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In the United Kingdom a great debate is taking place about aggressive tax avoidance. On one side, David Cameron, the Conservative prime minister, says it is immoral. On the other side, most executives say they have a duty to their shareholders, and most practitioners say they have a duty to their clients, to minimize taxes as long as they do nothing illegal. As one UK accountant is quoted as saying: "Directors have a fiduciary duty to minimize tax bills provided they are acting ethically and not inviting legal or other enforcement risks."
Despite the tremendous benefits it is getting from gaming the system, I have to side with business on this particular issue. As a practical matter, how on earth are tax directors supposed to conduct their affairs except by reference to the tax law? Why did we spend decades developing all those statutes, regulations, rulings, and court decisions anyway? Is there some set of shadow statutes out there that can tell them they are being a little too aggressive?...
The problem is not that business is not complying with the law, but that it has undue influence in shaping the law. In the United States businesses endlessly and aggressively lobby Congress when it writes statutes and--much less well known, but perhaps more importantly--they lobby the IRS and Treasury when they write regulations implementing those laws. It is the relentless lobbying of transfer pricing rules and of anti-abuse rules of Subpart F that has created the myriad loopholes that make widespread offshore tax avoidance possible....
View Martin Sullivan's opinion in its entirety on the taxanalysts® Blog.
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