Statement on New Tax Avoidance Schemes
An article in last Thursday’s New York Times described a major accounting firm that hasdeveloped several new methods to help wealthy individuals and corporations dramatically reducetheir tax burden by hiding income through complex layers of tax avoidance devices. Last week, theCommittee on Finance passed the Tax Shelter Transparency Act (S. 2498), which Sen. Max Baucus,chairman, and Sen. Chuck Grassley, ranking member, introduced last month. The senators issuedthe following comment about how the Tax Shelter Transparency Act would rein in the latest waveof tax avoidance plans.
“Media reports about tax avoidance schemes seem to have a common thread: majoraccounting firms and law firms receiving huge fees for giving advice they know violates the spiritof the law, and may violate the letter of the law. These firms are well aware of the questionablelegitimacy of the deals they are marketing. Consequently, they don’t disclose their deals to thegovernment, and they use techniques designed to avoid IRS discovery of their transactions.
“Our bill, the Tax Shelter Transparency Act, would impose stiff penalties on accountingfirms, law firms and other tax practitioners that fail to disclose deals like the ones outlined by TheNew York Times, if the newspaper’s report is accurate. By imposing a disclosure regime, our billwill help the IRS determine which tax avoidance techniques are legal and which are illegal. If theIRS doesn’t know what’s happening, it can’t police cheating. Sunshine is the greatest disinfectantfor a tax system sullied by illegal tax avoidance and evasion schemes.”
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