Page 46 - Strategic Tax Planning for Global Commerce & Investment

Cross Border Tax Planning Strategies

Tax Evasion

Tax evasion is the general term for efforts by taxpayers to
mitigate taxes by illegal means. What can be defined as legal or
illegal depends on the national laws and varies from
jurisdiction to jurisdiction. In other words, what prove to be
against the law in country A may be perfectly legal in country
B.

In a cross-border scenario, it is difficult to identify a transaction
that is illegal from the international point of view. The OECD
made some efforts to give a definition of tax evasion and,
according to its 1987 report "International Tax Avoidance and
Evasion", the term "tax evasion" means : "An action by the
taxpayer which entails braking the law and which moreover
can be shown to have been taken with the intention of escaping
payment of tax".

Tax Avoidance and Tax Planning

For most jurisdictions the difficulty is not so much to define
"tax evasion" but rather to distinguish between "tax avoidance"
and "tax planning". Pursuant to the principle of freedom to
contract, the point of departure generally is that taxpayers are
free to arrange their affairs as they wish in order to save taxes.
In this respect, on a number of occasions courts in various
jurisdictions have ruled in favor of the taxpayer's attempt to
minimize tax liabilities.

In addition to the principle of freedom to contract, there is a
second principle to be taken into account. Under the principle
of legal certainty, taxpayers should also be able to trust that the

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