Tax Evasion

What sets evasion apart is intent and concealment. Typical methods include leaving sales out of the books, claiming false expenses, keeping income in undeclared foreign accounts, using sham invoices and paying staff in cash. Penalties usually combine the unpaid tax, interest, fines and, for serious cases, prison. Many countries treat serious tax crime as a predicate offence for money laundering, which means that the proceeds can be pursued as criminal property and that banks must report suspicion. The FATF added tax crimes to its list of designated offences in 2012. Some laws also punish those who help, such as advisers or banks that facilitate the scheme, and a few penalise a company that fails to prevent its staff from facilitating evasion. Banks look for large cash deposits, inconsistent income and offshore links. Evasion links tax enforcement to financial crime controls and drains public revenue.

A restaurant owner reports only the card sales and keeps the cash takings off the books. Over several years he moves the cash to an account abroad. A bank notices repeated deposits that exceed his declared income, files a suspicious report, and the tax authority opens an investigation.