Yahoo Finance 6 Infamous Tax Scandals
It’s that time of year again: Tax time. Federal and state income taxes are due by April 18. You can file for an extension to buy more time to get your paperwork sorted out, but you can’t delay payment.
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Failure to pay your taxes in full results in the IRS slamming you with a penalty of 0.5% of the amount you owe per month. This penalty applies every month you fall behind on paying, up to a maximum of 25% of what you owe. But if the IRS issues an intent to levy notice and you don’t respond, that penalty jumps to 1% 10 days after the IRS sends you the notice.
Most Americans comply with the IRS, but there are more than a few famous examples of people and businesses using clever maneuvers to evade paying Uncle Sam. Here’s a look at six infamous tax scandals that sparked fires of controversy throughout the U.S.
Also see celebrities who were convicted of tax evasion.
The Panama Papers
Perhaps the most famous tax scandal of all time centers on the Panama Papers. In 2016, the leak of 11.5 million compromising documents from the archives of the Panamanian law firm Mossack Fonseca revealed financial details of nearly 215,000 offshore entities. More than 40,000 private and corporate clients were implicated in the leak, including big-name public officials and politicians such as former British Prime Minister David Cameron and Sanford I. Weill, the former CEO of Citigroup.
Running an offshore business entity is not in itself illegal, but how an offshore entity is operated (and what it does) matters — as does IRS compliance. The Panama Papers revealed that many shell corporations created by Mossack Fonseca were used for illegal activities including tax evasion.
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The Trump Organization
Donald Trump and some of his family members have been at the center of a few tax scandals. In January, Trump’s business empire, the Trump Organization, was fined $1.6 million for tax fraud and other crimes committed as part of a long-running scheme to enable high-level executives to dodge taxes.
Among the implicated executives was former Trump Organization Chief Financial Officer Allen Weisselberg. He pleaded guilty to tax fraud charges and worked with prosecutors to make a case against the Trump Organization and Trump himself.
Legal reps for the Trump Organization have said the business will appeal the verdict.
In 2019, it was publicly revealed that Google moved $23 billion through a Dutch shell company to Bermuda, a tax haven, in 2017. This maneuver is known as the “double Irish” tax arrangement, a controversial loophole. By shifting the funds over, Google Ireland Holdings evaded corporation tax both in the Republic and in the U.S. The shell company reported a $13 billion pretax profit for 2019 — all tax free.
In 2021, Google’s Irish subsidiary agreed to pay $218 million euros in back taxes to the Irish government.
Apple
In 2012, Apple moved $36 billion in worldwide income from the U.S. to offshore tax havens, a shift that allowed the company to avoid $9 billion in U.S. taxes, according to Americans for Tax Fairness. In 2016, European authorities charged Ireland with illegally setting up a privileged tax deal with the mega tech company that gave it a tax rate as low as 0.005%. That same year, the European Commission ordered Apple Inc. to pay Ireland back-owed taxes of $14.5 billion.
Amazon
Amazon fetched a record-breaking revenue of 44 billion euros in Europe in 2020 — a spike that was driven by the surge of people online shopping during the peak of the pandemic. But the online mammoth paid no corporate tax to Luxembourg, the home of the company’s European headquarters. Instead, the company’s European retail division claimed a loss of $1.4 billion to Luxembourg authorities, making it exempt from corporate taxes. The reported loss granted Amazon €56 million in tax credits that it could use toward future tax bills, when it reaps a profit.
Amazon technically didn’t do anything illegal, but its crafty maneuver struck up controversy and heightened demand in the U.S. for a global minimum tax.
Robert T. Brockman
In 2021, Robert T. Brockman, the former chairman and CEO of software services company Reynolds and Reynolds, was charged with hiding $2 billion in income from the IRS. Prosecutors accused Brockman of manipulating a web of entities based in Bermuda and Nevis, in addition to secret bank accounts in Bermuda and Switzerland. The prosecutors called Brockman’s scheme the largest individual tax evasion case in U.S. history. Brockman died while fighting the allegations in 2022.
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