Tax evasion

==Government response==
[[File:Size of European Shadow Economy.jpg|thumb|450px|The size of the shadow economy in Europe, 2011]]

The level of evasion depends on a number of factors, including the amount of money a person or a corporation possesses. Efforts to evade income tax decline when the amounts involved are lower.{{Citation needed|date=June 2017}} The level of evasion also depends on the efficiency of the tax administration. [[Political corruption|Corruption]] by tax officials makes it difficult to control evasion. Tax administrations use various means to reduce evasion and increase the level of enforcement: for example, privatization of tax enforcement<ref name="ReferenceA">Chowdhury, F. L. (1992) ''Evasion of Customs Duty in Bangladesh'', unpublished MBA dissertation, Graduate School of Management, Monash University, Australia.{{better source|date=January 2015}}</ref> or tax farming.<ref name="Stella">{{Cite journal | last1 = Stella | first1 = Peter | year = 1993 | title = Tax Farming: A Radical Solution for Developing Country Tax Problems? | journal = IMF Staff Papers | volume = 40 | issue = 1 | pages = 217–25 | jstor = 3867383 | doi = 10.2307/3867383| s2cid = 153924531 | url = http://elibrary.imf.org/view/IMF001/06707-9781451960327/06707-9781451960327/06707-9781451960327.xml }}</ref><ref>Alam. D (1999) Introduction of PSI system in Bangladesh: Facts and Documents, Desh Prokashon, Dhaka.</ref>

In 2011 [[HMRC]], the UK tax collection agency stated that it would continue to crack down on tax evasion, with the goal of collecting £18 billion in revenue before 2015.{{citation needed|date=August 2020}} In 2010, HMRC began a voluntary amnesty program that targeted middle-class professionals and raised £500 million.<ref>{{cite news|url=https://www.telegraph.co.uk/finance/financial-crime/8566897/HMRC-opens-16-criminal-cases-over-tax-evasion.html |archive-url=https://ghostarchive.org/archive/20220112/https://www.telegraph.co.uk/finance/financial-crime/8566897/HMRC-opens-16-criminal-cases-over-tax-evasion.html |archive-date=2022-01-12 |url-access=subscription |url-status=live | title=HMRC opens 16 criminal cases over tax evasion | last=Russell | first=Jonathan | date=June 10, 2011 | work=The Telegraph |publisher=telegraph.co.uk | access-date=August 12, 2011 | location=London}}{{cbignore}}</ref>

===Corruption by tax officials===
Corrupt tax officials co-operate with the taxpayers who intend to evade taxes. When they detect an instance of evasion, they refrain from reporting it in return for [[bribe]]s. [[Political corruption|Corruption]] by tax officials is a serious problem for the tax administration in many{{which|date=June 2013}} countries.{{Citation needed|date=December 2023}}

===Level of evasion and punishment===
[[File:Tax-delinquent apartment rental building in Santa Fe, Dasmariñas, Cavite.jpg|thumb|An [[apartment building]] closed for property tax evasion.]]

Tax evasion is a crime in almost all developed countries, and the guilty party is liable to [[Fine (penalty)|fines]] and/or [[imprisonment]]. In [[Switzerland]], many acts that would amount to criminal tax evasion in other countries are treated as civil matters. Dishonestly misreporting income in a tax return is not necessarily considered a crime. Such matters are handled in the Swiss tax courts, not the criminal courts.{{citation needed|date=November 2012}}

In Switzerland, however, some tax misconduct (such as the deliberate falsification of records) is criminal. Moreover, civil tax transgressions may give rise to penalties. It is often considered that the extent of evasion depends on the severity of punishment for evasion.

