Tax evasion has been a problem for decades, but due to the recent economic crisis, the government is trying to prevent further loss of revenue. Even though the implementation of the foreign account tax compliance act (FATCA) has been able to limit illegal tax evasion to a large extent, the current government concern is legal tax evasion.
Legal tax evasion is carried out by exploiting tax loopholes. It’s common knowledge that many multinationals use loopholes in the tax code to minimize their tax liability, but they can’t be punished because they are not doing anything illegal. The only way to prevent legal tax evasion is to alter the laws that are allowing it to continue.
Changing a few tax rules might not be sufficient to successfully limit tax evasion. A complete overhaul of the tax code would be required to prevent legal tax evasion from happening in the first place. Along with curbing tax evasion, this would also help to simplify the tax code.
Overhauling the tax code is a complex process and will require much time and thought. This would ultimately be necessary, though, in order to minimize legal tax evasion.