporate–focused tax havens into two different classifications: Sink OFCs, which act as the terminus for BEPS flows, Conduit OFCs, which act as the conduit for flows from higher–tax locations to the Sink OFCs.
It was noted that the 5 major Conduit OFCs, Ireland, the Netherlands, the United Kingdom and Switzerland, all have a top–ten ranking in the 2018 Global Innovation Property Centre IP Index". Once profits are "shifted" to the corporate tax haven, additional tools are used to avoid paying headline tax rates in the haven; some of these tools are OCED–compliant, others became OECD–proscribed, while others have not attracted OECD attention. Because BEPS hubs need extensive bilateral tax tr
In economics, the Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of government revenue. It illustrates the concept of taxable income elasticity—i.e. Taxable income changes in response to changes in the rate of taxation; the Laffer curve assumes that no tax revenue is raised at the extreme tax rates of 0% and 100%, that there is a rate between 0% and 100% that maximizes government taxation revenue. The Laffer curve is represented as a graph that starts at 0% tax with zero revenue, rises to a maximum rate of revenue at an intermediate rate of taxation, falls again to zero revenue at a 100% tax rate. However, the shape of the curve is uncertain and disputed among economists. Under some assumptions, such as revenue being a continuous function of the rate of taxation, the maximum illustrated by the Laffer curve is a result of Rolle's theorem, a standard result in calculus. One implication of the Laffer curve is that reducing or increasing tax rates beyond a certain point is counter-productive for raising further tax revenue.
A hypothetical Laffer curve for any given economy can only be estimated and such estimates are controversial. The New Palgrave Dictionary of Economics reports that estimates of revenue-maximizing tax rates have varied with a mid-range of around 70%. There is a consensus among leading economists that a reduction in the US federal income tax rate would not raise annual total tax revenue; the Laffer curve was popularized in the United States with policymakers following an afternoon meeting with Ford Administration officials Dick Cheney and Donald Rumsfeld in 1974, in which Arthur Laffer sketched the curve on a napkin to illustrate his argument. The term "Laffer curve" was coined by Jude Wanniski, present at the meeting; the basic concept was not new. Laffer does not claim to have invented the concept, it was not until the 1970s. The term "Laffer curve" was coined by Jude Wanniski after a 1974 dinner meeting at the Two Continents Restaurant in the Washington Hotel with Arthur Laffer, Dick Cheney, Donald Rumsfeld, his deputy press secretary Grace-Marie Arnett.
In this meeting, arguing against President Gerald Ford's tax increase sketched the curve on a napkin to illustrate the concept. Cheney did not accept the idea but it caught the imaginations of those present. Laffer professes no recollection of this napkin, but writes: "I used the so-called Laffer Curve all the time in my classes and with anyone else who would listen to me". There are historical precedents other. For example, in 1924, Secretary of Treasury Andrew Mellon wrote: "It seems difficult for some to understand that high rates of taxation do not mean large revenue to the government, that more revenue may be obtained by lower rates". Exercising his understanding that "73% of nothing is nothing", he pushed for the reduction of the top income tax bracket from 73% to an eventual 24%. Mellon was one of the wealthiest people in the United States, the third-highest income-tax payer in the mid-1920s, behind John D. Rockefeller and Henry Ford. While he served as Secretary of the U. S. Treasury Department his wealth peaked at around US$300–US$400 million.
Personal income-tax receipts rose from US$719 million in 1921 to over US$1 billion in 1929, an average increase of 4.2% per year over an 8-year period, which supporters attribute to the rate cut. David Hume expressed similar arguments in his essay Of Taxes in 1756, as did fellow Scottish economist Adam Smith, twenty years later; the Democratic party made a similar argument in the 1880s when high revenue from import tariffs raised during the Civil War led to federal budget surpluses. The Republican party, based in the protectionist industrial Northeast, argued that cutting rates would lower revenues, but the Democratic party rooted in the agricultural South, argued tariff reductions would increase revenues by increasing the number of taxable imports. In 2012, economists surveyed by the University of Chicago rejected the viewpoint that the Laffer Curve's postulation of increased tax revenue through a rate cut applies to federal US income taxes of the time in the medium term; when asked whether a "cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut", none of the economists surveyed agreed and 71% disagreed.
