It was Benjamin Franklin who first said, "In this world nothing is certain but death and taxes." Most of us understand and accept our obligation to pay taxes. Unfortunately, there is a growing problem in our country: the use of highly questionable and complex financial transactions to evade taxes. This practice is costing the federal government, and all of us taxpayers, billions of dollars in revenue each year.
|Senator Susan M. Collins represents the State of Maine in the U.S. Senate.|
I recently participated in a Senate hearing that cast light on the use of offshore tax schemes by some very wealthy Americans for the sole purpose of circumventing U.S. tax laws.
In one such scheme, over a thirteen-year period, two investors transferred over 17 million in stock options to a complex array of 58 trusts and shell corporations located in the Isle of Man and the Cayman Islands in order to avoid taxes. Other schemes were equally elaborate and had the same purpose: tax evasion.
There is, of course, nothing illegal or unethical about legitimate tax planning. Millions of Americans do it every year when they pay their taxes and plan their finances. However, when individuals try to avoid paying taxes by engaging in sham transactions, in financial moves undertaken to conceal their true purpose, or in business deals whose only purpose is to hide the expatriation and repatriation of taxable assets, they are likely to be crossing the line between proper tax planning and abusive tax sheltering.
One of the most disturbing aspects of this problem is the fact that a few legitimate, respected banks, attorneys, and investment advisers appear to have helped facilitate or promote these abusive transactions. The fact is some of these transactions are so complicated that they require a small army of highly trained professionals to plan and execute. These transactions are often hidden behind a curtain of secrecy in overseas jurisdictions, concealed from the view of the authorities in this country. This makes exposing these transactions extraordinarily difficult.
Unfortunately, problems like this are not new. In 2005, the Government Accountability Office placed the federal government's enforcement of its tax laws on its "High Risk List" of major challenges. In fact, this area has been included in every High Risk List going back to the first list in 1990.
These schemes to evade taxes, which are carried out by just a few dishonest individuals, place a burden on taxpayers and cost our federal treasury billions of dollars.
No one likes paying taxes, but it is our obligation to do so. Shutting down these overseas tax scams will help to ensure a fair tax system that does not unduly burden law abiding citizens.