Secrecy is the practice of hiding information from certain individuals or groups who do not have the "need to know", perhaps while sharing it with other individuals. That which is kept hidden is known as the secret.
122-410: A black market , underground economy , shadow market or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is not compliant with an institutional set of rules. If the rule defines the set of goods and services whose production and distribution are prohibited or restricted by law, non-compliance with the rule constitutes a black-market trade since
244-428: A front business that is not illegal. Secrecy Secrecy is often controversial, depending on the content or nature of the secret, the group or people keeping the secret, and the motivation for secrecy. Secrecy by government entities is often decried as excessive or in promotion of poor operation ; excessive revelation of information on individuals can conflict with virtues of privacy and confidentiality . It
366-428: A "tax gap" of $ 450–600 billion. The "unrecorded economy" circumvents the institutional rules that define the reporting requirements of government statistical agencies. A summary measure of the unrecorded economy is the amount of unrecorded income, namely the amount of income that should (under existing rules and conventions) be recorded in national accounting systems (e.g., National Income and Product Accounts ) but
488-445: A black market exists to supply them. Despite law enforcement efforts to intercept them, demand remains high, providing a large profit motive for organized criminal groups to keep drugs supplied. The United Nations has reported that the retail market value of illegal drugs is $ 502 billion. Although law enforcement agencies intercept a fraction of drug traffickers and incarcerate thousands of wholesale and retail sellers and users,
610-496: A black market. Money may be exchangeable for a differing amount of the same currency if it has been acquired illegally and needs to be laundered before the money can be used. Counterfeit money may be sold for a lesser amount of genuine currency. The rate of exchange between a local and foreign currency may be subject to a black market, often described as a " parallel exchange rate " or similar terms. This may happen for one or more of several reasons: A government may officially set
732-399: A country. The operation of this tax system must be based on the higher compliance of taxpayers and the goodness of taxation rather than relying on coercive measures. He pointed out that as the country's tax system for building important content must have the following five important characteristics: Under the premise of economic development level, the ability of a country to raise tax revenue
854-399: A defense in advance. Planning not to file tax returns and avoid prosecution using a "good faith belief" is kind of like planning to kill someone using a claim of "self-defense". If you've planned in advance, then it shouldn't work. By contrast, under Canadian law, the honesty of a taxpayer in expressing his beliefs can be a mitigating factor in sentencing. In R. v. Klundert , 2011 ONCA 646,
976-473: A defense to a charge of willfulness. By pointing out that arguments about constitutionality of federal income tax laws "reveal full knowledge of the provisions at issue and a studied conclusion, however wrong, that those provisions are invalid and unenforceable", the Supreme Court may have been impliedly warning that asserting such "constitutional" arguments (in open court or otherwise) might actually help
1098-401: A felony and, upon conviction thereof, shall be fined not more than $ 100,000 ($ 500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution. Under this statute and related case law, the prosecution must prove, beyond a reasonable doubt, each of the following three elements: An affirmative act "in any manner" is sufficient to satisfy
1220-495: A few years. If something commonly done is contrary to the intention of Parliament, it is only to be expected that Parliament will stop it. So that which is commonly done and not stopped is not likely to be contrary to the intention of Parliament. It follows that tax reduction arrangements which have been carried on for a long time are unlikely to constitute tax avoidance. Judges have a strong intuitive sense that that which everyone does, and has long done, should not be stigmatised with
1342-468: A foreign currency for the local currency. The U.S. dollar is viewed as a relatively stable and safe currency and is often used abroad as a second currency. In 2012, US$ 340 billion, roughly 37 percent of all U.S. currency, was believed to be circulating abroad. The most recent study of the amount of currency held overseas suggests that only 25 percent of U.S. currency was held abroad in 2014. The widespread substitution of U.S. currency for local currency
SECTION 10
#17327869922181464-492: A limited time monopoly on its use, though patent applications are initially secret. Secret societies use secrecy as a way to attract members by creating a sense of importance. Shell companies may be used to launder money from criminal activity, to finance terrorism, or to evade taxes. Registers of beneficial ownership aim at fighting corporate secrecy in that sense. Other laws require organizations to keep certain information secret, such as medical records ( HIPAA in
1586-402: A low-profit item for the rum-runners, and they moved on to smuggling Canadian whisky , French champagne , and English gin to major cities like New York City and Boston , where prices ran high. It was said that some ships carried $ 200,000 (roughly equivalent to US$ 4.5 million in 2022) in contraband in a single run. The United Kingdom has some of the highest taxes on tobacco products in
1708-485: A mitigating factor. While that may be an acceptable general rule of sentencing, the absence of deceit or fraud can nevertheless be a factor in deciding whether or not a conditional sentence is warranted. To the extent the trial judge did consider the appellant's low level of deceit, if any, and lack of fraud, it was not fairly emphasized in his reasons and amounts to error. According to some estimates, about three percent of American taxpayers do not file tax returns at all. In
1830-400: A person or group (e.g., a criminal gang) indicates to a store owner that they could protect her/his store from potential damage, damage that the same person or group would otherwise inflict, while the correlation of threat and protection may be more or less deniably veiled, distinguishing it from the more direct act of extortion . Racketeering is often associated with organized crime . The term
1952-520: A premium to acquire it. U.S. currency is viewed as a relatively stable store of value and, since it does not leave a paper trail, it is also a convenient medium of exchange for both illegal transactions and for unreported income both in the U.S. and abroad. More recently cryptocurrencies such as bitcoin have been used as a medium of exchange in black market transactions. Cryptocurrencies are sometimes favored over centralized currency due to their pseudonymous nature and their ability to be traded over
