ABUSIVE TAX SCHEMES

Through his role on the Permanent Subcommittee on Investigations, Senator Levin continues to lead investigations into abusive tax shelters and offshore tax havens used by businesses and individuals to dodge payment of their U.S. taxes.

Offshore tax havens and secrecy jurisdictions today hold trillions of dollars in assets. While these jurisdictions claim to offer clients financial privacy, limited regulation, and low taxes, too often these jurisdictions have instead become havens for tax evasion, financial fraud, and money laundering. A sophisticated offshore industry, composed of a cadre of international professionals including tax attorneys, accountants, bankers, brokers, corporate service providers, and trust administrators, aggressively promotes offshore jurisdictions to U.S. citizens as a means to avoid taxes and creditors in their home jurisdictions.

These professionals, many of whom are located or do business in the United States, advise and assist U.S. citizens on opening offshore accounts, establishing sham trusts and shell corporations, hiding assets offshore, and making secret use of their offshore assets here at home. Experts estimate that Americans now have more than $1 trillion in assets offshore and illegally evade between $40 and $70 billion in U.S. taxes each year through the use of offshore tax schemes. U.S. corporations are estimated to illegally evade another $30 billion in taxes each year through offshore tax dodges. America 's working people bear the burden of this $100 billion tax gap.

In November 2003, the Subcommittee held two days of hearings that pulled back the curtain and provided an inside look at how respected accounting firms, banks, investment advisors, and lawyers have become high-powered engines behind the design and sale of abusive tax shelters. The hearings and an associated report found a corporate culture that pressured CPAs and lawyers to become tax product salespersons, pushed executives to �sell, sell, sell� to meet revenue goals, and overruled the few who didn't want to go along.

In August 2006, the Subcommittee held the latest of its hearings to expose and combat abusive tax practices. An associated report detailed six case histories that revealed how Americans use offshore trusts, corporations, and tax shelters to evade payment of their taxes. In one case history, two brothers built a network of 58 offshore trusts and corporations to avoid paying taxes on hundreds of millions of dollars in income. In another case history, two billionaires, using offshore corporations, staged a fake sale of securities to avoid paying taxes on more than $2 billion in income. The Subcommittee report makes a number of recommendations to combat these abusive tax practices.

PSI Reports on Abusive Tax Schemes:

• Tax Haven Abuses: The Enablers, The Tools and Secrecy - August 1, 2006. [PDF]
• The Role of Professional Firms in the U.S. Tax Shelter Industry - April 13, 2005. [PDF]
• Government Accountability Office report - Tax Shelters: Services Provided by External Auditors - February 2005. [PDF]
• The U.S. Tax Shelter Industry - The Role of Accountants, Lawyers and Financial Professionals - November 18, 2003. [PDF]
• PSI hearing report - The U.S. Tax Shelter Industry - The Role of Accountants, Lawyers and Financial Professionals. (Link is to GPO website - S.Hrg. 108-473.)

Legislation supported by Senator Levin to address these problems:

• S. 681, A bill to restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid Federal taxation.
• Press release - Levin, Coleman, Obama Introduce Stop Tax Haven Abuse Act, February 17, 2007.
• Summary of Levin, Coleman, Obama Stop Tax Haven Abuse Act, February 17, 2007.
• Senate Floor Statement of Senator Levin on the Stop Tax Haven Abuse Act, Part I, February 17, 2007.
• Senate Floor Statement of Senator Levin on the Stop Tax Haven Abuse Act, Part II, February 17, 2007.