What does it mean?
Tax fraud is a form of deliberate evasion of tax which is generally punishable under criminal law. The term includes situations in which deliberately false statements are submitted or fake documents are produced.
Tax evasion generally comprises illegal arrangements where tax liability is hidden or ignored, i.e. the taxpayer pays less tax than he/she is supposed to pay under the law by hiding income or information from the tax authorities.
Tax avoidance is defined as acting within the law, sometimes at the edge of legality, to minimise or eliminate tax that would otherwise be legally owed. It often involves exploiting the strict letter of the law, loopholes and mismatches to obtain a tax advantage that was not originally intended by the legislation.
How big is the problem?
EU takes action…
Both collecting taxes and combating tax fraud and tax evasion are the responsibility of EU countries’ national authorities. However, much of the fraud happens across borders and a single country acting on its own will not achieve a lot. The EU has long provided tools to help member countries fight fraud more effectively. It now has an Action Plan to move up a gear.
Through IT and other means, the EU allows for co-operation and exchange of information among its member countries on all sorts of taxes, particularly savings taxation and VAT. For instance, an EU system of mutual assistance enables national tax authorities to recover unpaid taxes from one EU country to another.
Many businesses are global and so is tax evasion. The EU has signed agreements with a number of neighbouring countries and participates in all international initiatives aimed at preventing tax abuse. And tax havens are increasingly targeted.