Thursday, August 26, 2010

The department of Treasury is hard at work...

A Treasury Department inspector general reported in June that, out of 2.6 million applicants for federal mortgage relief, 14,000 "home buyers" wrongly received tax credits and that in fact, 1,300 of them were living in prison at the time of filing, including 241 serving life sentences. Sixty-seven of the 14,000 received tax credits for the same house, and 87 more potentially fraudulent tax-credit applications were filed by Internal Revenue Service employees. 
It is common knowledge that American corporations avoid taxes by running U.S. profits through offshore "tax havens" like the Cayman Islands and Bermuda, but a May Bloomberg Business Week investigation traced the specific steps that the pharmaceutical company Forest Labs takes to short the U.S. Treasury. Although Forest's anti-depressant Lexapro is sold only in the U.S., the company's patent is held by an Irish subsidiary (and since 2005, shared with a Bermuda subsidiary in a tax-code hocus-pocus that insiders call the "Double Irish"), which allows the vast majority of the $2 billion Forest earns a year on Lexapro to be taxed at Ireland's low rate (and at Bermuda's rate of zero). Bloomberg estimates that the U.S. Treasury loses at least $60 billion annually by corporations' "transfer pricing" -- enough to pay for the entire Department of Homeland Security for a year.
So, what should we infer from the above? IRS employees have an reasonable probability of being corrupt and corruption allows large American companies to get around the rules of the US. The reality is that we need a simple tax system that can be stated on one or two pages and we need legislative bills that are not filled with 2,000 pages of special interest elements by corrupt our current administration and most of the Legistlature, who never read them.
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