Forms of Escape from Taxation

• Shifting - the original payor or one to whom the tax was assessed transfers
the burden of tax to someone else.
• Capitalization - the total amount of future taxes expected to be paid for the
object is deducted from the purchase price of the object. It occurs if the
property is income-generating.
• Transformation - the seller maintains his selling price and margin of profit
not by shifting the tax to his customers but by improving his method of
production. The savings he acquires from reduced production costs is used
to cover the amount of tax.
• Evasion - the use of illegal or fraudulent means to escape or lessen the
payment of tax; evasion only occurs on the amount not paid. Evasion is a
crime punishable by a fine and imprisonment.
• Avoidance - the use of tax-saving devices or means sanctioned by law to
avoid or reduce tax liability. It could involve the use of alternative tax rates
or methods of tax assessment as provided by law.
• Exemption – the government grants immunity to particular persons,
corporations, or a particular class of persons or nature of business, it is a
privilege without which they would be taxed like others similarly situated.

Tax Evasion as Distinguished from Tax-Avoidance

Tax evasion - The use of unlawful means to hide income or information from the
IRS or other tax authorities to evade tax assessment or payment is known as tax
evasion, which is a type of tax fraud.
Tax-Avoidance - Contrarily, tax avoidance refers to the employment of lawful
strategies to lower taxable income or the amount of tax due. Common strategies
include investing in tax-advantaged accounts like 401(k)s and IRAs, as well as
claiming allowable tax deductions and credits.