Imagine smash and grab person, he or she will be charged for that, but bot for selling that and not taxing that profit. Or small scale drug dealer, he makes money but does not get charged with tax evasion. Same for robbery or embezzlement or anything. Why are tax evasion charges not being added on top of original charges??
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Probably several reasons. 1) Can’t evade taxes until after they’re due so you can’t charge someone right away. 2) Federal tax evasion would be a separate trial, theoretically a state could charge it in the same trial. 3) If the money is seized or they own restitution then there’s no profit to pay taxes on.
1. In the US, VAT/GST does not exist, so gaining ownership of something does not mean that you have to pay tax because of that.
2. In countries with VAT/GST, it is defined as the tax added on top of the value of goods or services provided by the business. This means the business needs to sell the goods and services to you, then you owe the tax. More practically, the business needs to provide an invoice to you that this item has been sold to you, along with the tax incurred. If the item is obtained not via the business selling it to you, then it does not incur VAT/GST.
tax evasion involves taxes, so its a pain in the ass. its generally thought of as not worth pursuing unless youre trying to put someone big away, like Capone. Same way RICO charges are pretty rare
In NC a drug dealer will get charged with tax evasion. There’s a special tax that’s supposed to be paid and if not then the fines and penalties all go to the cops.
because the profit from the crime is taken away. You would be paying tax on income you did not earn.
You can get charged for tax evasion, but that is usually only when they don’t have anything else to get you on (and that is only for past tax years and not the current one). Typically when the federal government is after you and not the state one.
Besides what everyone else has said, the practicality is that you go from a simple drug dealer (i.e. arrested in possession of drugs) which is pretty easy to address to now you have added a complicated tax element on top of it. This makes a.) conviction more difficult and b.) the jury potentially more sympathetic to these being “manufactured charges”.
TL;DR: DAs are not equipped to go after tax evasion and this will prolong trials and reduce the probability of conviction.
There are a couple of reasons.
1) At the federal level, most cases are settled through plea bargains. So the federal government will draw up a long list of charges against a defendant and negotiate with them to plead guilty to a charge or a subset of charges to end the case. So in those cases, tax evasion charges might be brought but dropped as part of the plea bargain.
2) Difficulty to prove tax evasion. In your example of a small scale drug dealer, the big crime is obviously selling the drugs. If there’s a firearm involved, that’s another charge that can be tacked on to the defendant. You can have an informant or an undercover make a purchase from the drug dealer, establishing that they are, in fact, selling illegal drugs. But it’s much more difficult to prove how much that drug dealer was retaining from each sale and not reporting as income. Since it’s a primarily cash business, it’s hard to document how much is getting kicked up to the drug distributor who supplies the dealer and how much the dealer keeps. Or in a smash-and-grab case, again, the theft is the big charge. Proving they generated income from the sales and didn’t report it is much more challenging.
3) Lack of sexiness – Some prosecutors are going to be worried that a jury might grab onto a less “sexy” charge of tax evasion rather than a drug dealing charge to convict the defendant of something, even if it’s not the top count. And a lot of accounting talk (necessary to show that the defendant had income, declared some of it, paid taxes on some of it, and evaded taxes on another portion) is putting the jurors into “my eyes glaze over” territory.
Sometimes it is done. Watch the movie “Molly’s Game”.
They charged her with money laundering and tax evasion on the money. And at the same time seized her money so that she couldn’t pay the tax on the seized money.
But they only do it for big crimes that they charge years later. Mostly because it takes about a year before tax on stolen money is due.
Jurisdiction and the difference between a civil case and a criminal case.
A county cannot prosecute for state level tax evasion, and a state cannot prosecute for federal tax evasion.
In most places, taxes are a civil offense. Civil trials to do not happen the same way or in the same courtroom as criminal trials.
It is a ton more work and effort to figure out and have evidence that the person sold $5,000 and reported nothing in taxes, then it is to say the person was caught selling something illegally and providing evidence.
To prove the amount someone has failed to pay in taxes would require evidence of every transaction. (most criminals do not keep a ledger of their illicit deals)
There’s typically a delay between when income is received and when taxes are owed. For a one time thing, this is usually at least 4 months in the US (taxes for the year are due the following April). For recurring/predictable income, you typically make a payment every quarter, but again with some delay between when the quarter ends and when taxes are due.
So if someone is arrested seconds or hours after a smash-and-grab, how do you prove that they did not *intend* to pay taxes on that income? By the time the taxes are due, they’ve already had the income taken away, and the case may be over anyway.
It’s possible to get large or complex criminal organizations on tax evasion charges, but it requires either that they keep records of income collected years ago (cue Stringer Bell’s admonishment about “taking notes on a criminal conspiracy”) or that you have an investigation that lasts long enough to document that income yourself.
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