Backgrounder: US politicians and tax avoidance

The Senate’s interventions into tax avoidance isn’t the US congress’s first
intervention into the area.

In fact, it is politicians who have in some respects led the way on cracking
down on unethical, and often illegal, behaviour by US tax accountants and
wealthy Wall Street bankers.

The US Permanent Subcommittee on Investigations has made it its favourite
subject; its
report
in 2005 on the promotion of tax shelters by accountancy firms led to one of
the
darkest
days in KPMG’s history.

The report, and the hearings that led up to it, helped bring about the
Department of Justice’s investigation into the firm that nearly led to its
downfall, and its paying a
$456m
fine.

A further
report
in 2006 delved into the issue again, uncovering some of the more aggressive
elements of the US tax industry again.

Now
Senators
Norm Coleman and Carl Levin are at it again, angry about the avoidance of
taxes on dividends from US companies.

This report may even have some UK institutions worried; though Levin and
Coleman’s primary target is the US investment banks who marketed the scheme, and
the IRS for not acting, the recipients of the tax advantages were foreign owners
of US stocks.

Some may be worried the powerful US politicians may be after them next.