The literature's theoretical models are elegant in their effort to identify the variables likely to affect non-compliance.
Alternative specifications, however, yield conflicting results concerning both the signs and magnitudes of variables believed to affect tax evasion.
Tax evasion is a crime in almost all developed countries, and the guilty party is liable to fines and/or imprisonment.
In Switzerland, many acts that would amount to criminal tax evasion in other countries are treated as civil matters.
The US has no broad-based consumption tax at the federal level, and no state currently collects VAT; the overwhelming majority of states instead collect sales taxes.
Canada uses both a VAT at the federal level (the Goods and Services Tax) and sales taxes at the provincial level; some provinces have a single tax combining both forms.Empirical work is required to resolve the theoretical ambiguities.Income tax evasion appears to be positively influenced by the tax rate, the unemployment rate, the level of income and dissatisfaction with government. concluded based on random stratified audits and leaked data that occurrence of tax evasion rises sharply as amount of wealth rises and that the very richest are about 10 times more likely than average people to engage in tax evasion.When there is ad valorem import duty, the tax base can be reduced through underinvoicing. Smuggling is resorted to for total evasion of customs duties, as well as for the importation of contraband.Misdeclaration of quantity is more relevant for products with specific duty. A smuggler does not have to pay any customs duty since smuggled products are not routed through customs-tax compliant customs ports, and are therefore not subjected to declaration and, by extension, to the payment of duties and taxes.During the second half of the 20th century, value-added tax (VAT) emerged as a modern form of consumption tax throughout the world, with the notable exception of the United States.Producers who collect VAT from consumers may evade tax by under-reporting the amount of sales.In Switzerland, however, some tax misconduct (such as the deliberate falsification of records) is criminal.Moreover, civil tax transgressions may give rise to penalties.This means that consumers who purchase something in a lower-taxed or untaxed jurisdiction with the intention of avoiding VAT or sales tax in their home jurisdiction are technically breaking the law in most cases.This is especially prevalent in federal countries like the US and Canada where sub-national jurisdictions charge varying rates of VAT or sales tax.