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The Internal Revenue Service has a comprehensive strategy in place to combat abusive tax shelters and transactions. This strategy includes guidance on abusive transactions, regulations governing tax shelters, a hotline for taxpayers to use to report abusive technical transactions, and enforcement ...
The Internal Revenue Service has a comprehensive strategy in place to combat abusive tax shelters and transactions. This strategy includes guidance on abusive transactions, regulations governing tax shelters, a hotline for taxpayers to use to report abusive technical transactions, and enforcement activity against abusive tax shelter promoters and investors.The Office of Tax Shelter Analysis (OTSA) in the Large Business & International (LB&I) Division collects and analyzes information about abusive tax shelters and transactions, and coordinates LB&I's tax shelter planning and operation. We are taking steps to combat abusive tax shelters and transactions.Tax law generally allows businesses to create "captive" insurance companies to protect against insurance risks and provides that certain small non-life insurance companies can choose to pay tax only on their investment income under Internal Revenue Code section 831(b) ("micro-captives"). In abusive micro-captive structures, promoters, accountants or wealth planners persuade owners of closely held entities to participate in schemes that lack many of the attributes of genuine insurance.At the same time, however, Treasury and IRS issued the proposed regulations to eliminate any confusion regarding the need to report these transactions and to ensure that these decisions do not disrupt the IRS's ongoing efforts to combat abusive tax shelters throughout the nation.
Multinational corporations cheated more after getting tax cuts, largest inadvertent real-world testing of corporate tax policies reveals Countries are losing US$492 billion in tax a year to multinational corporations and wealthy individuals using tax havens to underpay tax.
Biggest enablers of global tax abuse are also some of the biggest losers: US$177 billion lost by the 8 countries that recently voted against UN tax convention terms; US$189 billion lost by 44 abstainers; US$123 billion lost by 110 countries voting for.For each US$1 the hurtful eight collected in tax from enabling global tax abuse, the rest of the world lost US$16 in tax, demonstrating the extreme waste of the current arrangements that the hurtful eight voted to preserve.Active US attempts to undermine the two pillar proposals can only add to dissatisfaction with the OECD’s responsibility for designing a global tax system that loses nearly half a trillion dollars to tax havens every year, with the OECD’s failure to include the majority of countries meaningfully in its decision-making process, and ultimately with its decade-long failure to end global corporate tax abuse. ... “The hurtful eight want to stick with OECD tax rules that the OECD’s own data demonstrates have failed utterly.The Tax Justice Network’s annual State of Tax Justice report measures how much tax every country loses to global tax abuse a year. The 2024 edition of the report is available here. A UN vote was held on the draft terms of reference for a UN tax convention on 16 August 2024.
Recently introduced legislation would exempt from tax lawsuit recoveries by sexual abuse survivors. Without a "physical injury," they've faced taxation since 1996.
It would certainly remove an unfairness that many have talked about, including a Bloomberg Tax piece I co-authored, as well as the presidents of the Society of Settlement Planners, the American Association of Settlement Consultants, and the National Structured Settlements Trade Association. The AASC has made it a centerpiece of its policy work. Lawyers for sexual abuse survivors also support the change.She says, “Survivors deserve full justice, not a second round of trauma at the hands of the tax code.” · Trial lawyer Mike Arias helped secure an $852 million settlement for sexually abused students in a case against University of Southern California and Dr.Since 1996, federal law has exempted settlements and awards from taxation if received “on account of personal physical injuries or physical sickness.” While the rule itself is broadly written, the IRS has historically interpreted physical injuries narrowly, looking for visible harm to qualify for tax-free treatment. The problem is obvious: many forms of sexual abuse leave no visible injuries.As plaintiff lawyers know firsthand, uncertainty and unfair taxation make the fight for justice more difficult. Shahrad Milanfar recently won a $32 million verdict for elder abuse. He talked through the difficulty that current law creates, “Explaining to a plaintiff that they’re going to be taxed when recovering money for what was taken from them is terrible.
Treasury regulations require that certain tax shelters and transactions be registered and that lists of investors be maintained by parties who organize or sell interests in the shelter(s). Investors in certain shelters and transactions are required to disclose their participation on their tax ...
The penalty is for a promoter of an abusive tax shelter and is generally equal to $1,000 for each organization or sale of an abusive plan or arrangement (or, if lesser, 100 percent of the income derived from the activity).§ 301.6700 Promoting Abusive Tax Shelters.Treasury regulations require that certain tax shelters and transactions be registered and that lists of investors be maintained by parties who organize or sell interests in the shelter(s). Investors in certain shelters and transactions are required to disclose their participation on their tax returns.Any person subject to the penalty shall be penalized only once for documents relating to the same taxpayer for a single tax period or event.
