A Senate report estimates that tax cheating now equals about 7 cents out of each dollar paid by honest taxpayers, or as much as $70 billion annually.
The 400-page report, entitled "Tax Haven Abuses: The Enablers, The Tools & Secrecy," was released in anticipation of a Tuesday hearing on the subject before the Permanent Subcommittee on Investigations. The report, the result of a yearlong investigation into abusive tax shelters, details several methods allegedly used by wealthy individuals to avoid paying taxes.
Among the superrich cited in the report are the owner of the New York Jets football team, Robert Wood Johnson IV; producer of the "Mighty Morphin Power Rangers" children's show, Haim Saban; and two Texas businessmen, Charles and Sam Wyly, who are among President Bush's largest campaign contributors Bush.
Both Johnson and Saban testified before the subcommittee, saying that professional advisers told them the transactions were more lawful than not. The shelter used by both men generated billions of dollars of transactions involving fake securities that were then used to generate billions of dollars of fake capital losses. Johnson has already settled with the Internal Revenue Service, while Saban is in discussions with the agency.
The Wyly brothers told the committee they would invoke their Fifth Amendment rights and were not called to testify. IRS Commissioner Mark Everson testified, as did several bankers and lawyers who worked to facilitate shelters.
"These tax haven abuses are eating away at the fabric of the U.S. tax system, and undermining U.S. laws intended to safeguard our capital markets and financial systems from financial crime," said Sen. Carl Levin, D-Mich., whose staff ran the investigation, in a statement. "It is long, long past time for our country to shut down their use by U.S. citizens."
The investigation, which took 18 months, resulted in the report laying out eight changes to current, many of aimed at the law and accounting firms, banks and investment advisers that the report says enable tax schemes that rely on complexity, secrecy and compartmentalizing information.
The full report is available at http://hsgac.senate.gov/_files/TaxHvnAbRPT.pdf.
Previously on WebCPA:
IRS Loses 'Son of Boss' Shelter Case (July 24, 2006)
Feds Win Appeal in Tax Shelter Case (July 13, 2006)
KPMG Agrees to $456M Shelter Settlement (Aug. 30, 2005)
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