Are offshore tax shelters fraud — or just shady?
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Are offshore tax shelters fraud — or just shady?
KAI RYSSDAL: Well, let’s see. What was going on in Washington today. President Bush had his annual physical. Said he feels fine. The Commerce Department released its monthly report on consumer spending. Down for the fourth month in a row. Looks like rising energy costs are cutting into our spare change. Oh, and Senate investigators say they’ve uncovered $40 billion worth of fraud in offshore tax shelters every year. Marketplace’s Scott Tong has that story.
SCOTT TONG: The Senate investigation focuses on six shady cases of tax avoidance. For instance:
MICHAEL MCINTYRE: People making billions of dollars and still being chintzy about paying the tax on a painting that they want to use.
Wayne State law professor Michael McIntyre is talking about Sam and Charles Wyly, co-founders of the craft store chain Michael’s.
The report details their scheme of trusts and shell companies to shield more than $100 million which was supposed to be taxed, but wasn’t. McIntyre finds it complicated, in an Enron sort of way, and says it’s all meant to escape IRS scrutiny.
MCINTYRE: When I was in practice, people referred to it as the dark-of-night theory. You didn’t have a good legal theory, you’re just hoping you could escape in the dark of the night.
The report describes two basic frauds: One lets folks stick income offshore, invisibly. The other creates pretend losses to offset investment gains, which are taxable.
At a hearing today, Sen. Carl Levin questioned Jeffrey Greenstein of the securities firm Quellos, which facilitates this:
SEN. CARL LEVIN: . . . And the greater the loss, the greater your fee.
JEFFREY GREENSTEIN: Correct.
LEVIN: I think that speaks volumes.
The report cites questionable transactions from other rich people, like Robert Wood Johnson IV, the owner of the New York Jets. And Haim Saban, the man behind the Mighty Morphin Power Rangers.
Tax economist Marty Sullivan says the point is to spark outrage, and spur tougher laws. It’s worked before.
MARTY SULLIVAN: There was a report about several corporations [that] were not paying any income tax. And that brought about the tax reform act of 1986.
In Washington, I’m Scott Tong for Marketplace.
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