Jewish Law Logo Jewish Law - Commentary/Opinion
Paying Taxes: Time To Stop The Evasion
Eli Clark Esq.


Eli Clark Esq.

A woman in Toronto recently told me a story: she had gone shopping for children's clothes in a "basement boutique." Before making her purchase, she repeatedly asked the saleswoman if the price included sales tax. "Yes, it does," she was told. Still suspicious, she asked the saleswoman for a receipt. "Oh, if you want a receipt, then I'll have to charge you more," the saleswoman replied. As it happens, sales receipts do not generally cost extra in Canada. But printing a receipt does create a record of the sale, a record that could come to the attention of local tax authorities. Also as it happens, both of the people in the story were Orthodox Jews.

In communities all over the world there is an attitude among some Orthodox Jews that not paying taxes -- whether sales tax or income tax -- is acceptable. The phenomenon takes many forms: merchants who do not charge sales tax, customers who agree to pay cash for goods or services, individuals who understate their income on their income tax returns. Even many people who would not personally cheat the tax authorities seem most tolerant of those who do -- they make no criticism of such behavior among their friends, relatives and neighbors and, in many cases, willingly patronize businesses which flout the tax laws. Nor does one hear loud condemnation of this problem from the leadership of our community.

Yet, cheating on taxes violates Halacha, violates secular law and creates a prodigious chillul Hashem (desecration of God's name). Those who do not cheat but make it possible for others to evade tax violate the prohibition of lifnei iver (enabling another to sin).

Dina de-Malchuta Dina

The Halacha is explicit and unequivocal: one is absolutely obligated to pay taxes imposed by the government. The obligation stems from the famous statement of Shmuel, "Dina de-malchuta dina," literally, the law of the land is the law1. This halachic principle does not mean that Jews have to follow secular law (the "law of the land"); it means that Halacha incorporates the law of the land in which Jews live. In other words, where dina de-malchuta dina applies, a requirement of secular law becomes a halachic obligation as well2.

Obviously, this principle has limits. According to many Rishonim (medieval authorities), the rule of dina de-malchuta dina applies only to matters in which the government has a financial interest, such as taxes and currency regulations3. Other Rishonim take the position that dina de-malchuta dina applies more broadly, including any matter of civil law which is the subject of a specific governmental rule, provided the rule applies to all citizens equally and the rule is enforced by the government. Though different opinions exist regarding the precise scope of this principle, all Rishonim agree that dina de-malchuta dina applies to laws of taxation.

The consensus regarding taxes derives from a discussion in Bava Kama 113a. The Gemara quotes a braita relating a dispute whether it is forbidden to evade a tax. This prompts the Gemara to ask: How can it be permitted to evade a tax? Did Shmuel not state that dina de-malchuta dina? The Gemara provides two answers: tax evasion is permitted where the tax collector is authorized to collect any sum he wishes or, according to a different opinion, where the tax collector is self-appointed and does not represent the king. However, in the absence of either of these factors, tax evasion is prohibited on the basis of dina de-malchuta dina.

Stealing from the Government

Thus, the Gemara establishes that evading a fixed tax collected by a government tax collector is prohibited by Halacha. The Rambam formulates this rule in his Mishneh Torah (Hilchot Gezelah ve-Avedah 5:11), where he explains that tax evasion constitutes stealing from the king. He adds (ibid. 5:18) that this rule applies only to a king whose currency is accepted throughout the territory, which reflects that the citizens have consented to his rule and accepted that he is sovereign over them. This requirement, which is codified in the Shulchan Aruch (Choshen Mishpat 369:6), assuredly is satisfied by the government of the United States or any other democratically elected government.4 In the case of a gentile tax collector, some authorities suggest that indirect tax evasion may be permitted.5 This position is based on the statement of the Gemara (Bava Kama 113b) that it is forbidden to steal outright from a gentile, but indirect theft (for example, failing to repay a loan) is permitted. However, where such indirect theft could result in chillul Hashem, it is unanimously prohibited. Moreover, one is forbidden from cheating a gentile tax collector who is honest 6or acting solely as the king's agent.7

In contemporary times, poskim (decisors) have also taken a clear position on the issue. For instance, R. Moshe Feinstein writes to a person who engaged in tax evasion that it is "vadai (certain)" that he must repent for his actions and never do so again.8 The context suggests that the individual's tax evasion occurred in the United States.

