03-07-2022, 03:20 PM
The "evasion is illegal but avoidance is legit" is a common misconception, but a misconception nonetheless. It is half true, in that evasion is a criminal offence and can result in jail time, whereas avoidance isn't a criminal act. But avoidance can still result in penalties of up to 100% of the tax avoided (i.e. you end up having to pay the avoided tax twice) so isn't something you want to be caught doing.
The tax act contains general anti- avoidance provisions which prohibit doing anything for purpose of avoiding tax. So, instead, successful tax avoidance has to be carefully dressed up as having solid commercial justification, with the tax benefit being merely an incidental byproduct...and that's how good accountants earn their fees.
To be clear though, the tales of rich people using good accountants to reduce their tax bill to zero are just not true (that would certainly involve evasion, not just well disguised avoidance). Rich people using good accountants still pay heaps of tax, but just not quite as much as they might otherwise have paid.
The tax act contains general anti- avoidance provisions which prohibit doing anything for purpose of avoiding tax. So, instead, successful tax avoidance has to be carefully dressed up as having solid commercial justification, with the tax benefit being merely an incidental byproduct...and that's how good accountants earn their fees.
To be clear though, the tales of rich people using good accountants to reduce their tax bill to zero are just not true (that would certainly involve evasion, not just well disguised avoidance). Rich people using good accountants still pay heaps of tax, but just not quite as much as they might otherwise have paid.