2074-400: A problem, such as for a problem that does not actually exist or that would not otherwise exist if the racket did not exist. Conducting a racket is called racketeering. The potential problem may be caused by the same party that offers to solve it, although that fact may be concealed, with the intent to engender continual patronage for the racketeer. An archetype is the protection racket , wherein
2196-729: A red dye in the UK, a green dye in Ireland). The saving is attractive enough to make for a black market in agricultural diesel, which was estimated in 2007 to cost the UK £350 million annually in lost tax. In countries including India and Nepal, the price of fuel is set by the government, and it is illegal to sell the fuel at a higher price. During the petrol crisis in Nepal, black marketing in fuel became common, especially during mass petrol shortage. At times, people queued for hours or even overnight to get fuel. Petrol pump operators were alleged to hoard
2318-466: A secret. Also, the other may insist that one answer the question. Nearly 2500 years ago, Sophocles wrote: 'Do nothing secretly; for Time sees and hears all things, and discloses all.'. Gautama Siddhartha said: "Three things cannot long stay hidden: the sun , the moon and the truth .". Tax noncompliance Tax noncompliance is a range of activities that are unfavorable to a government's tax system. This may include tax avoidance , which
2440-750: A subject of the laws, as is true outside of elections) in selecting their government servants. It is argued that secrecy is impermissible as against the public in the area of elections where the government gets all of its power and taxing authority. In any event, permissible secrecy varies significantly with the context involved. Organizations, ranging from multi-national for profit corporations to nonprofit charities , keep secrets for competitive advantage , to meet legal requirements, or, in some cases, to conceal nefarious behavior. New products under development, unique manufacturing techniques, or simply lists of customers are types of information protected by trade secret laws. Research on corporate secrecy has studied
2562-654: A tax gap that Feige estimates to be in the neighborhood of $ 500 billion annually for the United States . In the United States, the use of the term 'noncompliance' often refers only to illegal misreporting. 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), Canada, Australia, New Zealand, South Africa, Norway and Hong Kong. In addition, judicial doctrines have accomplished
SECTION 20
#17327869922182684-544: A taxpayer does not have enough money to pay the entire tax bill, the IRS can work out a payment plan with taxpayers, or enter into a collection alternative such as a partial payment Installment Agreement , an Offer in Compromise, placement into hardship or "currently non-collectable" status or file bankruptcy. For years for which no return has been filed, there is no statute of limitations on civil actions – that is, on how long
2806-543: A taxpayer, without risking criminal prosecution, could ignore the duties imposed upon him by the Internal Revenue Code and refuse to utilize the mechanisms provided by Congress to present his claims of invalidity to the courts and to abide by their decisions . There is no doubt that Cheek, from year to year, was free to pay the tax that the law purported to require, file for a refund and, if denied, present his claims of invalidity, constitutional or otherwise, to
2928-436: A vicious balance of "low tax rates, low taxes, low public services, and high-scale underground economy." In the above-mentioned healthy balance, the tax gap is relatively small; in the vicious equilibrium, the tax gap is relatively large. Tax custom is different from tax avoidance or tax evasion. It does not measure the taxation behavior of individuals, but the tax attitude of individuals. The tax custom can also be considered as
3050-498: Is Joseph Conrad 's short story " The Secret Sharer ". Governments often attempt to conceal information from other governments and the public. These state secrets can include weapon designs, military plans, diplomatic negotiation tactics, and secrets obtained illicitly from others (" intelligence "). Most nations have some form of Official Secrets Act (the Espionage Act in the U.S.) and classify material according to
3172-409: Is rent control and subsidized affordable housing , which provide housing below the market cost, there may be a black market for housing rentals. For instance, in the UK there is illegal subletting of social housing homes where the tenant illegally rents out the government-subsidized home at a higher rent. In Sweden, rental contracts with regulated rent can be bought on the black market, either from
3294-408: Is a strong negative relationship between tax customary variables and underground economic size variables (which represent tax evasion or tax gaps) (correlation coefficient is -0.657). And both variables are significant at the 1% level. Bird believed that a sustainable and efficient tax system must be based on perceived fairness and goodwill response to taxation. It must be connected organically with
3416-414: Is difficult. Low-tax states are generally the major tobacco producers, and have come under criticism for their reluctance to increase taxes. North Carolina eventually agreed to raise its taxes from 5 cents to 35 cents per pack of 20 cigarettes, although this remains far below the national average. As of 2010, South Carolina has refused to follow suit and raise taxes from seven cents per pack (the lowest in
3538-487: Is illegal or highly regulated in some countries. This demonstrates the underground economy, because of consistent high demand from customers, relatively high pay, but labor-intensive and low-skilled work, which attracts a continual supply of workers. While prostitution exists in every country, studies show that it tends to flourish more in poorer countries, and in areas with large numbers of unattached men, such as around military bases. For instance, an empirical study showed that
3660-575: Is known as de facto dollarisation , and has been observed in transition countries such as Cambodia and in some Latin American countries. Some countries, such as Ecuador, abandoned their local currency and used U.S. dollars, essentially for this reason, a process known as de jure dollarization (see also the example of the Ghanaian cedi from the 1970s and 1980s). If foreign currency is difficult or illegal for local citizens to acquire, they will pay
3782-408: Is mainly determined by the tax system design in the country and the efficiency of its collection and management. From the perspective of taxation practices in various countries, the design of taxation system is affected and restricted by the efficiency of tax collection and management. Therefore, it can be said that the relative size of a country's tax revenue collection and tax gap is closely related to
