Abusive Tax Protestors Theories & Tax Shelter Arrangements
Be aware of the purpose of this page is not to defend your Tax-Man (he must defend himself.) Rather, the purpose of this page is to make it clear to you the non-effectiveness of certain theories and methods which are based on recent public criticism of the Taxation Authorities of various highly-industrialized countries.
Various persons and groups are actively marketing and selling a variety of information, legal products, and financial products based on interpretations of local and/or international taxation laws. The arguments advanced by these groups include:
- False argument that some Amendments to the Taxation Code (authorizing the income tax) were not properly ratified;
- False arguments that "income" cannot be defined, and therefore cannot be owed;
- False arguments that only foreigners are liable to pay income tax, and state citizens are not liable for income tax -- i.e., false arguments that the payment of income tax is really "voluntary".
- False arguments about a number of like subjects regarding income tax, all of which erroneously conclude that nobody is liable to pay income tax
These arguments are all false, and can easily be proved.
Don't believe us? Skeptical of us? Well, before your break ends at the tire shop, please look
Why These Arguments Can’t Help You:
We're going to show you here why these arguments can't help you -- and most likely will do you harm -- whether or not they are true. That is, we're going to suppose for the sake of argument that these (obviously false) theories are true.
The main problem is that NO COURT HAS HELD OR WILL HOLD THAT YOUR HOME COUNTRY TAXATION CODE IS INVALID OR THAT THE TAX MAN LACKS POWER TO LEVY OR COLLECT INCOME TAXES. Literally hundreds of people have tried these arguments over the last several years. ALL of these individuals have lost, and many of these people have been sanctioned or fined for advocating a "frivolous" theory to the court.
So, let's assume that you believe their argument, and you either don't declare your income to the Tax-Man, under whatever reason, or else you hide your money in a "Pure Trust" or other fictional legal unicorn. The Tax-Man then comes and assesses taxes and stiff fines on you and garnishes your wages and seizes all your assets to pay for the assessments and fines. You then go into court and assert your new found theory you've been sold as your defense against the Tax-Man. Now, you might be (in your own mind) 100% correct. The problem is that there is a 100% chance that the court will not agree with you, and you will lose everything you have.
So, the upshot is: Even if you believe this anti-taxation theory, don't employ these theories for planning because they have a proven failure rate of 100%. These theories are not going to protect your assets, period, and anyone who tells you differently is misleading you. You will get fined and sanctioned by the authorities, and these fines and sanctions most likely will not be dischargeable in a bankruptcy proceeding, so they will follow you for your entire life until paid. ALL these various anti-taxation or no-tax theories have had a ZERO success rate!!!
Instead, we’d highly recommend seeking appropriate and timely tax and legal advice from a qualified professional licensed to render such advice before acquiring any offshore structure or a company or trust. You may also ensure that you have received professional advice on the onerous restrictions and reporting requirements that the acquisition of an offshore company or trust may involve.
Definition of an Abusive Tax Shelter Arrangement
While there is no hard and fast definition of abusive tax shelter arrangements, typically they are promoted by the promise of tax benefits with no meaningful change in the taxpayer's control over or benefit from the taxpayer's income or assets. The promised benefits may include reduction or elimination of income subject to tax; deductions for personal expenses paid by the trust or other entity; depreciation deductions of an owner's personal expenses paid by the trust or other entity; depreciation deductions of an owner's personal residence and furnishings; a stepped-up basis for property transferred to the trust or other entity; the reduction or elimination of self-employment taxes; and the reduction or elimination of gift and estate taxes. These promised benefits are inconsistent with the tax rules.
Examples of Abusive Tax Shelters:
- Never Pay Taxes Again: The simple truth is if you have income, you will probably have to pay taxes, even we can help you in legally reducing your level of tax ourselves!
- Deduct Your Personal Living Expenses: Non-deductible personal living expenses can't be transformed into deductible expenses.
- Deduct the Cost of Your Child's Education: Non-deductible personal living expenses can't be transformed into deductible expenses.
- This is So New, Your Chartered Accountant Doesn't Know About it Yet: This is something said by promoters to discourage you from seeking advice from someone else about a proposed investment.
- Multiple Pure Trusts, Partnerships or Other Entities are Involved: The existence of multiple levels of entities does not necessarily mean there is anything wrong with the investment if there is a business purpose for each of the entities.
- Some of the Entities Involved are Foreign: Be wary of schemes that use foreign entities with no apparent business purpose other than reducing taxes or making money hard to trace.
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