Criminal Law, Tax Evasion, Shams, and Tax Avoidance: Part II – Criminal Law Consequences of Categories of Evasion and Avoidance

New Zealand Journal of Taxation Law and Policy, Vol. 2, pp. 59-74, 1996

Victoria University of Wellington Legal Research Paper No. 13/2012

18 Pages Posted: 12 May 2010 Last revised: 15 Apr 2015

John Prebble QC

Victoria University of Wellington - Faculty of Law; Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien; University of Notre Dame Australia - School of Law

Date Written: 1996

Abstract

Tax evasion can occur by taxpayers failing to disclose income or by creating sham transactions. Whether a taxpayer’s returns are evasive may depend on his state of mind. In Snook v. London West Riding Investments [1967] 1 All ER 518, 528-529 a sham was defined as acts done or documens executed which are intended to give the appearance of creating legal rights and obligations. Shams are used to hide tax evasion and other kinds of fraud. Transactions may be genuine and not shams, but still be impugned. Reasons include mislabelling, context, the affect of related transactions, and the arguments of logic.

A taxpayer may be guilty of tax evasion, and of an offence under section 229A of the Crimes Act 1961 if he knowingly undertakes a scheme that is void for tax purposes by virtue of section BB 9 of the Income Tax Act, if he fails to disclose the scheme to the Commissioner, or if he under-declares his income because he returns it on the basis that the scheme is effectual, although it is in fact void. That is, in some circumstances, a scheme may amout to both avoidance and evasion.

Keywords: Income Tax, Income Tax Act 1994, Tax Evasion, Tax Avoidance, Tax Mitigation, Fraudulent Evasion, Innocent Evasion, Sham, Criminal Law, Crimes Act 1961, Mislabelling, Self-concealing Transactions, Logic

JEL Classification: K34

Suggested Citation

Prebble QC, John, Criminal Law, Tax Evasion, Shams, and Tax Avoidance: Part II – Criminal Law Consequences of Categories of Evasion and Avoidance (1996). New Zealand Journal of Taxation Law and Policy, Vol. 2, pp. 59-74, 1996; Victoria University of Wellington Legal Research Paper No. 13/2012. Available at SSRN: https://ssrn.com/abstract=1604868

John Prebble QC (Contact Author)

Victoria University of Wellington - Faculty of Law ( email )

PO Box 600
Wellington, 6140
New Zealand
+64 4 463 6311 (Phone)
Papers Indexed at HOME PAGE (Fax)

HOME PAGE: http://www.victoria.ac.nz/law/staff/prebble-scholarly.aspx

Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

University of Notre Dame Australia - School of Law

Sydney Campus, New South Wales
Australia

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