Question

data series on pre tax top income shares are affectee by tax evasion and avoidance so it is impossible to say much about the evolution of inequality. true or false? explain.

Answer 1

This statement is true. The tax evasion and tax avoidance seems to be similar but both are very different to each other. Tax evasion is a criminal activity as it is an illegal activity to lower down the tax liability through concealment or misrepresenting the facts.

On the other hand, tax avoidance is a legal action and helps in gaining benefits in taxes as is lowering down the tax bill ethical means. There is a thin line between tax avoidance to become tax evasion. A proper planning needs to be done for tax avoidance.