Tax Evasion: A Federal Crime

In short, the Halacha is very clear that secular law is binding on matters of taxation. What does secular law say? Under federal law, deliberate tax evasion is a felony. U.S. law prohibits tax evasion in any manner, including, for example, the deliberate filing of a false tax return. An individual convicted of tax evasion can be sentenced to prison for up to five years and fines, in some cases, of up to $250,000 (or, if greater, twice the amount of the illegal gain). Many know that the only crime of which the notorious Chicago gangster, Al Capone, was convicted was tax evasion, for which he was sent to prison. But imprisonment is not limited to gangsters. In October 1996, for instance, one Milton Gottesman was sentenced to twelve months in prison for deliberately failing to file an income tax return for five years.

To prove that tax evasion is deliberate, the Internal Revenue Service may use circumstantial evidence, such as failing to report large amounts of income or avoiding the usual kinds of transactional records. In some cases, the Internal Revenue Service has proven that a charitable deduction was fictitious or inflated. It is also common to bring evidence that an individual is spending money that he must have earned but did not report. Technically, no amount of tax evasion is too small to be convicted of tax evasion. Nevertheless, the Internal Revenue Service has adopted guidelines which limit criminal charges to taxpayers who deliberately avoid paying at least $2,500 per year in taxes. In addition to criminal penalties, failure to file a tax return or pay a tax may result in civil fines, which can range up to 150% of the amount of taxes not paid. An additional penalty of 20-40% may also be imposed.

Sales tax is collected by the states, not the federal government, and each state punishes tax evasion differently. In New York, for example, failure to file a return or pay any tax is punished with a fine of up to 30% or, where the failure is deliberate, 50%. In addition, the deliberate failure to file a return or collect sales tax is a criminal misdemeanor in New York.

Lifnei Iver and Criminal Complicity

Because tax evasion is a violation of Halacha, it is likewise forbidden for a Jew to enable another Jew to evade tax. This prohibition derives from the Torah's command (Vayikra 19:14), "Lifnei iver lo titen michshol," do not put a stumbling block before a blind person. The Gemara (Pesachim 22a) explains that this rule prohibits extending a cup of wine to a Nazir (who is forbidden to drink wine) or the limb of a live animal to a non-Jew (who is forbidden to eat such a limb). However, the Gemara (Avodah Zarah 6b) also limits the prohibition regarding providing wine to a Nazir to a case of "trei ibrei de-nahara," two sides of the river, i.e., where a river separates the Nazir from the wine he wishes to drink. In other words, one violates the prohibition of lifnei iver only when the Nazir or other prospective sinner is unable to commit a particular sin without one's assistance. Yet, where others are available to assist a person in committing the sin, one who provides such assistance would not transgress the Biblical commandment of "lifnei iver," though one would, according to most authorities, violate a rabbinic prohibition against "mesaye'a yedei ovrei averah," assisting the committers of sins.9

If one makes a purchase from a Jewish merchant who does not collect and pay sales tax, one has enabled the merchant to violate the law which, under the principle of dina de-malchuta dina, constitutes a violation of Halacha as well. Indeed, this case clearly resembles the one addressed in the Gemara (Bava Metzi'a 75b), which states that every individual who facilitates a loan transaction involving the payment or collection of interest is guilty of lifnei iver, including the witnesses to the loan and the scribe who draws up the loan document. So too in the case of the person who patronizes a tax-evading merchant, the shopper's payment for the purchase enables the merchant to violate the Halacha.

As we have mentioned, whether such facilitation constitutes a Torah transgression or a rabbinic one depends on whether the merchant would be able to commit the sin of tax evasion without one's assistance. How does this rule apply to purchasing from a merchant who evades sales taxes? Two possibilities present themselves. It is possible that the willingness of other customers to patronize a particular merchant may reduce one's own purchases to a violation of the rabbinic prohibition rather than the Biblical one. On the other hand, the Halacha may deem each individual customer to be violating the Biblical prohibition, because each separate sales transaction that goes unreported to the tax authorities may represent a separate transgression on the part of the merchant. According to R. Herschel Schachter, R. Joseph B. Soloveitchik z.t.l. stated that patronizing a Jewish merchant who cheats on his taxes violates the Biblical prohibition of lifnei iver.

