FROM THE OFFICE OF PUBLIC AFFAIRS March 20, 2002PO-2021 Thank you all for being here this afternoon. Secretary O'Neill is currently in Mexico, but he joins us in spirit--and in a statement. I would like to thank Commissioner Rossotti for being here today as we announce Treasury's enforcement proposals to curb abusive tax avoidance transactions. Abusive tax avoidance transactions are not structured for business reasons but instead are structured to take advantage of a complex tax code to obtain tax benefits that Congress did not intend. These transactions must be curbed because they violate Congress' intent, harm the public fisc and erode the public's sense of fairness. As I said at my confirmation hearing and in several public speeches since, this Administration will continue to seriously examine the issue of abusive tax avoidance transactions and how best to step up enforcement against them. I asked for time to review the results of the first filing season of the new rules put in place in 2000. The results are in. We now have received and reviewed the first year of filings of disclosures. We are disappointed in the number and types of transactions disclosed. Today, we are proposing significant regulatory and legislative changes to enhance enforcement of the law. The current rules for disclosing, registering, and maintaining customer lists for tax shelter transactions differ dramatically, which creates complexity for some, and opportunity for others. The vast majority of taxpayers and practitioners do their best to comply with the letter and spirit of the laws. Some, however, are actively promoting or engaging in transactions structured to generate tax benefits never intended by Congress. All taxpayers have a stake in the government's success in establishing rules that assist in identifying and addressing these transactions. Transparency - that is, ensuring that questionable transactions are disclosed and subjected to IRS review - is critical to the Government's ability to identify and immediately address abusive tax avoidance practices. Our Legislative and Administrative Proposals will change the risk/reward analysis for taxpayers who would enter into questionable transactions and play the audit lottery to avoid paying their fair share of taxes. We are simplifying disclosure rules to eliminate gray areas that have been used to avoid disclosure, and imposing new penalties on promoters and taxpayers for failure to disclose. Simply put, if a taxpayer is comfortable entering into a transaction, a promoter is comfortable selling it, and an advisor is comfortable blessing it, they all should be comfortable disclosing it to the IRS. Together, these steps to simplify compliance and raise the cost of noncompliance will provide us with more information about the misuses of our tax code, so that we can work with Congress to correct them. We are deliberately casting a broader net with our legislative and administrative proposals than exists under the current rules. The Treasury Department's initiative will build upon ongoing Treasury Department and IRS efforts to combat abusive tax practices. Recent actions have focused on both individual and corporate tax avoidance transactions, and on both taxpayers and promoters.
Ultimately, to address these abusive tax avoidance transactions, we have to get at the heart of the problem-the complexity of the tax Code. Our complex tax system must be re-evaluated and simplified, so that the opportunities for abusive tax practices that currently exist are eliminated. Until abusive tax avoidance transactions can be addressed by simplifying the tax Code, the Treasury Department and the IRS will continue to use these simplified and strengthened rules for disclosure, registration and list maintenance to eliminate abusive tax avoidance transactions. |
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