One of the conceptual uses of the Laffer curve is to determine the rate of taxation that will raise the maximum revenue. The revenue maximizing tax rate should not be confused with the optimal tax rate, which economists use to describe tax rates in a tax system that raises a given amount of revenue with the least distortions to the economy; the New Palgrave Dictionary of Economics reports that a comparison of academic studies yields a range of revenue maximizing rates that centers around 70%. In the early 1980s, Edgar L. Feige and Robert T. McGee developed a macroeconomic model from which they derived a Laffer Curve. According to the model, the shape and position of the Laffer Curve depend upon the strength of supply side effects, the progressivity of the tax system and the size of the unobserved economy. Economist Paul Pecorino pre
Tax noncompliance is a range of activities that are unfavorable to a government's tax system. This may include tax avoidance, tax reduction by legal means, tax evasion, the criminal non-payment of tax liabilities; the use of the term'noncompliance' is used differently by different authors. Its most general use describes non-compliant behaviors with respect to different institutional rules resulting in what Edgar L. Feige calls unobserved economies. Non-compliance with fiscal rules of taxation gives rise to unreported income and a tax gap that Feige estimates to be in the neighborhood of $500 billion annually for the United States. In the United States, the use of the term'noncompliance' refers only to illegal misreporting. Laws known as a General Anti-Avoidance Rule statutes which prohibit "tax aggressive" avoidance have been passed in several developed countries including the United States, Australia, New Zealand, South Africa and Hong Kong. In addition, judicial doctrines have accomplished the similar purpose, notably in the United States through the "business purpose" and "economic substance" doctrines established in Gregory v. Helvering.
Though the specifics may vary according to jurisdiction, these rules invalidate tax avoidance, technically legal but not for a business purpose or in violation of the spirit of the tax code. Related terms for tax avoidance include tax sheltering. Individuals that do not comply with tax payment include tax protesters and tax resisters. Tax protesters attempt to evade the payment of taxes using alternative interpretations of the tax law, while tax resisters refuse to pay a tax for conscientious reasons. Tax protesters believe that taxation under the Federal Reserve is unconstitutional, while tax resisters are more concerned with not paying for particular government policies that they oppose; because taxation is perceived as onerous, governments have struggled with tax noncompliance since the earliest of times. The use of the terms tax avoidance and tax evasion can vary depending on the jurisdiction. In general, the term "evasion" applies to "avoidance" to actions within the law; the term "mitigation" is used in some jurisdictions to further distinguish actions within the original purpose of the relevant provision from those actions that are within the letter of the law, but do not achieve its purpose.
As the difference between the two concepts is becoming less clear, law professor Allison Christians deplores the condition that morality is being cited as a criterion instead of the rule of law. An avoidance/evasion distinction along the lines of the present distinction has long been recognised but at first there was no terminology to express it. In 1860 Turner LJ suggested evasion/contravention: Fisher v Brierly. In 1900 the distinction was noted as two meanings of the word "evade": Bullivant v AG; the technical use of the words avoidance/evasion in the modern sense originated in the US where it was well established by the 1920s. It can be traced to Oliver Wendell Holmes in Wisconsin, it was slow to be accepted in the United Kingdom. By the 1950s, knowledgeable and careful writers in the UK had come to distinguish the term "tax evasion" from "avoidance". However, in the UK at least, "evasion" was used in the sense of avoidance, in law reports and elsewhere, at least up to the 1970s. Now that the terminology has received official approval in the UK this usage should be regarded as erroneous.
But now it is helpful to use the expressions "legal avoidance" and "illegal evasion", to make the meaning clearer. In the United States "tax evasion" is evading the assessment or payment of a tax, legally owed at the time of the criminal conduct. Tax evasion is criminal, has no effect on the amount of tax owed, although it may give rise to substantial monetary penalties. By contrast, the term "tax avoidance" describes lawful conduct, the purpose of, to avoid the creation of a tax liability in the first place. Whereas an evaded tax remains a tax owed, an avoided tax is a tax liability that has never existed. For example, consider two businesses, each of which have a particular asset, worth far more than its purchase price. Business One underreports its gain. In this instance, tax is due. Business One has engaged in tax evasion, criminal. Business Two consults with a tax advisor and discovers that the business can structure a sale as a "like-kind exchange" for other real estate that the business can use.
In this instance, no tax is due of the provisions of section 1031 of the Internal Revenue Code. Business Two has engaged in tax avoidance, within the law. In the above example, tax may or may not be due when the second property is sold. Whether and how much tax will be due will depend on circumstances and the state of the law at the time; the United Kingdom and jurisdictions following the UK approach have adopted the evasion/avoidance terminology as used in the United States: evasion is a criminal attempt to avoid paying tax owed while avoidance is an attempt to use the law to reduce taxes owed. There is, however, a further distinction drawn between tax mitigation. Tax avoidance is a course of action designed to conflict with or defeat the evident intention of Parliament: IRC v Willoughby. Tax mitigation is conduct which reduces tax liabilities without "tax avoidance" (not contrary