Tax Evasion

Tax Evasion in United States


Practical Information

For a meaning of it, read Tax Evasion in the Legal Dictionary here.

The intentional nonpayment of taxes. Unlike most crimes, it can be committed wholly by omission. A person is not in double jeopardy (in U.S. law): if he or she is tried for committing a crime and later tried for not declaring the profits of the crime as taxable income. (Revised by Ann De Vries).

Efforts to combat money laundering, corruption, and tax evasion

In May 2016, the Obama Administration announced several important steps to combat money laundering, corruption, and tax evasion, and called upon Congress to take additional action to address these critical issues.

The United States has long led the global efforts to combat money laundering, corruption, and offshore tax evasion, and pursue the bad actors – including tax cheats, kleptocrats, and other criminals – who abuse the financial system or shell companies and other legal entities. Today’s actions build upon the substantial progress the United States and its global partners have made to date in strengthening the global financial system and providing greater transparency, so that criminals and tax cheats cannot hide their activities using anonymous shell companies and other legal entities. These efforts are critical to preventing criminals from using the global financial system to launder proceeds from corruption or other illegal activities, finance criminal activity or even terrorism, evade international sanctions regimes, or evade taxes.

In recent weeks, the disclosure of the so-called “Panama Papers” – millions of leaked documents reportedly revealing the use of anonymous offshore shell companies – has brought the issues of illicit financial activity and tax evasion into the spotlight. The Panama Papers underscore the importance of the efforts the United States has taken domestically, and the efforts we have undertaken with our international partners, to address these shared challenges.

In May 2016, the Obama Administration annonunced new Administrative actions to combat money laundering, terrorist financing, and tax evasion. The Administration is announcing new rules to increase transparency and disclosure requirements that will enhance law enforcement’s ability to detect, deter, and disrupt money laundering, terrorist finance, and tax evasion:

  • Final Treasury regulations on “Customer Due Diligence” that enhance transparency and protect the integrity of the financial system by requiring financial institutions to know and keep records on who actually owns the companies that use their services;
  • New proposed Treasury/IRS tax rules closing a loophole allowing foreigners to hide assets or financial activity behind anonymous entities established in the United States.

Putting forward new legislative proposals to strengthen our tools to fight corruption and money laundering, the Administration is releasing draft legislation that would increase transparency into the “beneficial ownership” of companies formed in the United States by requiring that companies know and report their true owners;

Additional law enforcement tools to combat corruption and money laundering

Calling on Congress to act on long-overdue proposals that help crack down on tax evasion: In a letter from Secretary Lew, the Administration called upon the Senate to finally approve tax treaties that have been pending for several years, and that would help crack down on offshore tax evasion.

Additional Tools to Combat Illicit Financial Activity and Tax Evasion

In addition, the Administration renews the call for Congress on:

  • New legislation to require reporting of the “beneficial ownership” of corporations, helping law enforcement prevent and investigate financial crimes: Treasury is sending to Congress draft legislation requiring legal entities to know and report information on beneficial ownership. Increasing law enforcement access to “beneficial ownership” information – information about the people who are really behind a corporation or other business entity – will help in preventing and investigating financial crimes.
  • The Administration is committed to working with Congress to pass meaningful legislation that would require companies to know and report adequate and accurate beneficial ownership information at the time of a company’s creation, so that the information can be made available to law enforcement. The legislation would authorize the Treasury Department to require that legal entities formed or qualified to do business within the United States file this information with the Treasury Department, and face penalties for failure to comply. The misuse of companies to hide beneficial ownership is a significant weakness in the transparency of entities formed in the United States that can only be resolved by Congressional action.
  • New legislation to strengthen our ability to fight transnational corruption: The Department of Justice is sending to Congress draft legislation to enhance and strengthen our efforts to combat transnational corruption. This legislation would enhance law enforcement’s ability to prevent bad actors from concealing and laundering illegal proceeds of transnational corruption. It would also allow U.S. prosecutors to more effectively pursue kleptocracy cases and prosecute money laundering as part of foreign corruption, and reinforce our role in the international community as a model for others in anti-corruption matters. The proposals would assist investigators and prosecutors in gathering evidence which can be used in prosecuting those who seek to hide and move illegal funds.
  • A call for long-overdue Senate action on tax treaties: Eight tax treaties with other countries have been awaiting Senate approval for several years – including amendments to our existing treaties with Switzerland and Luxembourg that would enable U.S. law enforcement in the United States to obtain information about financial accounts in those countries. The inability to obtain this information has impeded investigations and enforcement relating to offshore tax evasion – including evasion involving secret Swiss bank accounts. Today, in a letter from Secretary Lew, the Administration called on Congress to finally act upon the treaties so that they can be implemented without further delay.
  • “Reciprocal FATCA” legislation to strengthen our ability to work with other countries to fight tax evasion: Congress also must act to strengthen the United States’ hand in pressing other countries to improve transparency by ensuring that we live up to our end of the bargain. The President has proposed providing full “reciprocity” under the Foreign Account Tax Compliance Act (FATCA) in the last three budgets he has submitted to Congress. Secretary Lew’s letter reiterates that Congress should act on the Administration’s legislative proposal as soon as possible to ensure that the United States meets international standards.

