Re: Audit penalties?
Traditionally* the distinction between avoidance and evasion was that the former involved embracing the law in all its glory in order to find a legitimate path through the tax maze which didn't involve parting with cash, while the latter was about sidestepping the maze altogether and just not letting the authorities know about your income/profits.
So an avoidance scheme would involve declaring all your income, transactions etc, then explaining in painful detail why the law as written didn't tax it. Evasion would involve hiding income or transactions by booking them into secret accounts or not declaring cash takings. Also the former tends to be a civil offence, the latter criminal - so, corporations can afford the former in both financial (they can pay for the advice) and reputational (well, civil is better than criminal at least) terms. Evasion is cheaper provided you don't get caught and there's a mass of academic literature on why people think they won't get caught.
So, if following an audit the courts ruled/taxpayer and authority agreed that the law fell in the authorities' favour it wouldn't be evasion if the company had been up front about why it thought the income wasn't taxable. And if the "interpretation" had been made carelessly, negligently or fraudulently then yes, there'd be a penalty on top of the interest due, whoever the taxpayer is. (I think the UK is up to about 22,000 pages of tax law this year; plenty of room for ambiguity in there)
*Politicians tend to conflate avoidance and evasion, which muddies the waters. It doesn't help that the terms don't translate out of English either; conversations in Brussels have to be handled carefully. From a tax policy perspective though, it's very unhelpful - the tools you need to tackle avoidance are completely different from those needed to tackle evasion; one is about drafting your laws so there aren't loopholes, the other is about getting taxpayers to engage with the law in the first place.
Biting the hand that feeds IT
