What is Tax Evasion? (Vic)
Tax is widely understood to be a financial responsibility that is imposed by the government on an individual or company’s earnings, in order to contribute to funding government spending. The importance of regulating an individual’s financial responsibility to pay tax has been subject to various legislative developments as it is perceived by many to be the most significant contribution to various public expenditures. As society has developed over time, the laws and regulations relating to taxation have also developed to ensure individuals maintain their financial responsibility to pay tax. Quite often, many individuals who obtain employment within Australia, fail to declare their earnings to the Australian Taxation Office, and there are regular reports of individuals being offered a ‘cash in hand’ job and decide not to report their earnings, in an attempt to avoid having to pay income tax. This article deals with the criminal offence of tax evasion.
In accordance with section 61 of the Victorian Taxation Administration Act 1997, a person must not, by a deliberate act or omission, evade or attempt to evade tax. For a person to be found guilty of this offence, the prosecution must prove beyond all reasonable doubt each legal element of each offence.
Elements of the offence of tax evasion
The elements of the charge are as follows:
- Element One: That the accused evaded or attempted to evade paying tax, and
- Element Two: That they did so by a deliberate act or omission.
In relation to element one, there is no legal definition for tax evasion in the Taxation Administration Act 1997. However, the courts have applied the ordinary meaning of the meaning of ‘evade’. Put simply, to evade paying tax means to avoid an act that involves paying tax.
In relation to element two, it is not sufficient that the prosecution prove that the accused was careless in their act or omission, but rather to satisfy the second element, prosecution must establish that they evaded tax by a deliberate act or omission.
In Victoria, the maximum penalty for tax evasion is a fine of 1,000 penalty units ($165,220.00) in the case of a body corporate. In any other case, the court may impose a maximum of 200 penalty units ($33,044.00) or imprisonment for two years, or both.
Defences to tax evasion
In the event that a person has been charged with tax evasion, it is very important to consider the facts of the case and whether each legal element of each offence is proven beyond a reasonable doubt. Most commonly, defences raised to the charge of tax evasion are:
- Lack of intent – the accused did not deliberately avoid or attempt to avoid paying tax. One of the ways in which this defence can be applied is by establishing that they were merely careless in completing their income tax return.
- Factual dispute – the accused disputes the facts alleged in the prosecution case.
Before determining which defence is applicable, one should ask themselves the following questions:
- Did I avoid paying tax?
- Did I avoid paying tax deliberately?
- Did I knowingly fail to pay tax?
- Do I have a defence?
- Have I spoken to a lawyer about this?
Where will the case be heard?
A case involving tax evasion is usually dealt with in the Magistrates’ Court, however in certain circumstances and depending on the amount of tax evasion alleged, the case may be dealt with in a higher court.
What to do next
Understandably, when a person is faced with possible charges involving tax evasion, they may not be in the state of mind to think clearly and often act on impulse which can cause further complications defending the allegations. This is why it is extremely important that you do not speak to the police or to the prosecution before seeking legal advice and adequate representation.
If you require legal advice or representation in any legal matter please contact Armstrong Legal.