Black market - Misplaced Pages Continue
3904-494: Is no single underground economy; there are many. These underground economies are omnipresent, existing in market-oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape, or are excluded from the institutional system of rules, rights, regulations, and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to
4026-403: Is not kept secret. Information hiding is a design principle in much software engineering . It is considered easier to verify software reliability if one can be sure that different parts of the program can only access (and therefore depend on) a known limited amount of information. Military secrecy is the concealing of information about martial affairs that is purposely not made available to
4148-514: Is not violating the "tax law" – i.e., these errors are not treated as being caused by the "complexity of the tax law." In the Cheek case the Court stated: Claims that some of the provisions of the tax code are unconstitutional are submissions of a different order. They do not arise from innocent mistakes caused by the complexity of the Internal Revenue Code. Rather, they reveal full knowledge of
4270-399: Is not. Unrecorded income is a particular problem in transition countries that switched from a socialist accounting system to UN standard national accounting . New methods have been proposed for estimating the size of the unrecorded (non-observed) economy. However little consensus exists on the size of the unreported economies of transitional countries. The " informal economy " circumvents
4392-485: Is often associated with money laundering , a process used to conceal the illegitimate source of the money. Because of the clandestine nature of the black economy, it is not possible to determine its size and scope. The literature on the black market has not established a common terminology and has instead offered many synonyms including subterranean, hidden, grey , shadow, informal, clandestine, illegal, unobserved, unreported, unrecorded, second, parallel, and black. There
4514-612: Is often contrasted with social transparency . Secrecy can exist in a number of different ways: encoding or encryption (where mathematical and technical strategies are used to hide messages), true secrecy (where restrictions are put upon those who take part of the message, such as through government security classification ) and obfuscation , where secrets are hidden in plain sight behind complex idiosyncratic language ( jargon ) or steganography . Another classification proposed by Claude Shannon in 1948 reads that there are three systems of secrecy within communication: Animals conceal
4636-426: Is purchased on the black market". Smuggling one truckload of cigarettes from a low-tax U.S. state to a high-tax state can result in a profit of up to $ 3 million. Because traffic crossing U.S. state borders is not usually stopped or inspected to the same extent as happens at the country's international borders, interdicting this sort of smuggling (especially without causing major disruption to interstate commerce)
4758-451: Is relatively low. Bird and Zolt pointed out that, contrary to the practice of taxation in developed countries, personal income tax still plays a very limited role in developing countries today, both in terms of income mobilization and adjustment of income disparities. In 2000, the income tax income of developed countries was 53.8% of total income, compared with 28.3% in developing countries. They believe that wages and other income of workers in
4880-431: Is tax reduction by legal means, and tax evasion which is the illegal non-payment of tax liabilities. The use of the term "noncompliance" is used differently by different authors. Its most general use describes non-compliant behaviors with respect to different institutional rules resulting in what Edgar L. Feige calls unobserved economies. Non-compliance with fiscal rules of taxation gives rise to unreported income and
5002-407: Is the difference between true tax liability for a given tax year and the amount that is paid on time. It is comprised of the nonfiling gap, the underreporting gap, and the underpayment (or remittance) gap. The net tax gap is the portion of the gross tax gap that will never be recovered through enforcement or other late payments." An important way to study the tax gap is to examine the size of
Black market - Misplaced Pages Continue
5124-404: Is to avoid the creation of a tax liability in the first place. Whereas an evaded tax remains a tax legally owed, an avoided tax is a tax liability that has never existed. For example, consider two businesses, each of which have a particular asset (in this case, a piece of real estate) that is worth far more than its purchase price. In the above example, tax may or may not eventually be due when
5246-432: Is to seek to identify "artificial" transactions. However, a transaction is not well described as "artificial" if it has valid legal consequences, unless some standard can be set up to establish what is "natural" for the same purpose. Such standards are not readily discernible. The same objection applies to the term "device". It may be that a concept of "tax avoidance" based on what is contrary to "the intention of Parliament"
5368-422: Is traded. Goods and services acquired illegally and/or transacted for in an illegal manner may exchange above or below the price of legal market transactions: No government, no global nonprofit, no multinational enterprise can seriously claim to be able to replace the 1.8 billion jobs created by the economic underground. In truth, the best hope for growth in most emerging economies lies in the shadows. Even when
5490-578: The Internet . Within the European single market , it is legal for a person or business to buy fuel in one EU state for use in a vehicle in another, as well as a small amount of fuel in a container, but as with other goods, taxes (such as VAT ) will generally be payable by the final customer at the physical place of making the purchase. When fuel is transported across borders for resale, such taxes can often be recovered and then relevant taxes are payable in
5612-497: The PBS documentary Prohibition , the term "bootlegging" was popularized when thousands of city dwellers would sell liquor from flasks they kept in their bootleg all across major cities and rural areas. The term "rum-running" most likely originated at the start of Prohibition in the United States (1920–1933), when ships from Bimini in the western Bahamas transported cheap Caribbean rum to Florida speakeasies . Rum's cheapness made it
5734-407: The government , or included in the gross national product (GNP), unlike the formal economy. In developed countries, the informal sector is characterized by unreported employment . This is hidden from the state for tax, social security, or labour law purposes but is legal in other aspects. The term black market can also be used in reference to a specific part of the economy in which contraband
