Talk about timing!!! What's next????
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Questionable Corporate Shelters Cost U.S., NYT
Says (Update1)
2/20/00 12:56:00 PM
Source: Bloomberg News
(Adds details about the cost in the first paragraph.)
New York, Feb. 20 (Bloomberg) -- The use of questionable tax shelters is
spreading among large corporations and costing the U.S. Treasury more
than $10 billion a year, according to government officials, the New York
Times reported in today's editions.
''Corporate tax shelters are our No. 1
problem'' in enforcing tax laws, Treasury
Secretary Lawrence Summers told the
paper. ''Not just because they cost money
but because they breed disrespect for the
tax system.''
Courts have found that prominent
companies known for guarding their
images, such as Colgate-Palmolive Co.,
Compaq Computer Co. and United Parcel
Service Inc., engaged in the kind of tax-
avoidance techniques associated with
less reputable companies, the paper said.
The Tax Court ruled last year that UPS
used a long-running ''sham'' to evade more
than $1 billion in taxes. The company in a
statement said it was ''deeply offended''
that government officials would equate its
case with evasion or impropriety.
Compaq didn't return calls seeking
comment, while Colgate- Palmolive
declined to comment, the paper said.
Illegitimate tax shelters cost the government more than $10 billion a year,
Summers said, though department officials suspect the figure is much
larger. Last year, corporations paid 2.5 percent less in income taxes than
in 1998, while income-tax revenue from individuals rose 6.2 percent,
according to government finance records.
In a typical example of a shelter, a company that owes taxes might form
a partnership with another one, often overseas, that doesn't owe taxes.
The taxed company shifts its earnings to the books of the untaxed
company, then takes back the money in ways that don't count as profit.
In a recent case, AlliedSignal Inc., which Honeywell International Inc.
acquired last year, had a substantial tax bill wiped out with the help of
Merrill Lynch & Co., the paper said. Allied sold its investment in a Texas
petroleum company at a profit of more than $400 million, and would have
owed more than $140 million in taxes on the gain.
It shifted the profit to a partnership created with a Dutch bank and later
took back the profit untaxed, while reporting a $4 million profit from the
partnership investment.
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