11/12/2003

corporate tax evasion

A March 2002 study by Mihir A. Desai, Associate Professor of Finance at the Graduate School of Business Administration at Harvard University, concluded:

In 1988, less than 62 cents of each dollar of shareholder profit turned up on tax returns, down from 84 cents in 1996, Professor Desai said. Untaxed corporate profits totaled $247 billion in 1998, Professor Desai found, but deductions for stock options and other known legitimate deductions explained only about $88 billion of this amount.

His study suggests that in 1998 $155 billion or so of corporate profits were hidden from the I.R.S. in tax shelters, costing the government as much as $54 billion in taxes. That figure is more than five times the $10 billion cost of abusive tax shelters cited by in 1999 by Lawrence H. Summers, who as Treasury secretary then started a campaign to crack down on tax avoidance and evasion by large companies.


That was in 1998. Enron happened several years after, suggesting the problem has worsened, not improved, since then. Hardly a surprise, of course, given the fiscal ideology of the current Administration.

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