5856-470: The landmark legal case of United States v. Reynolds , decided by the Supreme Court in 1953. Excessive secrecy is often cited as a source of much human conflict. One may have to lie in order to hold a secret, which might lead to psychological repercussions. The alternative, declining to answer when asked something, may suggest the answer and may therefore not always be suitable for keeping
5978-432: The IRS can seek taxpayers and demand payment of taxes owed. For each year a taxpayer willfully fails to timely file an income tax return, the taxpayer can be sentenced to one year in prison. In general, there is a six-year statute of limitations on federal tax crimes. The IRS has run several Overseas Voluntary Disclosure Programs in 2009 and 2011, and its current one has "no set deadline for taxpayers to apply. However,
6100-470: The Internal Revenue Code negates willfulness or provides a defense to criminal prosecution under 7201 and 7203. Of course, Cheek was free in this very case to present his claims of invalidity and have them adjudicated, but, like defendants in criminal cases in other contexts who "willfully" refuse to comply with the duties placed upon them by the law, he must take the risk of being wrong . The Court ruled that such beliefs – even if held in good faith – are not
6222-482: The Ontario Court of Appeal upheld a tax protestor's conviction, but allowed him to serve a conditional sentence in the community on the grounds that his behaviour was neither fraudulent nor deceitful. The one-year custodial sentence imposed by the trial judge was overturned on this basis: [23] He went on to hold that, while deceit or fraud may be an aggravating factor, the absence of such features does not create
SECTION 50
#17327869922186344-410: The U.S. Freedom of Information Act and sunshine laws . Government officials sometimes leak information they are supposed to keep secret. ( For a recent (2005) example, see Plame affair . ) Secrecy in elections is a growing issue, particularly secrecy of vote counts on computerized vote counting machines. While voting, citizens are acting in a unique sovereign or "owner" capacity (instead of being
6466-400: The U.S. if aged less than 60 days. Rum-running , or bootlegging, is the illegal business of transporting ( smuggling ) alcoholic beverages where such transportation is forbidden by law. Smuggling is usually done to circumvent taxation or prohibition laws. The term rum-running is more commonly applied to smuggling over water; bootlegging is applied to smuggling over land. According to
6588-422: The U.S.), or financial reports that are under preparation (to limit insider trading ). Europe has particularly strict laws about database privacy. Preservation of secrets is one of the goals of information security . Techniques used include physical security and cryptography . The latter depends on the secrecy of cryptographic keys . Many believe that security technology can be more effective if it itself
6710-469: The UK approach (such as New Zealand) have recently adopted the evasion/avoidance terminology as used in the United States: evasion is a criminal attempt to avoid paying tax owed while avoidance is an attempt to use the law to reduce taxes owed. There is, however, a further distinction drawn between tax avoidance and tax mitigation. Tax avoidance is a course of action designed to conflict with or defeat
6832-562: The USA). According to the World Health Organization (WHO), illegal organ trade occurs when organs are removed from the body for the purpose of commercial transactions. The WHO justifies its stance on the issue by stating, "Payment for... organs is likely to take unfair advantage of the poorest and most vulnerable groups, undermines altruistic donation and leads to profiteering and human trafficking." Despite prohibitions, it
6954-505: The United States Supreme Court ruled that a genuine, good faith belief that one is not violating the federal tax law (such as a mistake based on a misunderstanding caused by the complexity of the tax law itself) would be a valid defense to a charge of "willfulness" ("willfulness" in this case being knowledge or awareness that one is violating the tax law itself), even though that belief is irrational or unreasonable. On
7076-413: The above analysis, we can see that compared with indirect taxes, developing countries still have a large tax gap in terms of direct taxes. Some tax evaders believe that they have uncovered new interpretations of the law that show that they are not subject to being taxed (not liable): these individuals and groups are sometimes called tax protesters . Many protesters continue posing the same arguments that
7198-597: The act of theft to be in the profits forgone to the pirates. However, this makes the unsubstantiated assumption that the pirates would have bought the copyrighted material if it had not been available through file sharing or other means. Copyright holders also say that they did work creating their copyrighted material and they wish to get compensated for their work. No other system than copyright has been found to compensate artists and other creators for their work, and many artists do not have an alternative source of income or another job. Many artists and film producers have accepted
7320-532: The black market include consumer-to-consumer online auction websites and private pages on social media websites. In black market venues in Cambodia, sex toys have been seized alongside aphrodisiac products. It has been suggested that if efforts in North America to ban realistic-looking sexbots succeed, it may result in a black market. People engaged in the black market may run their business hidden behind
7442-404: The bombing of innocents. In the United States "tax evasion" is evading the assessment or payment of a tax that is already legally owed at the time of the criminal conduct . Tax evasion is criminal, and has no effect on the amount of tax actually owed, although it may give rise to substantial monetary penalties. By contrast, the term "tax avoidance" describes lawful conduct, the purpose of which
SECTION 60
#17327869922187564-420: The case of U.S. federal income taxes, civil penalties for willful failure to timely file returns and willful failure to timely pay taxes are based on the amount of tax due; thus, if no tax is owed, no penalties are due. The civil penalty for willful failure to timely file a return is generally equal to 5.0% of the amount of tax "required to be shown on the return per month, up to a maximum of 25%. In cases where
7686-419: The concept of an avoidance/mitigation distinction goes back only to the 1970s. The concept originated from economists, not lawyers. The use of the terminology avoidance/mitigation to express this distinction was an innovation in 1986: IRC v Challenge . The difference between tax avoidance and tax evasion is the thickness of a prison wall. Denis Healey , The Economist , Volume 354, p. 186 In practice,
