Corporations hold trillions of US dollars hidden in tax havens. The most shocking tax evasion statistics show, such strategies cost governments worldwide billions of dollars. While plenty of countries struggle with this issue, the United States suffers the most.
Most Americans pay their taxes on time and believe this is their civic duty. Still, the country loses nearly $190 billion per year due to underreporting and underpayment of taxes. Both individuals and corporations play their role in this situation, which damages the economy and results in budget cuts.
Scroll down to learn how much money the EU countries are losing to tax evasion. Discover how the IRS handles such cases in the US and what can trigger an audit by the authority.
Tax Evasion Statistics (Editor’s Choice)
- The USA loses nearly $190 billion to tax evasion every year.
- The annual cost of tax evasion in European countries is over €823 billion.
- Switzerland is a haven for about $2.3 trillion of foreign personal wealth.
- The world’s wealthiest keep $21-$32 trillion of personal assets in offshore tax havens.
- More than 80% of US taxpayers report and pay taxes on time.
- Over 68% of tax offenders in the USA are men.
- American corporations underreport approximately $41 billion per year.
Global Tax Evasion Statistics
1. The United States loses the most money to tax evasion.
Data by Statista shows that the US loses about $188.8 billion a year in tax evasion. China and Japan record annual losses of about $66.8 billion and $46.9 billion, respectively. Meaning, even combined, they don’t come anywhere near the American tax avoidance losses. The cost of tax evasion in India, Australia, and South Korea is $41.2 billion, $6.1 billion, and $1.1 billion, respectively.
2. Tax evasion costs the EU countries €823.5 billion a year.
In the period between 2009 and 2015, tax avoidance in the EU dropped by 12-16%. Still, the total amount lost in unpaid taxes is stunning. Tax evasion statistics by country show that Italy had the most severe problem with tax avoidance costs of €190.0 billion.
Germany and France follow with €125.1 billion and €117.9 billion lost to tax avoidance. Other countries with notable tax avoidance amounts were the UK (€87.5bn), Spain (€60bn), Poland (€34.6bn), and Belgium (€30.4).
Luxembourg, Estonia, and Malta, on the other hand, recorded the lowest tax evasion amounts. The money lost to people and corporations not paying taxes in these countries totaled €1.6 billion, €1.4 billion, and €0.9 billion, according to national and global tax evasion statistics.
3. Tax evasion is responsible for about £5.3 billion of the British tax gap.
In the fiscal year 2018, the UK saw a total of 3,809 tax evasion cases and 40,695 people called the tax evasion hotline. In 2017-2018, the amount lost to not paying taxes amounted to £37 billion. According to the UK tax fraud statistics, tax evasion has been on the rise in the country. Namely, in 2015-2016, there were only 2,972 tax evasion cases recorded.
4. Nearly half of British people wouldn’t report a family member for tax evasion.
About 43% said they wouldn’t report tax avoidance by a family member. About 35% of Brits said that they would report such a crime and 18% didn’t know how they would react. Males are more likely (47%) to hide tax evasion compared to females (40%).
5. Switzerland, Hong Kong, and Singapore are the leading offshore destinations for personal wealth.
Their private wealth amounts from abroad in 2019 were $2.3 trillion, $1.3 trillion, and $1 trillion, according to tax evasion statistics. It’s interesting that the US is number 4 considering that most of its corporations hold billions offshore. In any case, the country’s private wealth value from abroad was $800 billion in 2019. Other notable mentions here include the Channel Islands ($500bn), the UAE ($500bn), and Luxembourg ($300bn).
6. Wealthy individuals hide between $21-$32 trillion of personal capital offshore.
Tax Justice’s corporate tax evasion statistics suggest that governments worldwide lose about $189 billion per year due to such offshore personal wealth. Approximately 8% of household wealth worldwide is safe and sound in tax havens. About 75% of such capital is unrecorded. Profit shifting by international companies meanwhile costs around $500 billion a year. Developing countries suffer the most from this.
Tax Evasion in the USA
7. In 2019, nearly 500 cases handled by the US Sentencing Commission were associated with tax fraud.
Out of 76,538 reported cases, a total of 494 were tax fraud offenses, according to tax fraud statistics. Meaning, less than 1% (0.6%) of the cases of the Sentencing Commission were related to this issue. There has been a positive trend in the number of tax fraud offenses. In 2015, there were a total of 660 cases, which was the highest number in the 2015-2019 period. Since 2015, the number of tax fraud offenses has dropped by 25.2%.
8. More than two-thirds of Americans believe every citizen must pay taxes.
About 68% of participants agree entirely that it’s every American’s responsibility to pay their share to the country. 27% mostly agree, while 3% and 2% mostly disagree and strongly disagree. Over 90% believe that everyone who evades paying taxes should be held accountable.
9. American companies hold billions of US dollars offshore through subsidiaries in tax havens.
US tax evasion statistics show that Apple led the way with its $181.1 billion held offshore in three subsidiaries back in 2014. No other company came near this amount, but Microsoft was the only other enterprise with over $100 billion overseas. Namely, the tech giant had $108.3 billion outside US soil in five subsidiaries. The top five list was rounded up with IBM ($61.4bn), Cisco ($52.7bn), and Google owner Alphabet ($47.4bn).
10. Twenty Fortune 500 ‘non-disclosing’ companies held over $1 trillion in unrepatriated income.
Corporate tax evasion statistics show that a total of $1.07 billion in unrepatriated income remained outside the United States due to companies keeping their money offshore. Here, Pfizer led the way with its $197 billion, while General Electric followed with 82 billion. International Business Machines was another company with a significant unrepatriated income of $71.40 billion. The list of top 20 companies with substantial unrepatriated income included popular brands like Cisco Systems, Johnson & Johnson, and Coca-Cola.
