Taxation serves as the cornerstone of public finance, enabling the state to collect monetary resources from individuals to fund essential public expenditures. In contrast, auditing denotes a systematic, impartial process of evidence gathering and evaluation to investigate claims related to economic activities. Within this framework, tax audits encompass a comprehensive set of procedures aimed at understanding and verifying the accuracy of taxpayer information and transactions subject to tax regulations. Beyond core compliance objectives, tax audits strive to curb the informal economy, promote social justice and equality in taxation, and achieve other critical societal goals. This paper delves into the intricate and consequential relationship between taxation., illicit money transactions and the funneling of funds to support terrorist activities within the framework of Azerbaijan and Europe. While taxation serves as the government's primary mechanism for generating revenue to finance public services and infrastructure, tax evasion, the unlawful act of avoiding required tax payments on income or assets, undermines these efforts and creates vulnerabilities. The study seeks to elucidate the complex interaction of these three domains within the framework of Azerbaijan’s tax law, while also situating the analysis within the relevant European legal instruments to enable a comprehensive comparative assessment.