7808-421: The costs of, and is excluded from the benefits and rights incorporated in, the laws and administrative rules covering property relationships, commercial licensing, labor contracts, torts, financial credit, and social security systems. A summary measure of the informal economy is the income generated by economic agents that operate informally. The informal sector is part of an economy that is not taxed , monitored by
7930-626: The country of sale, but there are no customs checks on borders between countries within the European Union Customs Union . Differences in tax rates can thus lead to opportunities for arbitrage even when prices before tax are equal, in a form that is illegal as a form of tax evasion . For example, between the Republic of Ireland and Northern Ireland , there has often been a black market for petrol and diesel . The direction of smuggling can change depending on variation in
8052-487: The courts, as the operations are distributed and widespread, traversing national borders and thus legal systems. Since digital information can be duplicated repeatedly with no loss of quality, and passed on electronically at little to no cost, the effective underground market value of media is zero, differentiating it from nearly all other forms of underground economic activity. The issue is compounded by widespread indifference to enforcing copyright law, both with governments and
8174-458: The courts. See 26 U.S.C. 7422. Also, without paying the tax, he could have challenged claims of tax deficiencies in the Tax Court, 6213, with the right to appeal to a higher court if unsuccessful. 7482(a)(1). Cheek took neither course in some years, and, when he did, was unwilling to accept the outcome . As we see it, he is in no position to claim that his good-faith belief about the validity of
8296-639: The current tenant or sometimes directly from the property owner. Specialized black-market dealers assist the property owners with such transactions. Items such as medicines as well as essential aircraft and automobile parts (e.g. brakes, motor parts, etc.) are counterfeited on a large scale. Street vendors in countries where there is little enforcement of copyright law , particularly in Asia and Latin America, often sell copies of films , music CDs , and computer software such as video games , sometimes even before
8418-581: The demand for such drugs and profit margins encourage new distributors to enter the market. Drug legalization activists draw parallels between the illegal drug trade and the Prohibition of alcohol in the United States in the 1920s. The laws of many countries forbid or restrict the personal ownership of weapons . These restrictions can range from small knives to firearms , either altogether or by classification (e.g., caliber , handguns , automatic weapons , and explosives ). The black market supplies
8540-773: The demands for weaponry that cannot be obtained legally or may only be obtained legally after obtaining permits and paying fees. This may be by smuggling the arms from countries where they were bought legally or stolen, or by stealing from arms manufacturers within the country itself, using insiders. In cases where the underground economy is unable to smuggle firearms, they can also satisfy requests by gunsmithing their own firearms. Those who may buy this way include criminals to use for illegal activities, gun collectors, and otherwise law-abiding citizens interested in protecting their dwellings, families, or businesses. In England and Wales, certain categories of weapons used for hunting may be owned by qualified residents but must be registered with
8662-419: The distinction is sometimes clear, but often difficult to draw. Relevant factors to decide whether conduct is avoidance or mitigation include: whether there is a specific tax regime applicable; whether transactions have economic consequences; confidentiality; tax linked fees. Important indicia are familiarity and use. Once a tax avoidance arrangement becomes common, it is almost always stopped by legislation within
8784-399: The earliest of times. The use of the terms tax avoidance and tax evasion can vary depending on the jurisdiction. In general, "evasion" applies to illegal actions and "avoidance" to actions within the law. The term "mitigation" is also used in some jurisdictions to further distinguish actions within the original purpose of the relevant provision from those actions that are within the letter of
8906-406: The effective provision of public goods or services, and the effective protection of property rights. It is generally believed that the higher the level of government regulation, the greater the size of its underground economy and the greater the tax gap. And vice versa, when government over-regulation occurs, an alternative relationship exists between the size of the underground economy and the size of
9028-436: The evident intention of Parliament: IRC v Willoughby . Tax mitigation is conduct which reduces tax liabilities without "tax avoidance" (not contrary to the intention of Parliament), for instance, by gifts to charity or investments in certain assets which qualify for tax relief. This is important for tax provisions which apply in cases of "avoidance": they are held not to apply in cases of mitigation. The clear articulation of
9150-468: The factors of taxation determines that developing countries can only adopt the tax system that is mainly based on turnover tax. From the perspective of taxation, due to restrictions on the level of taxation in developing countries, tax revenues can only be raised through indirect taxes that focus on taxes such as value-added tax and consumption tax, while direct taxes represented by income taxes and property taxes are included in total tax revenue. The proportion
9272-471: The factors supporting secret organizations. In particular, scholars in economics and management have paid attention to the way firms participating in cartels work together to maintain secrecy and conceal their activities from antitrust authorities. The diversity of the participants (in terms of age and size of the firms) influences their ability to coordinate to avoid being detected. The patent system encourages inventors to publish information in exchange for
9394-411: The family with outsiders or sometimes even within the family. Many "family secrets" are maintained by using a mutually agreed-upon construct (an official family story) when speaking with outside members. Agreement to maintain the secret is often coerced through "shaming" and reference to family honor . The information may even be something as trivial as a recipe . Secrets are sometimes kept to provide
9516-476: The federal courts have rejected time and time again, ruling the arguments to be legally frivolous. Tax resistance is the refusal to pay a tax for conscientious reasons (because the resister finds the government or its actions morally reprehensible). They typically do not find it relevant whether that the tax laws are themselves legal or illegal or whether they apply to them, and they are more concerned with not paying for what they find to be grossly immoral, such as