===Privatization of tax enforcement===
[[File:(Venice) Bocca di Leone in the Doge's Palace.jpg|thumb|upright|A "Lion's Mouth" postbox for anonymous denunciations at the [[Doge's Palace, Venice|Doge's Palace]] in Venice, Italy. Text translation: "Secret denunciations against anyone who will conceal favors and services or will collude to hide the true revenue from them."]]
Professor [[Christopher Hood]] first{{Citation needed|date=July 2008}} suggested [[privatization]] of tax enforcement to control tax evasion more efficiently than a government department would,<ref>Hood, C. (1986) Privatizing UK tax Law Enforcement?, ''Public Administration'', Vol. 64, Autumn, 1986, p. 319–33.</ref> and some governments have adopted this approach. In [[Bangladesh]], customs administration was partly privatized in 1991.<ref name="ReferenceA" />{{better source|date=January 2015}}

Abuse by private tax collectors (see tax farming below) has on occasion led to revolutionary overthrow of governments who have outsourced tax administration.

===Tax farming===
{{Further|Tax farming}}
[[Tax farming]] is an historical means of collection of revenue. Governments received a lump sum in advance from a private entity, which then collects and retains the revenue and bears the risk of evasion by the taxpayers. It has been suggested that tax farming may reduce tax evasion in less developed countries.<ref name="Stella" />

This system may be liable to abuse by the "tax-farmers" seeking to make a profit, if they are not subject to political constraints. Abuses by tax farmers (together with a tax system that exempted the aristocracy) were a primary reason for the [[French Revolution]] that toppled Louis XVI.{{citation needed|date=January 2016}}

===PSI agencies===
[[Pre-shipment inspection|Pre-shipment inspection agencies]] like [[SGS S.A.|Société Générale De Surveillance S. A.]] and its subsidiary Cotecna are in business to prevent evasion of [[customs duty]] through [[structuring|under-invoicing]] and misdeclaration.

However, PSI agencies have cooperated with importers in evading customs duties. Bangladeshi authorities found Cotecna guilty of complicity with importers for evasion of customs duties on a huge scale.<ref>{{cite web|url=http://www.newagebd.com/2007/sep/14/front.html#21 |date=14 September 2007 |work=New Age |publisher=Media New Age Ltd|location = Dhaka |url-status=dead |archive-url= https://web.archive.org/web/20101120114802/http://www.newagebd.com/2007/sep/14/front.html |archive-date=November 20, 2010 |title =  NBR showcauses Cotecna on car import scam}}</ref> In August 2005, Bangladesh had hired four PSI companies – Cotecna Inspection SA, SGS (Bangladesh) Limited, [[Bureau Veritas|Bureau Veritas BIVAC (Bangladesh) Limited]] and [[Intertek|INtertek Testing Limited]] – for three years to certify price, quality and quantity of imported goods. In March 2008, the Bangladeshi National Board of Revenue cancelled Cotecna's certificate for serious irregularities, while importers' complaints about the other three PSI companies mounted. Bangladesh planned to have its customs department train its officials in "[[Customs valuation|WTO valuation]], trade policy, [[ASYCUDA]] system, risk management" to take over the inspections.<ref name="BN">{{cite news|date=3 May 2008|title=PSI system likely to continue|work=Bangladesh News|url=http://www.independent-bangladesh.com/200805034959/country/psi-system-likely-to-continue.html|url-status=dead|access-date=3 January 2015|archive-url=https://web.archive.org/web/20080511223840/http://www.independent-bangladesh.com/200805034959/country/psi-system-likely-to-continue.html|archive-date=May 11, 2008}}</ref>

Cotecna was also found to have bribed Pakistan's prime minister [[Benazir Bhutto]] to secure a PSI contract by Pakistani importers. She and her husband were sentenced both in Pakistan and Switzerland.<ref>{{cite news |newspaper=New York Times |date=6 August 2003 |title=Pakistan: Bhutto Sentenced In Switzerland |url=https://www.nytimes.com/2003/08/06/world/world-briefing-asia-pakistan-bhutto-sentenced-in-switzerland.html |first=Alison |last=Langley}}</ref>