The IRS Lead Development Center (LDC) is constantly working to combat tax abuse by stopping abusive promoters and tax return preparers as early as possible.
The IRS warns you to look out for promoters who peddle false hopes of large tax deductions from abusive arrangements. These "deals" are generally marketed by unscrupulous promoters who make false claims about their legitimacy and charge high fees to boot. These promoters frequently devise new ways to cheat the system and market them aggressively.We rely on you to help us identify promoters of “too good to be true” tax schemes and tax preparers using improper methods to avoid paying taxes. Help us protect American taxpayers from unscrupulous individuals who promote improper and abusive tax schemes as well as tax return preparers who deliberately prepare improper returns by reporting them to us.For detailed information on the tax schemes listed above as well as other schemes not listed here, visit the IRS Dirty Dozen page. If you know of one of these schemes or an abusive tax return preparer, you can complete an online referral using the Form 14242, Document Upload Tool or you can send a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers PDF, and any supporting materials to the IRS Lead Development Center (LDC).The LDC within the Office of Promoter Investigations follows up on each referral and ensures cases involving abusive tax schemes and improper tax return preparation are appropriately sent for further IRS action, including sending cases to Criminal Investigation.
Camilo Rodríguez, Ricardo Ruiz, and Pedro Madera of KPMG Colombia analyse how the country addresses tax abuse, recent court guidance on the general anti-avoidance rule, and the practical challenges faced by taxpayers and authorities
Historically, administrative and judicial authorities addressed tax abuse through various legal and doctrinal frameworks, including the theory of simulation, the principle of substance over form (under Article 228 of the Colombian Constitution), the business purpose doctrine, the principle of abuse of rights, the doctrine of fraud against the law, and the doctrine of a series of transactions.Pursuant to the Colombian GAAR, a transaction or series of transactions are deemed “tax abuse” when they involve the use or implementation of one or more artificial legal acts or arrangements that lack a clear economic and/or commercial purpose and are primarily designed to obtain a tax benefit – regardless of any additional subjective intent of the parties involved in the transaction.The GAAR special administrative procedure is aimed at eliminating any room for arbitrary or unfounded decisions by the Colombian tax authority and preventing the misuse of doctrines such as substance over form or abuse of rights, which in the past were sometimes invoked without sufficient legal grounds to recharacterise transactions and impose amendments to tax returns.In some cases, the GAAR has been invoked by the Colombian tax authority to incorrectly challenge costs or expenses arising from nonexistent operations, which should have been addressed through standard audit procedures. Conversely, there are cases or transactions in which tax abuse is likely to arise, but the Colombian tax authority has refrained from applying the special GAAR procedure.
A new report has made recommendations for how the Tax Office can respond to abuse in the tax system to better support victim-survivors.
The report highlights how the tax system is being used as a weapon of financial abuse and makes recommendations for how the ATO, along with other organisations, can respond through prevention, detection and support for the victim-survivors.Owen said it was shocking to see that the tax system was being used as a weapon to inflict financial and emotional damage on unsuspecting and vulnerable individuals. “Financial abuse is far more prevalent than people think, and it can happen to anyone from any walk of life.Owen explained that this abuse could include perpetrators using coercive control or fraud to access superannuation early, pay family trust distributions to other bank accounts, appoint company directors without consent, and falsify tax returns.This could land their victims with significant tax bills. “The stories we heard during our review were very disturbing, particularly because so many victims only find out about the abuse when they receive a bill from the ATO.
The BEAT is essentially a 10 percent minimum tax that is meant to prevent foreign and domestic corporations operating in the United States from avoiding domestic tax liability by shifting profits out of the United States. The scope of the BEAT is limited to large multinational corporations ...
The Base Erosion and Anti-Abuse Tax (BEAT) was adopted as part of the 2017 Tax Cuts and Jobs Act (TCJA) and is a tax meant to prevent foreign and domestic corporations operating in the United States from avoiding domestic tax liability by shifting profits out of the United States.One component of the new international tax system is a new tax called the “Base Erosion and Anti-Abuse Tax,” or BEAT. The BEAT was adopted when the U.S.The BEAT is essentially a 10 percent minimum tax that is meant to prevent foreign and domestic corporations operating in the United States from avoiding domestic tax liability by shifting profits out of the United States. The scope of the BEAT is limited to large multinational corporations with gross receipts of $500 million or more.The BEAT works much like a minimum tax. Corporations pay BEAT to the extent it exceeds its ordinary corporate income tax liability. BEAT is equal to 10 percent of “modified taxable income” minus regular corporate income tax liability (not to go below zero).