9638-462: The fuel and sell it to black marketeers. Black marketing in vehicle/cooking fuel became widespread during the 2015 Nepal blockade ; even after it was eased and petrol imports resumed, people were not getting the fuel as intended, and resorted to the black market. In some countries including Saudi Arabia, Thailand, and India sex toys are illegal, and are sold illegally, without compliance with regulations on safety, etc. Platforms used to sell sex toys on
9760-582: The general public and hence to any enemy, in order to gain an advantage or to not reveal a weakness, to avoid embarrassment , or to help in propaganda efforts. Most military secrets are tactical in nature, such as the strengths and weaknesses of weapon systems , tactics , training methods, plans, and the number and location of specific weapons. Some secrets involve information in broader areas, such as secure communications, cryptography , intelligence operations, and cooperation with third parties. US Government rights in regard to military secrecy were uphold in
9882-421: The informal sector in developing countries are still free from tax collection. The same is true of the property tax situation. Due to the lack of necessary information and assessment mechanisms for the assessment of property values, property taxes cannot be successfully implemented in many developing countries; even if developing countries with property taxes exist, their income collection is still insufficient. From
10004-469: The law, but do not achieve its purpose. All pursue the same immediate goal, minimising the amount paid. In particular, in the American legal system, tax evasion is a criminal action disciplined by 26 US Code §7201, under which the taxpayer who fails to pay or willfully underpays his tax liability (i.e., with criminal mens rea like stated in the James v. United States ) will undergo criminal penalties. On
10126-455: The legal requirements or procedures—health checks, standards of accommodation, and so on. In other countries, such as Nicaragua , where legal prostitution is regulated, hotels may require both parties to identify themselves, to prevent child prostitution . Personally identifying information , financial information like credit card and bank account information, and medical data are bought and sold, mostly in darknet markets . People increase
10248-492: The level of protection needed (hence the term " classified information "). An individual needs a security clearance for access and other protection methods, such as keeping documents in a safe , are stipulated. Few people dispute the desirability of keeping Critical Nuclear Weapon Design Information secret, but many believe government secrecy to be excessive and too often employed for political purposes. Many countries have laws that attempt to limit government secrecy, such as
10370-466: The local police force and kept within a locked cabinet. Among those who may purchase weapons on the black market are people who are unable to pass the legal requirements for registration—convicted felons or those suffering from mental illness for example. The illegal logging of timber , according to Interpol , is an industry worth almost as much as the drug production industry in some countries. In many developing countries, living animals are captured in
10492-604: The location of their den or nest from predators . Squirrels bury nuts, hiding them, and they try to remember their locations later. Humans attempt to consciously conceal aspects of themselves from others due to shame , or from fear of violence, rejection, harassment, loss of acceptance , or loss of employment . Humans may also attempt to conceal aspects of their own self which they are not capable of incorporating psychologically into their conscious being. Families sometimes maintain " family secrets ", obliging family members never to discuss disagreeable issues concerning
10614-513: The moral responsibility of the individual. Making a specific contribution to society by paying taxes on the government must fulfill this responsibility. It embodies the ethical code of conduct for individuals in taxation, although it does not require the form of law. The decline or deterioration of taxation practices will reduce the moral costs of taxpayers engaging in illegal operations or underground economic activities. An empirical study by ALM on transition countries such as Russia found that there
10736-550: The official economy. Representatives of this view are Levenson, Maloney, and Johnson. They believe that higher tax rates can raise higher tax revenues, and the government can provide higher levels of public services accordingly, thereby attracting more companies and individuals out of the underground economy, resulting in a healthy balance of "high tax rates, high taxes, high public services, and small-scale underground economy", but low-tax countries, because they do not have enough income to provide high levels of public services, will form
10858-466: The official release of the title. A determined counterfeiter with a few hundred dollars can make copies that are digitally identical to an original with no loss in quality; innovations in consumer DVD and CD writers and the widespread availability of cracks on the Internet for most forms of copy protection technology make this cheap and easy to do. Copyright-holders and other proponents of copyright laws have found this phenomenon hard to stop through
10980-496: The other side of the coin, tax avoidance happens when the taxpayer tries to lessen his tax obligation using deductions and credits to maximize after-tax income. All of this is considered legal by the IRS even though it foresees civil penalties. All things considered, the main difference between tax evasion and tax avoidance is the taxpayer's guilty mind of minimization or failure to pay the tax liability. The U.S. Internal Revenue Service provides formal definitions: "The gross tax gap
11102-443: The particular institutional rules that they violate: The "illegal economy" consists of economic activities pursued in violation of legal statutes that define the scope of legitimate forms of commerce. Illegal-economy participants produce and distribute prohibited goods and services , such as drugs , weapons , and prostitution . The "unreported economy" circumvents or evades institutionally established fiscal rules as codified in
11224-520: 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
11346-421: The pejorative term of "avoidance". Thus UK courts refused to regard sales and repurchases (known as bed-and-breakfast transactions) or back-to-back loans as tax avoidance. Other approaches in distinguishing tax avoidance and tax mitigation are to seek to identify "the spirit of the statute" or "misusing" a provision. But this is the same as the "evident intention of Parliament" properly understood. Another approach
