Tax Evasion is the practice of using fraudulent means to pay lower taxes or to avoid paying any tax at all. This is a criminal act and attracts sanctions from the Tax Authority and/or the courts.
Example: Using two receipt books to record transactions, with one reflecting the actual transactions (not rendered for tax purposes) and another showing lower transactions for tax reporting purposes.
(2 marks)

Tax Avoidance, on the other hand, is the practice of using legal loopholes in the tax laws to legitimately reduce tax liability. This is not illegal.
Example: Selling chargeable assets and using the proceeds to acquire a replacement asset within a year, which exempts the transaction from capital gains tax.
(2 marks)

(1 mark for examples)