US Government Highlights Tax Enforcement Efforts

by Mike Godfrey, Tax-News.com, Washington

13 April 2006

The United States authorities have continued their "vigorous" efforts in the criminal and civil courts against people who engage in tax fraud and other forms of non-compliance with federal tax laws, the Department of Justice announced.

Since 2001, the DoJ says that the government has successfully prosecuted hundreds of tax cheats and promoters of abusive tax schemes and has sought and obtained civil injunctions to stop the promotion of tax scams and the preparation of false and fraudulent tax returns.

These enforcement efforts have been "significantly increased" during the past year and the DoJ highlighted some notable success for the Tax Division in bringing to book some large corporations, such as KPMG, which was ordered to pay $456 in fines, restitution and penalties in August 2005, and HVB, Germany’s second largest bank, which entered a deferred prosecution agreement for its role in facilitating tax shelters marketed by KPMG.

In 2006, the DoJ has also won significant court victories against users of tax shelters such as Corporate Owned Life Insurance (COLI), contingent liability tax shelters and 'lease stripping' shelters.

“The Department of Justice is committed to using all available law enforcement tools to recover tax revenue, punish tax offenders, and to prevent future misconduct,” stated Eileen J. O’Connor, Assistant Attorney General for the Tax Division.

“People who promote, facilitate, or engage in plans or schemes to avoid reporting their income or another person’s income are risking penalties and, where appropriate, criminal prosecution," she warned.

During 2005, the Justice Department’s Tax Division authorized prosecutions against 1,256 defendants for tax crimes such as concealing income and assets through trusts, shifting assets offshore, and claiming fictitious deductions. This is an increase of more than 43 percent over the 877 defendants authorized for prosecution in 2001.

Since January 2001, the Justice Department has sought and obtained injunctions against more 170 tax return preparers and promoters, including 66 since January 2005, and it expects to obtain many more throughout the year.

“Our injunctions suits enable us to stop the harm caused by the promotion of tax fraud schemes and the preparation of false tax returns,” added O’Connor.

“By taking action, we minimize the number of people who get caught up in these schemes and help to assure that everyone abides by this essential duty of citizenship—the duty to pay tax," she added.

Abusive shelters for large corporations and high-income individuals have cost the federal treasury more than $10 billion annually, according to Treasury Department estimates.

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