Illicit Financial Activity and Tax Evasion

Financial transparency

The United States has led efforts within the major economic powers of the G-20 and the Financial Action Task Force (FATF) to strengthen international standards on combatting money laundering and terrorist financing, and facilitate their implementation. More than 190 jurisdictions around the world have committed to the FATF Recommendations through the global network of FATF-Style Regional Bodies (FSRBs) and FATF memberships.

Preventing evading U.S. taxes using hidden offshore accounts

Since President Obama signed FATCA into law in 2010, the United States has negotiated agreements with more than 100 countries that help us enforce tax our laws. FATCA’s pioneering approach to automatic information sharing on tax matters is the template for the development of international standards that have been endorsed by the G-20 nations and are being deployed around the world.

Cracking down on U.S. tax cheats

The United States has cracked down on tax evasion through criminal and civil enforcement actions, including successful enforcement actions against dozens of Swiss banks. Prompted by the threat of prosecution, thousands of U.S. individuals have come forward voluntarily to disclose offshore accounts and pay back taxes and penalties. The IRS has received more than 54,000 offshore “voluntary disclosures” since 2009.

Anti-Bribery efforts

The United States was the first country to criminalize money laundering and the U.S.’s Foreign Corrupt Practices Act (FCPA) provided the model for the OECD’s Anti-Bribery Convention and other efforts globally. The Department of Justice has an unparalleled commitment to, and record of, fighting corruption through law enforcement action, as reflected through six anti-corruption programs:

  • public integrity prosecutions of U.S. public officials;
  • prosecutions of U.S. individuals that pay bribes to foreign officials;
  • prosecutions of U.S. taxpayers who seek to conceal foreign accounts, as well as bankers and advisors;
  • pursuit of those who misuse the U.S. financial system through money laundering and other corrupt schemes;
  • the pioneering Kleptocracy Initiative, which uses investigation and litigation to recover the proceeds of foreign official corruption and return the proceeds to the citizens of countries victimized by corruption, which has led to the restraint of more than $1.8 billion involving 12 countries; and,
  • assistance to foreign counterparts in fighting corruption, both through cooperation in foreign corruption cases and through overseas capacity building.

Tax Evasion and Tax Law

There are more details about Tax Evasion in thetax compilation of the legal Encyclopedia.

Concept of Tax Evasion in Constitutional Law

The following is a very basic definition of Tax Evasion in this context: Not paying taxes

Concept of Tax Evasion in Political Science

The following is a very basic definition of Tax Evasion in relation to the election system and the U.S Congress: Not paying taxes


See Also

Further Reading

Further Reading (Articles)

Bob McDonnell’s Virginia Road Tax Evasions, The Washington Post; January 14, 2013

Tax evasions found rampant., Vietnamese News Agency; July 1, 2008

Bribes and Business Tax Evasion, The European Journal of Comparative Economics; December 1, 2009; Joulfaian, David

The Pedagogy of Tax Evasion: Its Extent and Its Determinants, International Advances in Economic Research; November 1, 2000; Cebula, Richard Paul, Chris

The Ethics of Tax Evasion: An Investigation into Demographic Differences, Journal of Legal, Ethical and Regulatory Issues; January 1, 2012; McGee, Robert W. Nickerson, Inge Pleshko, Larry Broihahn, Michael

Attitudes toward Tax Evasion: A Demographic Study of South African Attitudes on Tax Evasion, Journal of Economics and Economic Education Research; September 1, 2012; Ross, Adriana M. McGee, Robert W.