UK tax law is specifically targeted rather than purposive: in tackling the exploitation of loopholes in the law, governments have legislated against individual avoidance schemes as and when these have come to light. This note looks at the case that has been made recently for a general ...
UK tax law is specifically targeted rather than purposive: in tackling the exploitation of loopholes in the law, governments have legislated against individual avoidance schemes as and when these have come to light. This note looks at the case that has been made recently for a general anti-avoidance rule, and the Coalition Government's introduction of a 'narrower' General Anti-Abuse Rule in 2013.Tax avoidance: a General Anti-Abuse Rule (838 KB , PDF)Download full report Download ‘Tax avoidance: a General Anti-Abuse Rule’ report (838 KB , PDF)In June 2012 the Government launched a consultation exercise with a view to introducing a General Anti-Abuse Rule (GAAR) in 2013,[4] confirming its plans in December 2012.[5] Provisions in the Finance Bill 2013 for the new GAAR were agreed, without changes, and the new rule came into force on 17 July 2013.[6]
Tax evasion or tax fraud are illegal activities aimed at avoiding paying taxes altogether. Tax evasion can involve not declaring all profits, under-reporting income, or taking part in complex schemes to avoid paying value-added tax (VAT), for example.
The EU anti-tax avoidance measures directive (ATAD) bans a number of specific forms of corporate tax avoidance across the EU, while ensuring a fairer and more stable environment for businesses. The rules include five anti-abuse measures, which all member states are legally bound to apply against common forms of aggressive tax planning.Rules agreed at EU level promote cooperation on tax matters and help countries manage cross-border issues in order to ensure the functioning of the EU single market.Tax fraud and tax avoidance occur when a taxpayer or an entity deliberately files an incomplete or incorrect tax return to or hides relevant information from the national tax authorities, in order to avoid paying taxes. These activities can take many forms, each with distinct characteristics and implications.Tax evasion or tax fraud are illegal activities aimed at avoiding paying taxes altogether. Tax evasion can involve not declaring all profits, under-reporting income, or taking part in complex schemes to avoid paying value-added tax (VAT), for example.
Charles Rettig, the I.R.S. commissioner, attributed the growing tax gap to the rise of the cryptocurrency and the abuse of pass-through provisions in the tax code by companies.
Mr. Rettig attributed the growing tax gap to the rise of the $2 trillion cryptocurrency sector, which remains lightly regulated and has been an avenue for tax avoidance. He also pointed to foreign-source income and the abuse of pass-through provisions in the tax code by companies.The United States is losing $1 trillion in unpaid taxes every year, Charles Rettig, the Internal Revenue Service commissioner, estimated on Tuesday, arguing that the agency lacks the resources to catch tax cheats.The so-called tax gap has surged in the last decade. The last official estimate from the I.R.S. was that an average of $441 billion per year went unpaid from 2011 to 2013. Most of the unpaid taxes are the result of evasion by the wealthy and large corporations, Mr.Business|Tax cheats cost the U.S. $1 trillion per year, I.R.S.
Report offers first country-by-country breakdown of the losses governments suffer from companies and wealthy elites abusing the tax system. Authors call for overhaul of "broken" laws.
Blame lies not only with multinational companies and wealthy individuals, but with high-income countries that have “stalled meaningful reform of the broken, international tax system and have actively hid the scale and extent of international tax abuse from their populations,” they said.The researchers also point a finger at the U.K. and its tax-haven territories and crown dependencies, including Bermuda, Cayman, Jersey and the British Virgin Islands. This network is responsible for 37 percent of all losses governments suffer from corporate and private tax abuse, the report says.U.S. loses the most, $90 billion, according to first country-by-country breakdown of the impact of companies and wealthy elites abusing the tax systemPoorer countries, meanwhile, are losing a larger share of their total tax revenue to the abusive practices — about 5.8 percent vs.
This measure tackles the small minority of taxpayers who unfairly seek to reduce their tax bill by misusing the insolvency of companies.
Anti-Tax Avoidance Directive (ATAD): On 20 June 2016 the European Council adopted the Directive (EU) 2016/1164 which contains five legally binding anti-abuse measures that should be applied as common forms of aggressive tax legislations. The member States must have applied these measures as ...
