One of the central problems of taxation is the problem of the distinction between legal tax planning and tax evasion. By all means, the entrepreneurs as well as the owners of the companies want to find the legal ways to decrease their taxes and lose less money, some of them undertake even illegal actions. Unfortunately, there is no definition of the thin border line between permitted tax optimization and illegal tax evasion. The complicacy of tax law combined with the changing realities of the business management lead to the situation when all the businessmen try to find the possibilities not to pay the whole percent of taxes.

International measures

The pumping up of the budget of the country depends on the taxes paid by the business, so the problems of tax fraud and tax evasion become of crucial importance. That is why the head of the biggest countries gathered together and started the fight against off-shores and popular methods of tax evasion in the international business. Their toolkit consists of the following documents:

1. Law on controlled international companies.
2. Law about transfer pricing.
3. The requirement of public access to the data on beneficiary owners.
4. International cooperation aimed at the introduction of the standards of the fight with the dilution of the taxable base and tax evasion (e.g. BEPS plan, OECD).
5. The agreements and conventions on tax data sharing between the countries.
6. Step by step elimination of the notion of the “bank secret”.
7. The creation of the list of off-shore zones and discrimination sanctions applied to them.
8. The creation of a negative image of the off-shores. Treating them as such who support terrorism and fraud.

GAAR

General Anti-Avoidance Rules (GAAR) become more and more popular tool against tax evasion. This is a general concept of sanctions against those who don’t want to pay taxes. GAAR give tax authorities the tools to fight against the illegal schemes of tax minimization. The first attempts of GAAR implementation were introduced at the beginning of the 20^th century. First, they were made in Australia (in 1915) and then in Holland, France, Germany, Canada, etc.

The main characteristic elements of GAAR are:

1. The systematization of legal norms and leading cases, which define the notions of “tax evasion” and “tax rules abuse’.
2. The implementation of the legal mechanisms of verification of the content of the business schemes.
3. The description of the features of the deals and transactions which formally don’t contradict the law and which have baseless tax concessions as a side effect.
4. The creation of legal penalties for the usage of the schemes that lead to tax evasion.

The rules of GAAR implementations may be indicated in the legal basis of the country, as well as in the international agreements on tax regulation.