Secular law also prohibits complicity in tax evasion. Aiding or abetting the criminal evasion of tax is treated in U.S. law as equivalent to tax evasion. Similarly, the United States Criminal Code classifies conspiracy to defraud the United States as a felony.

Moral Issues

In addition to arguments rooted in Jewish and secular law, paying taxes represents a moral obligation. The Torah (Shemot 19:6) commands us to be a mamlechet kohanim ve-goy kadosh, a kingdom of priests and a holy nation. This mandate requires avoiding any kind of dishonesty, certainly financial dishonesty. The Torah (Devarim 25:16) tells us that maintaining false weights and measures is a to'evah, an abomination. As the Sefer ha-Chinuch (no. 259) writes: "The rationale for the mitzvah of honesty and distancing oneself from theft and deceit among human beings is known by every person of intelligence." Indeed, according to R. S. R. Hirsch (Commentary to Bereshit 6:11), the sin of chamas for which the generation of the flood were destroyed was "underhand dealing by cunning, astute dishonesty."

Finally, there is the issue of chillul Hashem. The Torah (Vayikra 22:32) explicitly prohibits desecrating the name of God, and the Halacha states that dishonesty in business constitutes a chillul Hashem.10 In fact, theft from a gentile is actually worse than theft from a Jew because it causes a chillul Hashem.11 The Talmud Yerushalmi (Bava Kama 4:3) recounts that Rabban Gamliel prohibited stealing from a gentile specifically because of chillul Hashem. Similarly, according to Tosafot, there is no dispute that robbing from a gentile is prohibited where it will cause a chillul Hashem.12

Halachically speaking, there is no question about the permissibility of the evasion of taxes. Tax evasion is both a sin and a crime. It violates numerous biblical prohibitions, including that of chillul Hashem. In addition to active tax evasion, Halacha prohibits enabling others to commit the transgression. These rules unquestionably apply in the United States and most Western countries, where the tax system is administered in an even-handed and objective fashion. Therefore, the halachic community must not -- cannot -- tolerate the continued evasion of taxes in our midst. If one would not patronize a restaurant owned by a religious Jew who serves non-kosher food, then one should not patronize a store owned by a religious Jew who cheats on his taxes. Even paying cash for an item is forbidden where circumstances suggest that the purchase will not be reported to the appropriate tax authorities. Nor is tax evasion justified by a motive to dedicate the extra money to a mitzvah, such as tzedaka (charity) or supporting talmud Torah (Torah study). As is well-known, the Torah invalidated the mitzvah ha-ba'ah ba-averah, the mitzvah that is brought about by a transgression.13

The Torah demands absolute integrity in business matters. According to the Gemara (Shabbat 31a), when we face Divine judgement, we are asked a series of questions about how we lived our earthly lives. For example, we are asked: Kavata itim le-Torah? Did you establish time for Torah study? Tzipita le-yeshu'a? Did you anticipate the redemption? It seems fair to assume that the questions are ranked in order of importance. Yet, the first question is not about Torah study or awaiting the coming of Mashiach. The first question we are asked by the Divine Judge is: Nasata ve-natata be-emunah? Did you conduct business honestly?


1 The primary Talmudic discussion of this principle appears in Bava Kama 113a, Nedarim 28a, Bava Batra 54b-55a and Gittin 10b.

2 See Gittin 10b, where dina de-malchuta dina is applied to explain why, with two exceptions, Gentile contracts are valid under Jewish law.

3 See, e.g., Rambam, Hilchot Malveh ve-Loveh 27:1.

4 See, e.g., Chiddushei ha-Ramban, Gittin 10b; Chiddushei ha-Rashba, Gittin 10b.

5 See Kesef Mishneh, Hilchot Gezelah ve-Avedah 5:11.

6 Tur, Choshen Mishpat 369.

7 Mishneh la-Melekh, Hilchot Gezelah ve-Avedah 5:11.

8 Igrot Moshe, Choshen Mishpat I, no. 88.

9 Rabbenu Nissim, Avodah Zarah 6b; Magen Avraham, Orach Chayyim 347:4; Bi'ur ha-Gra, Yoreh De'ah 151:8.

10 Semag, Negative Commandment no. 152, citing Sifra, Vayikra 19:35.

11 Tosefta, Bava Kama 10:8.

12 Tosafot, Bava Metzi'a 87b, s.v. ela.

13 See, e.g., Sukkah 30a, which derives the principle from Malachi1:13.

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