11468-647: The placing of the burden of proof on the prosecution is of limited utility to a defendant that the jury simply does not believe. A further stumbling block for tax protesters is found in the Cheek Doctrine with respect to arguments about "constitutionality." Under the Doctrine, the belief that the Sixteenth Amendment was not properly ratified and the belief that the federal income tax is otherwise unconstitutional are not treated as beliefs that one
11590-427: The pleasure of surprise. This includes keeping secret about a surprise party , not telling spoilers of a story, and avoiding exposure of a magic trick. Keeping one’s strategy secret – is important in many aspects of game theory . In anthropology secret sharing is one way for people to establish traditional relations with other people. A commonly used narrative that describes this kind of behavior
11712-425: The prosecutor prove willfulness. Daniel B. Evans, a tax lawyer who has written about tax protester arguments, has stated that if you plan ahead to use it [the Cheek defense], then it is almost certain to fail, because your efforts to establish your "good faith belief" are going to be used by the government as evidence that you knew that what you were doing was wrong when you did it, which is why you worked to set up
11834-452: The provision of public goods or services. If taxpayers see their preferences reflected in governance and see efficient provision of government services, they stay in the official economy and fulfill tax obligations. Tax revenues increase while the tax gap narrows. The economic experiments cited by Torgler and Schaltegger show that the extensive exercise of voting rights in tax affairs will significantly increase taxpayer compliance. The deeper
11956-406: The provisions at issue and a studied conclusion, however wrong , that those provisions are invalid and unenforceable. Thus, in this case, Cheek paid his taxes for years, but after attending various seminars and based on his own study, he concluded that the income tax laws could not constitutionally require him to pay a tax. The Court continued: We do not believe that Congress contemplated that such
12078-495: The public at large. Additionally, not all people agree with copyright laws, on the grounds that they unfairly criminalize competition, allowing the copyright-holder to effectively monopolize related industries. Copyright-holders also may use region-coding to discriminate against selected populations price-wise and availability-wise. Copyright infringement law goes as far as to deem illegal " mixtapes " and other such material copied to tape or disk. Copyright holders typically attest
12200-488: The rate of exchange of its currency with that of other, "harder" currencies. When it does so, the peg may overvalue the local currency relative to what its market value would be if it were a floating currency . Those in possession of the harder currency, for example, expatriate workers, may be able to use the black market to buy the local currency at better exchange rates than they can get officially. In situations of financial instability and inflation, citizens may substitute
12322-450: The role of piracy in media distribution. The spread of material through file sharing is a source of publicity for artists and builds fan bases that may be inclined to see the performer live (live performances make up the bulk of successful artists' revenues, however not all artists can make live performances, for example, photographers typically only have a single source of income: the licensing of their photos). Money itself may be subject to
12444-463: The second property is sold. Whether and how much tax will be due will depend on circumstances and the state of the law at the time. The application of the U.S. tax evasion statute may be illustrated in brief as follows. The statute is Internal Revenue Code section 7201: Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of
12566-612: 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. 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
12688-665: The supply of prostitutes rose abruptly in Denver and Minneapolis in 2008 when the Democratic and Republican National Conventions took place there. Prostitutes in the black market generally operate with some degree of secrecy, sometimes negotiating prices and activities through codewords and subtle gestures. In countries such as Germany or the Netherlands , where prostitution is legal but regulated, illegal prostitutes exist whose services are offered more cheaply without regard for
12810-438: The surface, this rule might appear to be of some comfort to tax protesters who assert, for example, that "wages are not income." However, merely asserting that one has such a good faith belief is not determinative in court; under the American legal system the trier of fact (the jury, or the trial judge in a non-jury trial) decides whether the defendant really has the good faith belief he or she claims. With respect to willfulness,
12932-424: The tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported economy is the " tax gap ": the difference between the amount of tax revenues due the fiscal authority and the amount of tax revenue actually collected. In the U.S. unreported income is estimated to be $ 2 trillion resulting in
13054-421: The tax collection and management efficiency of the s tax administration agencies in the country. A reasonable explanation for the introduction of value-added tax by most developing countries in the world is to increase the taxpayer's compliance with tax payment through the mutual supervision mechanism between taxpayers without increasing the cost imposed by the tax administration authorities. This consideration for
13176-413: The tax gap in a country by analyzing the size of the underground economy and its influencing factors. The size of the underground economy is directly related to the institutional infrastructure. The institutional infrastructure of a country mainly includes the intensity of government regulation, the establishment and implementation of laws, the degree of judicial independence, the size of effective tax rates,
13298-506: The tax, as the Internal Revenue Service bases its initial assessment (i.e., the formal recordation of the tax on the books of the U.S. Treasury) on the tax amount shown on the return. The federal tax evasion statute is an example of an exception to the general rule under U.S. law that "ignorance of the law or a mistake of law is no defense to criminal prosecution". Under the Cheek Doctrine ( Cheek v. United States ),
13420-514: The taxes and the exchange rate between the Republic's euro (and previously punt ) and Northern Ireland's pound sterling ; indeed sometimes diesel will be smuggled in one direction and petrol the other. In some countries, diesel fuel for agricultural vehicles or domestic use is taxed at a much lower rate than that for other vehicles. This is known as dyed fuel , because a colored dye is added so it can be detected if used in other vehicles (e.g.
