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Webley, Paul --- "Tax compliance by businesses" [2004] ELECD 88; in Sjögren, Hans; Skogh, Göran (eds), "New Perspectives on Economic Crime" (Edward Elgar Publishing, 2004)

Book Title: New Perspectives on Economic Crime

Editor(s): Sjögren, Hans; Skogh, Göran

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843766452

Section: Chapter 7

Section Title: Tax compliance by businesses

Author(s): Webley, Paul

Number of pages: 32

Extract:

7. Tax compliance by businesses
Paul Webley*

INTRODUCTION

The Meaning of `Tax Compliance'

Tax compliance is a deceptively straightforward term. There are tax rules (for
example VAT laws, regulations on corporation tax filing) and businesses that
follow the rules are showing tax compliance. Those that don't are non-
compliant. But there are some legal and conceptual distinctions that must be
borne in mind at the outset. Social scientists tend to use the terms `tax
evasion', `tax fraud' and `tax (non-)compliance' interchangeably. A search
through the literature shows that they favour the first (probably because the
deliberate breaking of rules is more theoretically tractable) but this is
inappropriate. Tax authorities and tax agencies very clearly prefer the term
`compliance'.
So it is appropriate to begin with some definitions. In the UK (and in most
jurisdictions) there is a legal distinction between tax evasion and tax
avoidance. Tax evasion is illegal. It involves deliberately breaking the law in
order to reduce the amount of tax paid. It can involve acts of omission (for
example failing to report certain assets to the tax authorities) or commission
(for example, falsely reporting personal expenses as business expenses). Tax
avoidance is not illegal. It involves `every attempt by legal means to reduce
tax liability which would otherwise be incurred by taking advantage of some
provision or lack of provision in the law ... it presupposes the existence of
alternatives, one of which would result in less tax than the other (Royal
Commission on Taxation, 1966, ...