Distinguish between Tax Evasion and Tax Avoidance and give one example of each. (5 marks)
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Tax Evasion is the practice of using fraudulent means to pay lower tax or not pay any tax at all. This is criminal and attracts sanctions from the Tax Authority and or the courts. Example (includes but not limited to) is using two receipt books to record transactions with one recording actual transactions which will not be rendered for tax purpose and the one recording lower transactions which will be made available to the Ghana Revenue Authority for tax purpose.
On the other hand, Tax Avoidance is the practice of using the loopholes in the tax laws to pay legitimately lower tax. An example of Tax Avoidance schemes include but not limited to selling chargeable assets and using the proceeds to acquire a replacement asset within a year of such disposal. This is exempt from capital gains tax.