A Demographic Study of Polish Attitudes toward Tax Evasion, Academy of Accounting and Financial Studies Journal; October 1, 2012; Ross, Adriana M. McGee, Robert W.

Jewish Perspectives on the Ethics of Tax Evasion, Journal of Legal, Ethical and Regulatory Issues; July 1, 2008; McGee, Robert W. Cohn, Gordon M.

A DEMOGRAPHIC STUDY OF POLISH ATTITUDES TOWARD TAX EVASION, Allied Academies International Conference. Academy of Accounting and Financial Studies. Proceedings; January 1, 2011; Ross, Adriana M

Education Level and Ethical Attitude toward Tax Evasion: A Six-Country Study, Journal of Legal, Ethical and Regulatory Issues; April 1, 2012; Ross, Adriana M. McGee, Robert W.

The Tax Evasions of a Would-Be Tory Big Spender, Daily Mail (London); March 3, 2006; Alexander, Andrew

United Kingdom : Serious Tax Evasion Cases at Their Lowest Level for Five Years, Mena Report; June 25, 2013

Presenting the Dimensionality of an Ethics Scale Pertaining to Tax Evasion, Journal of Legal, Ethical and Regulatory Issues; January 1, 2009; Nickerson, Inge Pleshko, Larry McGee, Robert W.

Internal control versus external manipulation: a model of corporate income tax evasion., RAND Journal of Economics; March 22, 2005; Chen, Kong-Pin Chu, C.Y. Cyrus

THE ETHICS OF TAX EVASION: EMPIRICAL STUDIES OF JEWISH OPINION, Allied Academies International Conference. Academy of Accounting and Financial Studies. Proceedings; January 1, 2007; McGee, Robert W Cohn, Gordon M

A SIX-COUNTRY STUDY ON EDUCATION LEVEL AND ETHICAL ATTITUDE TOWARD TAX EVASION, Allied Academies International Conference. Academy of Educational Leadership. Proceedings; January 1, 2011; Ross, Adriana M

UBS halts U.S. service that helped tax evasions, International Herald Tribune; July 18, 2008; Lynnley Browning The New York Times Media Group

Local Authorities Lose Millions in Tax Evasions, The Daily Mirror (Colombo, Sri Lanka); December 30, 2013

Income tax evasion revisited: the impact of interest rate yields on tax-free municipal bonds., Southern Economic Journal; October 1, 2004; Cebula, Richard J.

How to get round tax evasion. (preventing tax evasion) (Column), The Economist (US); May 28, 1994

Other Popular Tax Concepts

Tax Evasion: Open and Free Legal Research of US Law

Federal Primary Materials

The U.S. federal government system consists of executive, legislative, and judicial branches, each of which creates information that can be the subject of legal research about Tax Evasion. This part provides references, in relation to Tax Evasion, to the legislative process, the federal judiciary, and the primary sources of federal law (cases, statutes, and regulations).

Federal primary materials about Tax Evasion by content types:

Laws and Regulations

US Constitution
Federal Statutory Codes and Legislation

Federal Case Law and Court Materials

U.S. Courts of Appeals
United States courts of appeals, inclouding bankruptcy courts and bankcruptcy appellate panels:

Federal Administrative Materials and Resources

Presidential Materials

Materials that emanate from the President’s lawmaking function include executive orders for officers in departments and agencies and proclamations for announcing ceremonial or commemorative policies. Presidential materials available include:

Executive Materials

Federal Legislative History Materials

Legislative history traces the legislative process of a particular bill (about Tax Evasion and other subjects) for the main purpose of determining the legislators’ intent behind the enactment of a law to explain or clarify ambiguities in the language or the perceived meaning of that law (about Tax Evasion or other topics), or locating the current status of a bill and monitoring its progress.

State Administrative Materials and Resources

State regulations are rules and procedures promulgated by state agencies (which may apply to Tax Evasion and other topics); they are a binding source of law. In addition to promulgating regulations, state administrative boards and agencies often have judicial or quasi-judicial authority and may issue administrative decisions affecting Tax Evasion. Finding these decisions can be challenging. In many cases, researchers about Tax Evasion should check state agency web sites for their regulations, decisions, forms, and other information of interest.

State rules and regulations are found in codes of regulations and administrative codes (official compilation of all rules and regulations, organized by subject matter). Search here:

State opinions of the Attorney General (official written advisory opinions on issues of state law related to Tax Evasion when formerly requested by a designated government officer):

Tools and Forms

Law in Other Regions

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