Tax noncompliance

Tax noncompliance is a range of activities that are unfavorable to a government's tax system. This may include tax avoidance, which is tax reduction by legal means, and tax evasion which is the illegal non-payment of tax liabilities.^[1] The use of the term "noncompliance" is used differently by different authors.^[2] Its most general use describes non-compliant behaviors with respect to different institutional rules resulting in what Edgar L. Feige calls unobserved economies.^[3] 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.^[4]

In the United States, the use of the term 'noncompliance' often refers only to illegal misreporting.^[5] Laws known as a General Anti-Avoidance Rule (GAAR) statutes which prohibit "tax aggressive" avoidance have been passed in several developed countries including the United States (since 2010),^[6] Canada, Australia, New Zealand, South Africa, Norway and Hong Kong.^[7] 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 which is technically legal but not for a business purpose or in violation of the spirit of the tax code.^[8] Related terms for tax avoidance include tax planning and 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. In the United States, 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 often perceived as onerous, governments have struggled with tax noncompliance since the earliest of times.^[9]

^ Michael Wenzel (2002). "The Impact of Outcome Orientation and Justice Concerns on Tax Compliance" (PDF). Journal of Applied Psychology: 4–5. When taxpayers try to find loopholes with the intention to pay less tax, even if technically legal, their actions may be against the spirit of the law and in this sense considered non-compliant. The present research will deal with both evasion and avoidance and, based on the premise that either is unfavorable to the tax-system and uncooperative towards the collective, subsume both under the concept of tax noncompliance. {{cite journal}}: Cite journal requires |journal= (help)
^ Dyreng SD, Hanlon M, Maydew EL. (2008). Noncom Long-run corporate tax avoidance. The Accounting Review.
^ Feige, Edgar L. (2016). "The Meaning and Measurement of Unobserved Economies: What do we really know about the "Shadow Economy"?". Journal of Tax Administration (30/1).
^ Feige, Edgar L. (2012). "America's Unreported Economy:Measuring the Size, Growth and Determinants of Income Tax Evasion in the U.S.". Crime, Law and Social Change (57/3). pp 265–85.
^ For example, see: GAO. (2012). Sources of Noncompliance and Strategies to Reduce It. GAO-12-651T.
^ Prebble R, Prebble J. (2010). Does the Use of General Anti-Avoidance Rules to Combat Tax Avoidance Breach Principles of the Rule of Law?. Saint Louis University Law Journal.
^ UK’s general anti-avoidance rule process on schedule. T Magazine.
^ For example, a Canadian organization describes Canada's law, first passed in 1988 in Section 245 of the Canada's federal income tax act (described here [1]), as invalidating the tax consequences of a tax avoidance transaction if "not conducted for any primary purpose other than to obtain a tax benefit".
^ David F. Burg (2004). A World History of Tax Rebellions. Taylor & Francis. pp. vi–viii. ISBN 9780203500897.

[1] Michael Wenzel (2002). "The Impact of Outcome Orientation and Justice Concerns on Tax Compliance" (PDF). Journal of Applied Psychology: 4–5. When taxpayers try to find loopholes with the intention to pay less tax, even if technically legal, their actions may be against the spirit of the law and in this sense considered non-compliant. The present research will deal with both evasion and avoidance and, based on the premise that either is unfavorable to the tax-system and uncooperative towards the collective, subsume both under the concept of tax noncompliance. {{cite journal}}: Cite journal requires |journal= (help)

[2] Dyreng SD, Hanlon M, Maydew EL. (2008). Noncom Long-run corporate tax avoidance. The Accounting Review.

[3] Feige, Edgar L. (2016). "The Meaning and Measurement of Unobserved Economies: What do we really know about the "Shadow Economy"?". Journal of Tax Administration (30/1).

[4] Feige, Edgar L. (2012). "America's Unreported Economy:Measuring the Size, Growth and Determinants of Income Tax Evasion in the U.S.". Crime, Law and Social Change (57/3). pp 265–85.

[5] For example, see: GAO. (2012). Sources of Noncompliance and Strategies to Reduce It. GAO-12-651T.

[6] Prebble R, Prebble J. (2010). Does the Use of General Anti-Avoidance Rules to Combat Tax Avoidance Breach Principles of the Rule of Law?. Saint Louis University Law Journal.

[7] UK’s general anti-avoidance rule process on schedule. T Magazine.

[8] For example, a Canadian organization describes Canada's law, first passed in 1988 in Section 245 of the Canada's federal income tax act (described here [1]), as invalidating the tax consequences of a tax avoidance transaction if "not conducted for any primary purpose other than to obtain a tax benefit".

[burg-9] David F. Burg (2004). A World History of Tax Rebellions. Taylor & Francis. pp. vi–viii. ISBN 9780203500897.

[1]

[2]

[3]

[4]

[5]

[6]

[7]

[8]

[9]