Anti-Tax Avoidance Directive (ATAD): On 20 June 2016 the European Council adopted the Directive (EU) 2016/1164 which contains five legally binding anti-abuse measures that should be applied as common forms of aggressive tax legislations. The member States must have applied these measures as from 1 January 2019.ATAD contains the following five anti-abuse measures: 1. Interest deductibility, to discourage artificial debt arrangements which are design to minimise taxes, 2. Exit taxation, for preventing the avoidance of taxes when companies are re-locating assets, 3. Incorporation of the GAAR for disregarding of non-genuine arrangements, 4.Although things such as home ownership, pension plans, and Individual Retirement Accounts (IRAs) can be broadly considered "tax shelters", insofar as funds in them are not taxed, provided that they are held within the Individual Retirement Account for the required amount of time, the term "tax shelter" was originally used to describe primarily certain investments made in the form of limited partnerships, some of which were deemed by the U.S. Internal Revenue Service to be abusive.The Internal Revenue Service and the United States Department of Justice have recently teamed up to crack down on abusive tax shelters. In 2003 the Senate's Permanent Subcommittee on Investigations held hearings about tax shelters which are entitled U.S. tax shelter industry: the role of accountants, lawyers, and financial professionals.To allow prompter response to tax avoidance schemes, the US Tax Disclosure Regulations (2003) require prompter and fuller disclosure than previously required, a tactic which was applied in the UK in 2004. Some countries such as Canada, Australia, United Kingdom and New Zealand have introduced a statutory General Anti-Avoidance Rule (or General Anti-Abuse Rule, GAAR).
Laura says the physical abuse was the breaking point, but she had suffered years of abuse and control. Her ex had a criminal record and was running a business under her name that had accumulated massive tax debts.
Laura was a victim of domestic violence and financial abuse. (ABC News: Darryl Torpy) When the tax system is used to perpetrate financial abuse, the ATO has limited powers to clear a tax debt entirely or to transfer it to the perpetrator of the abuse.She says Director Penalty Notices (DPNs) can be an effective way of collecting tax debt, "but what we're concerned about is that … this is unwittingly capturing people, survivors of abuse, and there are not appropriate safeguards in place".Workers on the front line helping women recover from financially abusive situations say the ATO is often unsympathetic to their plight. Rose says when she decided to leave him, he emptied their joint business bank account and then she had to spend years dealing with a tax debt he created.Rose says that when it comes to victims of financial abuse, the ATO must "be more compassionate" and "investigate further into situations like that rather than just chase" victims. "They were threatening me with jail, and I was just a tiny, tiny little person. I felt like I was maybe an easy target for them," she says. The ATO contacted Rose about her ex-partner's tax debts.
Tax evasion often entails the deliberate misrepresentation of the taxpayer's affairs to the tax authorities to reduce the taxpayer's tax liability, and it includes dishonest tax reporting, declaring less income, profits or gains than the amounts actually earned, overstating deductions, bribing ...
Professor Christopher Hood first suggested privatization of tax enforcement to control tax evasion more efficiently than a government department would, and some governments have adopted this approach. In Bangladesh, customs administration was partly privatized in 1991. Abuse by private tax collectors (see tax farming below) has on occasion led to revolutionary overthrow of governments who have outsourced tax administration.Governments received a lump sum in advance from a private entity, which then collects and retains the revenue and bears the risk of evasion by the taxpayers. It has been suggested that tax farming may reduce tax evasion in less developed countries. This system may be liable to abuse by the "tax-farmers" seeking to make a profit, if they are not subject to political constraints.Abuses by tax farmers (together with a tax system that exempted the aristocracy) were a primary reason for the French Revolution that toppled Louis XVI.Tax evasion often entails the deliberate misrepresentation of the taxpayer's affairs to the tax authorities to reduce the taxpayer's tax liability, and it includes dishonest tax reporting, declaring less income, profits or gains than the amounts actually earned, overstating deductions, bribing authorities and hiding money in secret locations.One measure of the extent of tax evasion (the "tax gap") is the amount of unreported income, which is the difference between the amount of income that the tax authority requests be reported and the actual amount reported.
Enhance the IRS’ effectiveness without compromising taxpayer protections. The Administration is reining in international tax abuses. The Administration is committed to exploring ways in which the IRS can work more effectively without compromising taxpayer protections.
