Tax Fraud and Investigation
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Questions and Answers

What is the main difference between tax evasion and tax avoidance?

  • Tax evasion is a criminal offense, while tax avoidance is a civil offense
  • Tax evasion is the intentional omission to pay taxes, while tax avoidance is the exploitation of legal loopholes (correct)
  • Tax evasion is lawful while tax avoidance is unlawful
  • Tax evasion is an attempt to minimize tax liability by lawful means

    • What is the key element in establishing tax fraud?

  • Carelessness on the part of the taxpayer
  • Negligence in filing tax returns
  • Actual evil motive or intent to evade taxes (correct)
  • Lack of knowledge of tax laws

    • What is the primary goal of a tax fraud investigation?

  • To impose penalties on the taxpayer
  • To recover taxes owed to the government
  • To educate the taxpayer on tax laws
  • To establish the intent to evade taxes (correct)

    • What is the distinction between fraud and negligence in tax cases?

    <p>Fraud is intentional, while negligence is unintentional</p> Signup and view all the answers

    What is the purpose of classifying evidence in a tax fraud case?

    <p>To prioritize the evidence based on relevance</p> Signup and view all the answers

    What is the penalty for tax evasion?

    <p>Fine of not less than five hundred thousand pesos (P500,000) but not more than ten million pesos (P10,000,000) and imprisonment of not less than six (6) years but not more than ten (10) years</p> Signup and view all the answers

    What is the main purpose of ghost companies?

    <p>To issue fraudulent receipts and invoices for the purpose of tax evasion</p> Signup and view all the answers

    What is the purpose of the Run After Fake Transactions (RAFT)?

    <p>To conduct audit and enforcement activities against taxpayers claiming fake transactions</p> Signup and view all the answers

    What is an example of tax evasion?

    <p>Understatement of income done intentionally</p> Signup and view all the answers

    What is the purpose of fictitious receipts/invoices?

    <p>To claim false deductions and reduce income tax and VAT liabilities</p> Signup and view all the answers

    Study Notes

    Tax Fraud and Tax Evasion

    • Tax fraud: an intentional act to evade taxes, with an actual evil motive or intent to evade taxes legally due to the government.
    • Negligence: an omission or act that a reasonable person would not do, or not doing something a reasonable person would do.
    • Fraud: a generic term for deceit, deception, or trickery to induce someone to surrender something of value.

    Distinction between Tax Evasion and Tax Avoidance

    • Tax evasion: the elimination or reduction of tax liability by fraudulent means, criminally punishable with a fine of not less than P500,000 and imprisonment of not less than 6 years.
    • Tax avoidance: an attempt to minimize tax liability by lawful means, not criminally punishable.

    Examples of Tax Evasion

    • Omitting to report income
    • Understatement of income done intentionally
    • Overstatement of deductions done improperly and intentionally
    • Issuance of fictitious receipts/invoices to claim false deductions/expenses and input VAT
    • Claiming false personal exemptions

    Ghost Companies and RAFT

    • Ghost companies: fake companies issuing fraudulent receipts/invoices for clients to claim false deductions.
    • RAFT (Run After Fake Transactions): a national task force created by the BIR to stop the selling of fake receipts and/or invoices and conduct audit and enforcement activities against taxpayers claiming fake transactions.

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    Description

    Learn about the principles of tax fraud, identification of sources, and stages of fraud investigation. Understand the standard of proof required in criminal and civil cases.

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