The use of legally permissible means to reduce tax liabilities is known as tax?

Step 1: Analyze the question The key phrase is "legally permissible means to reduce tax liabilities." We need the term that describes lawfully minimizing the tax you owe.

Step 2: Explain the concepts

• Tax evasion: Illegal. It involves deliberately hiding income or giving false information to pay less tax (e.g., not declaring profits). It is punishable by law.
• Tax avoidance: Legal. It means using the loopholes, allowances and provisions in tax law to arrange your affairs so that you pay less tax.
• Tax relief: A reduction in the amount of tax payable granted by government to certain people or situations (e.g., relief for dependants or for pension contributions). It is a specific benefit, not the general act of using lawful means to reduce liability.
• Tax exemption: Complete freedom from paying tax on certain persons, incomes or goods (e.g., income of charities or diplomats).

Step 3: Match to the question

• The question asks about the use of legally permissible means, which describes an action taken by the taxpayer within the law.
• Evasion is ruled out because it is illegal.
• Relief and exemption are benefits granted by the government, not the taxpayer's strategy of reducing liability.
• Avoidance fits exactly.

Answer: B. Avoidance

Tip: Remember the pair: Evasion = Escape illegally (the "E" and "illegal" go together), while Avoidance = Allowed by law (both start with "A"). In JAMB, whenever you see "legal means to reduce tax," think avoidance; whenever you see "illegal" or "concealing income," think evasion.