(Archived Content) FROM THE OFFICE OF PUBLIC AFFAIRS js-1314 As part of a comprehensive strategy to ensure all taxpayers pay their fair share, the Treasury Department and the IRS are moving aggressively to combat abusive tax avoidance transactions. Abusive transactions are being addressed effectively through increased disclosure by taxpayers and promoters, timely response by the Treasury Department and the IRS to transactions that are identified, and, where necessary, targeted legislative changesto the substantive tax laws.Beginning back in early 2002, the Administration proposed significant legislation to end the “hide-and-seek” tactics of promoters and taxpayers involved in these abusive transactions. In addition, the Administration is committed to providing the IRS with the resources and support needed to ensure that all taxpayers pay their fair share.The Administration’s FY 2005 Budget includes an additional $300 million for IRS efforts to ensure compliance with the tax laws, and increases the total IRS budget by 4.8 percent to $10.674 billion– significantly above the average for non-defense, non-homeland security discretionary spending. The budget continues a three year trend of increasing resources for the IRS to improve taxpayer compliance and to target abusive transactions, while maintaining customer service to taxpayers.The specific steps taken by the Administration to address tax shelters are detailed below. The Administration Is Taking Vigorous Enforcement Action Against Abusive Tax Shelters
Understand the base erosion and anti-abuse tax (BEAT) regulations, including who is subject to the tax and the BEAT tax rate schedule.
The base erosion and anti-abuse tax, known as BEAT, was enacted as part of the Tax Cuts and Jobs Act of 2017. BEAT is effectively a minimum tax rate of that applies to certain multinational corporate taxpayers that make significant deductible payments to foreign related parties.This corporate tax planning strategy would increase costs and reduce profits, therefore reducing their U.S. tax liability in the process. The U.S. previously tried to limit this practice by regulating transfer prices between companies, but this was hard to enforce.BEAT targets large multinational companies using a gross receipts threshold and a base erosion percentage threshold. The thresholds are somewhat blurred by an aggregation rule, which considers the gross receipts and expenditures of a taxpayer as well as the taxpayer’s aggregate group when determining the taxpayer’s gross receipts threshold and base erosion percentage.Sometimes referred to as a new alternative minimum tax, when it applies, BEAT increases tax liability for U.S. corporations and U.S. branches of non-U.S.
The bill would empower survivors of domestic abuse or spousal abandonment to file taxes without contacting their abuser.
The AICPA supports a bill that would allow survivors of domestic abuse or spousal abandonment to file their taxes as if they were not married, which would allow victims to avoid contacting their abusers when filing and possibly receive a larger refund.In a letter to Sen. John Fetterman, D-Pa., the bill’s sponsor, the AICPA said that S. 2129, the Survivors Assistance for Fear-Free and Easy (SAFE) Tax Filing Act of 2025, would provide fairness, safety, and equality to survivors of spousal abuse or abandonment.The bill “would remove the control that abusive or absent spouses may have over survivor spouses and would empower survivors to take back control when it comes to tax returns and tax benefits,” the AICPA said in the letter.In a news release sent June 19, the day after the bill was filed, Fetterman said Congress “can and should do everything we can to make life easier for survivors of domestic abuse. … It’s really the least we can do.” · Co-sponsors include Sens. John Cornyn, R-Texas; Catherine Cortez Masto, D-Nev.; and Joni Ernst, R-Iowa, Fetterman’s news release said. If the bill becomes law, the IRS should develop regulations that avoid complexity and also balance the needs of survivors with the risks of possible misuse, the AICPA said. The regulations also should address any conflicts between the tax returns of survivors and abusers and offer protections for preparers who exercise due diligence, the AICPA said.
Abusive tax schemes contribute to the nation's tax gap—the difference between taxes owed and paid. These schemes can involve complex, multi-layer...
One of IRS's tools to combat such schemes—and the people that promote them—is its Dirty Dozen list. This annual publication lists schemes that taxpayers may encounter. However, we found that this list does not include instructions on how the public can report potential abusive tax schemes to the IRS.The Internal Revenue Service (IRS) has taken steps to identify and stop promoters who arrange and market abusive tax schemes. Such schemes involve various kinds of arrangements designed to circumvent tax laws or evade taxes. IRS's investigations into promoters vary in complexity and may span across different organizational units within IRS, as shown in the figure below.Currently, IRS is aware of over 40 types of abusive tax schemes involving promoters. One method IRS uses to identify these promoters is information referrals from the public. GAO found that the public can refer information to IRS on a number of forms, few of which can be submitted online.Adding instructions to the Dirty Dozen list about how to submit information on promoters may allow IRS to better leverage information from the public and increase its ability to identify and stop promoters of abusive tax schemes.
