It has been seen as a common activity in the world of underground economy. Tax evasion is an activity where individuals and businesses avoid paying taxes by hiding their activities and income from government agencies. The underground economy is difficult to measure, making it challenging to estimate the amount of tax revenue lost due to tax evasion. Tax evasion can take many forms, including failing to report income, claiming false deductions, and hiding assets in offshore accounts.Â
As we can see in the chart, United States of America has the highest rate for tax loss, losing nearly almost $350 billion. Tax evasion can be deliberate or inadvertent and is distinct from tax avoidance. Deliberate evasion occurs when individuals do not report income or do not pay taxes, while unintentional mistakes made in filing tax returns can also give rise to inadvertent tax evasion.Â
MONEY LAUNDRING
As we can see in the chart, United States of America has the highest rate for tax loss, losing nearly almost $350 billion. Tax evasion can be deliberate or inadvertent and is distinct from tax avoidance. Deliberate evasion occurs when individuals do not report income or do not pay taxes, while unintentional mistakes made in filing tax returns can also give rise to inadvertent tax evasion.Â
The process of laundering money typically involves three steps: placement, layering, and integration. Placement surreptitiously injects the "dirty money" into the legitimate financial system, layering conceals the source of the funds through a series into the legitimate financial system layering conceals the source of the funds through a series of transactions and bookkeeping tricks, and integration combines the laundered funds with legitimate funds. There are several red flags to look out for that may point to money laundering, including suspicious or secretive behavior by an individual around financial transactions.
An example of a real life situation of money laundering are :
1. Using a legitimate, cash-based business owned by a criminal organization: For example, if the organization owns a restaurant, it might inflate the daily cash receipts to funnel illegal cash through the restaurant and into the restaurant's bank account
2. Real estate laundering: Someone could purchase a piece of real estate property with cash, and quickly sell it. Any profits made would be associated with the sale and are completely legal.
3. Trade-based laundering: This typically involves altering invoices or business documents in order to disguise dirty money as business profits. Because the money has a paper trail, the bank does not suspect the profits as "dirty"Â
Note that these examples are not exhaustive, and money laundering methods vary endlessly.