13542-492: The taxicab market with a medallion system (taxicabs must get a special license and display it on a medallion in the vehicle). In most such jurisdictions it is legal to sell the medallions, but the limited supply and resulting high prices of medallions have led to a market in unlicensed carpooling / illegal taxicab operation . In Baltimore , Maryland , for example, it is not uncommon for private individuals to provide illegal taxicab service for city residents. In places where there
13664-415: The taxpayer participates in political decision making, the higher the tax contract performance efficiency and tax compliance. The taxpayer society in this state is a civil society with tax and good customs, and the taxpayer is a real citizen who has been given a wide range of powers. Everest Phillips believes that the design of a reasonable and effective tax system is an important part of the construction in
13786-433: The terms of this program could change at any time going forward.". By contrast, the civil penalty for failure to timely pay the tax actually "shown on the return" is generally equal to 0.5% of such tax due per month, up to a maximum of 25%. The two penalties are computed together in a relatively complex algorithm, and computing the actual penalties due is somewhat challenging. The United Kingdom and jurisdictions following
13908-407: The third element of the offense. That is, an act which would otherwise be perfectly legal (such as moving funds from one bank account to another) could be grounds for a tax evasion conviction (possibly an attempt to evade payment ), provided the other two elements are also met. Intentionally filing a false tax return (a separate crime in itself) could constitute an attempt to evade the assessment of
14030-499: The totality of such activity is referred to with the definite article, e.g., " the black market in bush meat". The black market is distinct from the grey market , in which commodities are distributed through channels that, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market, in which trade is legal and official. Black money is the proceeds of an illegal transaction, on which income and other taxes have not been paid. Black money
14152-535: The transaction itself is illegal. Such transactions include the illegal drug trade , prostitution (where prohibited), illegal currency transactions, and human trafficking . Participants try to hide their illegal behavior from the government or regulatory authority. Cash is the preferred medium of exchange in illegal transactions, since cash transactions are less easily traced. Common motives for operating in black markets are to trade contraband, avoid taxes and regulations, or evade price controls or rationing. Typically,
14274-604: The underground market offers lower prices, consumers may still buy on the legal market when possible, because: However, in some situations, consumers may conclude that they are better off using black market services, particularly when government regulations hinder what would otherwise be a legitimate competitive service. For example, in Baltimore , many consumers actively prefer illegal taxi cabs, citing that they are more available, convenient, and fairly priced. Some examples of underground economic activities include: Prostitution
14396-419: The value of the stolen data by aggregating it with publicly available data, and selling it again for a profit, increasing the damage that can be done to the people whose data was stolen. From the late 19th and early 20th centuries, many countries began to ban the possession or use of some recreational drugs , such as in the United States' war on drugs . Many people nonetheless continue to use illegal drugs, and
14518-405: The wild and sold as pets. Wild animals are also hunted and killed for their meat , hide, and organs, the latter of which and other animal parts are sold for use in traditional medicine. In several states in the United States , laws requiring the pasteurization of milk have created black markets in raw milk , and sometimes in raw milk cheese which is legal in a number of EU countries but banned in
14640-592: The world and strict limits on the amount of tobacco that can be imported duty-free from other countries, leading to widespread attempts to smuggle relatively cheap tobacco from low tax countries into the U.K. Such smuggling efforts range from vacationers concealing relatively small quantities of tobacco in their luggage to large-scale enterprises linked to organized crime . British authorities have aggressively tried to detect and confiscate such illegal imports, and to prosecute those caught. Nevertheless, it has been reported that "27% of cigarettes and 68% of roll your own tobacco
14762-580: Was coined by the Employers' Association of Chicago in June 1927 in a statement about the influence of organized crime in the Teamsters union. Where taxicabs, buses, and other transportation providers are strictly regulated or monopolized by government, a black market typically flourishes to provide transportation to poorly served or overpriced communities. In the United States, some cities restrict entry to
14884-410: Was estimated that 5% of all organ recipients engaged in commercial organ transplant in 2005. Research indicates that illegal organ trade is on the rise, with a recent report by Global Financial Integrity estimating that the illegal organ trade generates profits between $ 600 million and $ 1.2 billion per year across many countries. A racket is a service that is fraudulently offered to solve
#217782