PA & E - 1 TAX PLANNING, TAX EVASION AND TAX AVOIDANCE...

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1 TAX PLANNING, TAX EVASION AND TAX AVOIDANCE 1. Planning, Evasion, Avoidance Model 2. Tax Planning (a) Tax Planning is Legal (b) Tax Planning Tactics (c) Implementing a Tax Planning Strategy (d) Objectives of a Tax Planning Strategy (i) Tax Reduction (ii) Tax Deferral (iii) To Play the Game 3. Tax Evasion 4. Tax Avoidance 5. Aggressive Tax Avoidance 6. Implementing a Tax-Efficient Strategy 7. CRA Objectives 8. Transactions Viewed With Concern by the CRA 9. CRA and Finance Initiatives 1. Planning, Evasion and Avoidance Model Duke of Westminster dictum 2. Tax Planning (a) Tax Planning is Legal It is a well established principle that tax planning is the legal arranging of one’s affairs so as to pay the least amount of total tax. (b) Tax Planning Tactics The following list itemizes the principal tactics that could be employed in designing a tax planning strategy: splitting income between or among individuals and/or time periods; taking advantage of all possible deductions and/or credits , especially those that cannot be carried forward; converting personal expenditures to deductible business expenses; purchasing tax deferral investments and/or tax shelters; moving to a tax haven ; altering the source of income to one allowing more deductions; accelerating deductions ; delaying the receipt of discretionary income ; and utilizing available losses .
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2 (c) Implementing a Tax Planning Strategy In order to implement a tax planning strategy, taxpayers must have: sufficient time to establish and carry out the plan; a thorough knowledge of the Act and current departmental assessing procedures; a “clean” record with the Agency; a type of income not readily susceptible to a tax audit ; adequate cash flow to meet both personal and planning needs, as a number of planning tactics necessitate the investment of upfront cash or a delay in receiving taxable income; and relatively few players involved in the arrangements , as the conflicting objectives of numerous participants may prevent the design of an optimal strategy for each taxpayer. (d) Objectives of a Tax Planning Strategy The first step in designing a tax planning strategy is determining the objective(s) of the taxpayer(s). Generally these are some combination of: tax reduction, tax deferral, and/or playing the game. (i) Tax Reduction Of paramount concern to the tax conscious investor is the reduction or elimination of current or future taxes payable . For example, by deducting all or a portion of the cost or associated expenditures of a tax shelter against other income, thus creating a tax deductible loss, taxes currently payable are reduced. Another version of a reduction strategy is
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This note was uploaded on 02/19/2012 for the course ACCT 4454 taught by Professor Barry during the Spring '12 term at Saint Mary's University Texas.

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PA & E - 1 TAX PLANNING, TAX EVASION AND TAX AVOIDANCE...

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