Tax evasion is usually thought as an act where a person intentionally chooses to not pay taxes due. This action of not paying taxes may be done by simply choosing to not report an income tax return, or choosing to not include information about taxable income within the filed return. In all instances, tax evasion could be regarded to be fraud, and often carries stiff penalties. Illegally avoiding paying taxes, failing to report, or reporting inaccurately are good examples of tax evasion. The federal government imposes strict and serious penalties for tax evasion. Tax evasion is different from tax avoidance, which is actually using legitimate techniques to reduce a tax burden.Tax evasion is a crime in almost all civilized world and subjects the responsible party to fines and/or imprisonment – within China the punishment can be as severe as the death penalty. Within Switzerland, many acts that could add up to criminal tax evasion in other countries are handled as civil issues. Even dishonestly misreporting income in a tax return is not necessarily regarded as a crime. Such matters are dealt with in the Swiss tax courts, not the criminal courts. However, even within Switzerland, a number of fraudulent tax actions is criminal, for instance, planned falsification of data.In America, tax evasion is really a criminal offense that could bring about huge monetary fines, imprisonment, or both. Section 7201 of the Internal Revenue Code says, “Any person who willfully tries in any way to avert or defeat any tax enforced by this title or even the payment thereof shall, besides other fees and penalties supplied by law, be responsible for a felony and, upon conviction thereof, shall be penalized not more than $100,000 ($500,000 when it comes to a firm), or imprisoned not more than five years, or both, together with the costs of prosecution.” Evidence of the offense requires first proving the attendant circumstance that the unpaid tax liability exists. Second, the prosecution must prove some affirmative act by the defendant to evade or attempt to evade a tax. Third, prosecutors must show that the accused possessed the particular intention to avert a known legal responsibility to pay. To convict, the court has to find the defendant accountable for each of these elements over and above a reasonable doubt.From the bank’s perspective, tax evasion thus increases information asymmetry among borrowers and lenders and ultimately reduces access and increases financing expenses for firms. Yet there could be a countervailing effect. Within countries with more effective financial institutions, the presence of collateral may be less important for the lenders because the information gap between creditor and borrower is smaller and because the creditors could keep track of the firms more effectively. Debtors have thus less of a motivation to ensure totally transparent book keeping.Tax avoidance and tax evasion threaten government income. The US Senate estimates income deficits from tax evasion by U.S.-based firms and individuals at close to 100 billion dollars annually. In lots of other countries, the sums run into vast amounts of euros. This implies fewer sources for infrastructure and services such as education and health, lowering standards of living in both developed as well as developing economies.