Intent is the big differentiator. In most jurisdictions, tax evasion is fraud. Fraud gets you in jail. Say you siphon off $1m by doing a deal somewhere, and you

Intent is the big differentiator. In most jurisdictions, tax evasion is fraud. Fraud gets you in jail. Say you siphon off $1m by doing a deal somewhere, and you don't declare taxes on it. That's evasion. Avoidance is making sure the proceeds of that deal, for example, end up in a foreign corporate entity with a lower tax rate, while not breaking any laws. Even if you end up paying (close to) nothing, the first will (possibly) land you in jail, the second won't. The intent to defraud the government is very clear and easy to prove in the first example. In the second, you didn't actually break any laws, and even if the avoidance mechanism wouldn't hold up in court, you didn't actually defraud anyone -> you pay the normal tax rate / maybe some small penalty and some interest / you won't end up in jail. tldr: don't break the law.. but you can have creative interpretations.