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| November 18, 2003 | |||
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| COLEMAN HEARING EXPOSES HIGH PROFILE ACCOUNTING FIRM’S SHAKY AND ILLEGAL TAX SHELTERS COSTING TAXPAYERS BILLIONS | |||
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FOR IMMEDIATE RELEASE: November 18, 2003
CONTACT: Tom_Steward@coleman.senate.gov 202-224-2995 Investigation reveals big-name accounting firms, law firms and investment houses participated in complex and abusive schemes to evade billions in taxes WASHINGTON—In the first of two Permanent Subcommittee on Investigations (PSI) hearings this week, Chairman Senator Norm Coleman (R-MN) held a hearing that discussed the results of an extensive investigation that implicates prestigious accounting, legal and financial firms in the development, marketing and implementation of abusive and illegal tax shelters to millionaire clients. “The fact is, abusive and potentially illegal tax shelters sold to corporations and wealthy individuals rob the U.S. Treasury of billions of dollars in lost tax revenues annually,” Senator Coleman said in his opening statement. “While some of the products we discuss today are not technically illegal—they are most certainly ethically questionable and demonstrate a deliberate effort on the part of the participants to fly underneath the regulatory radar of the IRS.” The subcommittee uncovered evidence that the transactions studied were deliberately designed to avoid detection by the IRS. Abusive and potentially illegal tax shelters sold to corporations and wealthy individuals rob the U.S. Treasury of an estimated $11-15 billion in lost tax revenues annually, according to GAO. “This is not a victimless crime,” Coleman said. “It is not the government that loses the money. It is the people of America—average working families—who will bear the brunt of lost revenue so that a handful of rich lawyers, accountants and their clients can manipulate legitimate business practices to make a profit.” While several major accounting firms and tax shelters were included in the probe, the hearing focused on the accounting firm of KPMG with testimony from four current or former KPMG partners involved in devising and marketing complex and abusive tax shelters to wealthy clients for the sole purpose of avoiding taxes. KPMG says it has since discontinued the tax and financial strategies exposed in the PSI report. The PSI hearings will focus on three overarching issues: Ø The Internal Revenue Service’s ability to enforce the nation’s tax laws. Ø The possibility that the institutions under investigation gave misleading advice to their taxpayer clients. Ø A breakdown in the internal controls of the accounting and law firms designed to prevent unethical and illegal transactions. Coleman commended Senator Levin for initiating the year-long investigation and exposing the abuse of the tax code by high profile firms willing to exploit loopholes. A second hearing on the U.S. tax shelter industry will be held on November 20, 2003 and will focus on the regulatory aspect of the investigation. Among the scheduled witness are IRS Commissioner Mark Everson and Federal Reserve official Richard Spillenkothen. |
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