Saturday, October 25, 2008
Guest Blogger Geraldine S. Moohr:
The University of Houston Law Center’s symposium, "White Collar Crime: Issues in Tax Fraud" was held on October 14, 2008. Gerry Moohr, Alumnae Professor of Law at the Law Center moderated the event and provided this summary of the presentations by scholars and tax specialists with experience on both sides of the courtroom.
Stuart Green, Professor of Law and Justice Nathan L. Jacobs Scholar at Rutgers School of Law - Newark, answered the question, "Is tax evasion a moral wrong?" He noted first that there was little consensus on this point. There are many aspects to the moral ambiguity of income tax evasion, including the difficulty in drawing a clear line between aggressive accounting and criminality, the fact that tax evasion causes a small harm to a large number of victims, and concerns that the criminalization of both inchoate and successful crimes dilutes the seriousness of the offense.
Indeed, the tax laws and their enforcement may foster the idea that tax evasion is not a serious wrong. For instance, the heightened mens rea of "willful" (defined as an intentional violation of known legal duty) makes tax offenses difficult to prove, lowering the deterrent impact of enforcement. The heightened mens rea may also downplay the significance of the actus reas of tax evasion.
Returning to his larger theme of the morality of tax evasion, Stuart addressed the effect of the deep ambiguity about the norms governing tax avoidance and tax evasion. Ultimately, the moral content of tax evasion depends to some extent on the fairness of the underlying tax code.
Stuart asked whether these crimes are punished because they represent a breach of the overarching moral obligation to obey the law, because they are a species of cheating, (focusing on the horizontal relationship between the tax avoider and her fellow citizens), or because they are analogous to stealing (focusing on the harm to the government fisc).
Bob Davis, a tax specialist at K & L Gates, noted Justice Holmes’ belief that an income tax is the price of living in a civilized community. Notwithstanding Holmes’ support for the income tax, Bob emphasized that paying them is no longer voluntary. Withholding, civil fines, high interest rates on taxes owed, and criminal fines and penalties add an element of coercion that belies the myth of voluntary compliance. Bob also noted distinctions between enforcement actions that involve illegal income and income from legal sources that raised questions about case selection. Increasing the budget of the DOJ Tax Division will not significantly increase the number of charged cases because the Tax Division, positioned between the IRS and U.S. Attorneys, pursues cases referred to it by those entities.
Jack Townsend, of Townsend & Jones, specializes in tax controversies and represented one of the KPMG defendants in the Stein case, which dismissed charges because of prosecutorial misconduct. Noting the difficulty of proving evasion and tax perjury, he emphasized the government’s increasing use of the tax obstruction provision, 26 U.S.C. § 7212, patterned after the general obstruction statute, 18 U.S.C. § 1503. Jack also noted the use of the general conspiracy statute, 18 U.S.C. § 371, making it a crime to "defraud the government" by interfering with the operation of the IRS.
The roundtable discussion, with panelists Professor Linda Fentiman, Professor of Law at Pace University School of Law (visiting this semester at the University of Houston), and two litigators in Houston’s white collar bar, Larry Finder, and George Connelly, Jr., considered these and other topics, including the policy and political choices inherent in criminal enforcement and the special problems posed by tax protestors (a.k.a. "deniers," according to the IRS).
Look for the symposium essays and articles in the Houston Business and Tax Law Journal next spring. A podcast will be available soon. For details, contact Kacie Bevers, Symposium Editor, here.