Expert lambasts the impact of shelters on tax base
AUSTIN, Texas-University of Texas at Austin School of Law Professor Calvin
Johnson, an expert in tax, testified before the U.S. Government Affairs Committee
of the U.S. Senate in Washington, D.C. on November 18, 2003 about the relationships
of public accountants and the tax shelter industry. Johnson, the Andrews &
Kurth Centennial Professor of Law at UT-Austin, was the only academic invited
to testify.
The Permanent Subcommittee on Investigations' hearings examined the role of
professional organizations like accounting firms, law firms, and financial
institutions in developing, marketing and implementing tax shelters. The Subcommittee
heard from tax experts, as well as representatives from accounting firms,
law firms, financial institutions, and a panel of government regulators.
Johnson lambasted the current system of allowing public accountants to sell tax shelter advice was irreconcilable with their function as auditors. The New York Times reported November 19 on Johnson's testimony, writing "'tax shelters have done real damage to the tax system' and allowed many taxpayers who should pay income taxes of 35 percent to pay 10 percent."
Johnson advocated a "legislative audit" to retroactively fix interpretations of the tax laws that were not what Congress intended. The tax shelter industry is creating fissures loopholes in the tax base on the mega-million dollar level, which are often brilliant, he said, and possibly even legal. The tax shelter war is being won by those who are talented, vicious, hard driving, and smart, he said, and they are destroying the tax base. Another remedy, he said, would be to give the IRS a civil right of action against promoters and opinion writers for the harm that they do to the revenue base and allow the plaintiff's lawyers to sue on behalf the IRS, Johnson said. The plaintiffs' bar is every bit as talented as the people in the tax "skunkworks," he said.
A complete copy of Johnson's statement, titled, "Public Accountants and
the Tax Shelter Industry," can be found online at http://www.senate.gov/~govt-aff/_files/111803johnson.pdf.
Johnson received his undergraduate degree from Columbia College (Philosophy)
and his law degree from Stanford. Before entering teaching, he was a tax lawyer
with Paul, Weiss, Rifkind, Wharton and Garrison in New York City and with the
U.S. Department of Treasury in Washington, D.C. He has been Guest Scholar at
the Brookings Institution in Washington, a member of the IRS Commissioner's
Advisory Group and of the Academic Advisers on the Tax System to the U.S. Congress
Joint Committee on Taxation. He has served as Chairman of the American Bar Association
Tax Section Committee on Tax Structure and Simplification and as Chairman of
the American Association of Law Schools, Tax Section.
Professor Johnson is today one of the nation's most prolific tax scholars. His
several dozen articles have appeared in Tax Notes, Tax Law Review
and elsewhere. This year's articles include "Stock and Stock-Option Compensation,"
51 Canadian Tax Journal 1259 (2003); "Depreciation Policy During
Carnival," 100 Tax Notes 713 (2003); "Destroying Tax Base: The Proposed
INDOPCO Regulations," 99 Tax Notes 1381 (2003); "The Bush 35 Percent
Flat Tax on Distributions from Public Corporations," 98 Tax Notes
1881 (2003); "A Thermometer for the Tax System: The Overall Health of the
Tax System as Measured by Implicit Tax," 56 SMU Law Review 13 (2003);
"Requiring Inventory Accounting for Rotable Spare Parts," 99 Tax
Notes 1711 (2003); "A Fool or a Fox? The Clearly Erroneous One-year
Rule," 22 ABA Section of Taxation Newsletter 17 (Winter 2003); "SEC
Should Take Tough Stance on Auditor Independence," 98 Tax Notes
765 (2003); "Purging out Pollock: The Constitutionality of Federal Wealth
or Sales Taxes," 97 Tax Notes 1723 (2002). See
also Calvin Johnson: http://www.utexas.edu/law/faculty/calvinjohnson/
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