(Washington-AP) July 11, 2005 - The head of the IRS says dozens of corporate executives accused of abusing a tax shelter have had a change of heart.I suppose there are a few take away points here. Many, many companies believe that it is generally unlikely for them to get caught under-reporting income, otherwise they wouldn't have tried to pull it off in the first place. The IRS is underfunded and can't enforce the government's rules, leaving it to rely on deals like this to make up for lost revenue. The bad news here is that this cost, in terms of relative tax burden, and the impairment of our future ability to invest in public projects thanks to federal debt, is passed directly onto honest taxpayers. Every dollar that corporations evade paying is added to our national debt. We pay interest on it, and it eats into the government's ability to act. Moreover, in the future, a greater percentage of each tax-dollar that honest folks pay will go towards servicing this inflated debt bill.
80 executives and more than 30 corporations are owning up to the accusations in exchange for reduced penalties. Another 19 executives who aren't taking advantage of the IRS offer face audits or criminal tax investigations into whether they under reported their income by $400 million.
Companies participating in the IRS program must disclose the names of all executives who used the tax shelter. The IRS says executives used the shelter to hide income from stock options.
From the AP: