Tax Me If You Can (full documentary) | FRONTLINE
FRONTLINE PBS | Official・2 minutes read
Tax shelters in corporate America exploit loopholes to evade taxes, creating a significant tax gap of $250-300 billion annually and lowering corporate tax rates to as low as 6%. Major companies use deceptive practices like creating phantom losses to manipulate profits, while the IRS struggles to combat these schemes due to resource shortages and a lack of regulatory oversight.
Insights
- Tax shelters in corporate America lead to a $250-300 billion annual tax gap, with companies exploiting loopholes to significantly reduce tax rates, manipulating profits to impress shareholders and the IRS, and relying on tax professionals to create and sell these schemes.
- KPMG, a prominent accounting firm, engaged in deceptive tax shelter practices, selling schemes to wealthy individuals like Dale Earnhardt and William Simon, prioritizing profits over integrity, avoiding registration of shelters for secrecy, and facing legal challenges and internal turmoil as a result of aggressive sales tactics.
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Recent questions
What are tax shelters?
Tax shelters involve creating phantom losses to lower tax liabilities, impressing Wall Street with artificially reduced profits. Companies keep two sets of books, reporting higher profits to shareholders and lower profits to the IRS to minimize taxes. Tax professionals, accounting firms, and law firms play a crucial role in creating and selling tax shelters.
How do major corporations reduce tax rates?
Major corporations exploit tax loopholes and shelters to reduce their tax rates significantly, sometimes down to 6%. They use tax tricks to reduce their tax burden, leaving honest taxpayers to pick up the tab. Corporate tax rates have significantly declined due to loopholes and shelters, with companies paying less than half of what they should.
What challenges did the IRS face in combating tax shelters?
The IRS was understaffed and overwhelmed in combating tax shelters, unable to keep up with the sophisticated schemes. Efforts to tackle the tax shelter problem were hindered by the IRS's lack of resources and inability to spot fraudulent transactions effectively. The IRS faced challenges tracking leasing business activities.
What was KPMG's involvement in tax shelter schemes?
KPMG, a top accounting firm, devised tax schemes involving basis shifting to create artificial losses to offset real gains. They sold tax shelters to over 160 wealthy individuals, prioritizing profits over integrity. KPMG avoided registering tax shelters to maintain secrecy and maximize profits.
What actions were taken against tax shelter promoters?
Republican Charles Grassley of Iowa led the Senate to pass a bill with an economic substance Rule and harsher penalties for tax shelter promoters. Despite opposition from powerful firms, calls for Congress to outlaw tax shelters entirely and for the administration to take action against those involved persist. Tax shelter reform remains stalled in the House Ways and Means Committee.
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