Newspaper article The Christian Science Monitor

Raining on Tax Shelters

Newspaper article The Christian Science Monitor

Raining on Tax Shelters

Article excerpt

As treasury Secretary Lawrence Summers acknowledged, taxpayers are expected to pay the minimum they legally can. But they shouldn't be allowed to twist the tax code to avoid that minimum.

Mr. Summers is convinced that's what many corporate income- taxpayers are doing - using ever more elaborate "tax shelters" to avoid paying their fair share. He points to declining tax revenue from companies, even as profits climb. Last year corporate tax receipts were down 2 percent. Revenue from individuals, by contrast, was up 6.2 percent.

The secretary estimates that at least $10 billion a year is diverted from the federal Treasury by a bewildering array of dubious tax shelters. Some involve shifting profits to foreign partners that aren't subject to US taxes; others have involved manipulating loans or insurance policies.

Creating shelters is an industry in itself. Tax accountants compete to come up with new ones that can be profitably marketed to businesses. Is their use illegal, or just shrewd?

It all depends. When the Internal Revenue Service spots a questionable tax shelter, it takes the company using it to court. …

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