11. Underreporting is the most common type of tax evasion in the US.
Tax evasion statistics show that about 84% of the cases belong in this category, and the country loses about $386 billion due to underreporting. Here, individuals make the most offenses (68%), while corporate income tax (11%) and employment tax (21%) underreporting account for the remaining losses.
Underpayment and non-filing are the two other common types of tax avoidance, but far less prominent than underreporting. These two represent only 9% and 7%, respectively, of tax evasion in the USA, according to tax fraud statistics. The States lose about $39 billion to underpayment and $32 billion to non-filing.
12. The tax gap due to individual income underreporting in the US is over $250 billion.
A total of $264 billion was lost due to underreporting by Americans. The largest share of $125 billion comes from business income and $64 billion from non-business revenue. Credits and deductions contribute losses of about $40 billion and $18 billion, respectively.
13. While the tax gap amount in the US grows the compliance rate drops.
US tax evasion statistics reveal that in 2006 the gross tax gap was $450 billion. In the period between 2008 and 2010, it increased by $8 billion to $458 billion. A similar trend was seen among the net tax gap, which went from $385 billion to $406 billion. The net compliance rate, in contrast, dropped from 85.5% to 83.7%. These figures show that the share of Americans who evaded paying taxes was slowly increasing.
14. Corporations underreport about $41 billion a year.
This figure represents about 9% of the total tax gap in the US, according to IRS tax evasion statistics. Large corporations whose assets are valued at $10 million or more underreport about $28 billion per year. Small corporations valued less than $10 million underreport about $13 billion, per the. Shifting our focus on the underpayment gap, corporations fail to pay about $3 billion in corporate income tax.
15. Over two-thirds of the offenders are men.
Tax evasion statistics show that in 2019, 68.1% of the offenders were men. White Americans committed the most tax fraud cases, i.e., 48.2%. African Americans, Hispanics, and people from other races were responsible for 32.6%, 13.3%, and 5.9% of tax fraud in the States. Most offenders (93.1%) were US citizens, and their average age was 50 years. Interestingly, 80.2% of the offenders had no or little prior criminal history.
How does tax evasion affect the economy?
Taxpayer money is a country’s fuel. Governments use it to carry out projects that benefit everyone and fund critical sectors like the police. Tax evasion, therefore, results in lower state budgets and, consequently, stagnation. It’s also associated with unfair competition in the business sector.
What is the difference between tax avoidance and tax evasion?
Tax avoidance is legally reducing your taxable income, so you pay the least amount of taxes. Tax evasion is lying and hiding information on tax forms, so you don’t pay taxes. When done right, tax avoidance can be perfectly legal. Tax evasion, however, is not.
What are the methods of tax avoidance?
Making an IRA contribution, taking advantage of tax credits, deducting expenses, and buying a home instead of renting are some options. People also turn to holding capital assets for over a year and appealing to local or county tax authorities.
Each of these is a legal strategy to minimize the amount you must pay in taxes. Inexperienced people, however, can easily make a mistake that can result in a penalty. So, it’s smart to leave this to a professional providing tax and accounting services rather than do it yourself.
How long can you legally go without filing taxes?
Filing taxes is a legal obligation of all Americans, and the IRS doesn’t tolerate people who fail to meet it. There is no accepted period within which you can simply not file your taxes. You must submit your taxes on Tax Day at the latest.
Filing for Federal returns may be done within three years of the original date of the return. Depending on your state, you may still get a penalty for this. There are stories of people who didn’t file their taxes for years. The IRS, however, always discovers such individuals and fines them.
What is low dollar tax fraud?
Low dollar tax fraud is any case involving amounts under $100,000. For example, when married couples file taxes for the head of the households only to get larger refunds than they should. Also, another typical example is people adding children they don’t have for the same purpose.
How does the IRS find evasion?
The IRS uses the latest computer data analysis to match the information provided by individuals and corporations with the details reported on tax filings. The Information Returns Processing System finds errors and prevents bogus refunds. The IRS reportedly uses other strategies too, but these aren’t shared with the public.
If the IRS establishes any wrongdoings, the offender gets an appropriate fine. The penalty for tax fraud in the United States depends on the type and severity of the offense. For instance, the offender may get a tax evasion jail time between one and five years. There are also fines of up to $250,000 for individuals or up to $500,000 for corporate tax evasion cases.
What triggers an IRS audit?
The IRS can perform an audit whenever it deems necessary. In 2017, only 0.6% of individual filings were examined by the authority. Still, some triggers can lead to an investigation. These include overlooking income, earning too much or too little, and computer triggers.
IRS tax evasion statistics show that these are the three most common triggers. A few other things, however, can also make you the target of an audit. Spending and depositing lots of cash, claiming lots of itemized deductions, and being self-employed are some of those. Sometimes, the IRS is even performing audits based on random selection, but that’s rare.
Underreporting, underpaying, and offshore tax havens all contribute towards the significant tax gaps in countries worldwide. Tax evasion statistics show that the US tops the list of economies whose individuals and corporations fail to pay as much taxes as they should.
Evading taxes has serious consequences for any country’s economy and its prosperity. It goes beyond failing to pay small amounts of money to the IRS. Instead, it creates unfair competition among businesses and prevents the government from fulfilling projects for the greater good.