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You are paying about 15% too much in taxes due to illegal tax cheats. That’s the conclusion of Charles O. Rossotti, who was commissioner of IRS for five years. In a recent interview, Rossotti, a conservative Republican businessman, gave that stunning statistic to Frontline, a PBS show hosted by Bill Moyers.

According to Rossotti, roughly $250-300 billion a year is owed but not being paid. “Which basically means everybody is paying 15 percent more,” says Rossotti. “You could give everybody twice as big a refund, if they average it out, if you just collected all the taxes that are due.”

That missing fortune includes outright tax cheats and frauds and a myriad of underpayments. The biggest single chunk, Mr. Rossotti says, is abusive tax shelters cooked up and marketed wholesale by the very people we trust to keep the system honest — highly respected accounting firms and law firms. Their tax tricks have the veneer of legality but turn the tax code on its head because they generally lack authentic business purpose. “Sham transactions” is what John Chapoton, former assistant secretary of the treasury for tax policy in the Reagan administration, calls them.

The epidemic of illegitimate tax shelters has so seriously infected the tax system in recent years that Larry Langdon, tax director at Hewlett Packard for 10 years, says he recalls “a number of CFOs, CEOs and others who realized it was going on and it was wrong. But frankly, a fair number, almost half of the major companies, were succumbing to that sort of pressure.”

Broadcast info:

Tax Me if You Can
Monday, Feb. 23, 2004 at 1.00 am (Thirteen/WNET New York).

Sources:
PBS: Tax Me If You Can

http://www.pbs.org/wgbh/pages/frontline/shows/tax/

The Great Amercian Tax Dodge

http://www.pbs.org/wgbh/pages/frontline/shows/tax/shelter/oped.html

Charles O. Rossotti, IRS commissioner

http://www.pbs.org/wgbh/pages/frontline/shows/tax/interviews/rossotti.html

Prospects for Reform

http://www.pbs.org/wgbh/pages/frontline/shows/tax/reform/substance.html

Category: Finance, Politics

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