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The Tax Shelter Problem

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  • Bankman, Joseph

Abstract

This article offers a definition and examples of the modern tax shelter and summarizes the anti–tax shelter weapons in the government's arsenal. Particular attention is given to the economic substance doctrine, which allows the government to attack transactions that comply with the literal language of the law. The battle between taxpayers and the government is described as a multi–player, multi–period game. Recent moves by the government have greatly reduced the payoff to shelters set up by high net–worth individuals. The corporate shelter market is more robust, as taxpayers have been able to exploit flaws in the economic substance doctrine. One attractive policy option is to follow the lead of California and increase the cost of shelters by increasing the penalties.

Suggested Citation

  • Bankman, Joseph, 2004. "The Tax Shelter Problem," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(4), pages 925-936, December.
    • Handle: RePEc:ntj:journl:v:57:y:2004:i:4:p:925-36
    DOI: 10.17310/ntj.2004.4.08
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    Cited by:

    1. Mihir A Desai & Dhammika Dharmapala, 2009. "Corporate Tax Avoidance and Firm Value," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 537-546, August.
    2. Chih-Liang Liu & Junmao Chiu, 2024. "External social networks and tax avoidance," Review of Quantitative Finance and Accounting, Springer, vol. 62(4), pages 1459-1504, May.
    3. Terando, William D. & Kurtenbach, James M., 2009. "The impact of tax law uncertainty on the development of the Sarbanes-Oxley auditor independence rules with regard to tax shelters," Research in Accounting Regulation, Elsevier, vol. 21(2), pages 118-124.
    4. Wei Li & Yuan Lu & Weining Li, 2019. "Does CSR Action Provide Insurance-Like Protection to Tax-Avoiding Firms? Evidence from China," Sustainability, MDPI, vol. 11(19), pages 1-19, September.
    5. George R. Zodrow, 2019. "Should Capital Income Be Subject to Consumption-Based Taxation?," World Scientific Book Chapters, in: George R Zodrow (ed.), TAXATION IN THEORY AND PRACTICE Selected Essays of George R. Zodrow, chapter 5, pages 131-168, World Scientific Publishing Co. Pte. Ltd..
    6. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
    7. Jaehong Lee & Suyon Kim & Eunsoo Kim, 2021. "Designation as the Most Admired Firms to the Sustainable Management of Taxes: Evidence from South Korea," Sustainability, MDPI, vol. 13(14), pages 1-17, July.
    8. Wen, Wen & Cui, Huijie & Ke, Yun, 2020. "Directors with foreign experience and corporate tax avoidance," Journal of Corporate Finance, Elsevier, vol. 62(C).
    9. James, Simon & Edwards, Alison, 2010. "An annotated bibliography of tax compliance and tax compliance costs," MPRA Paper 26106, University Library of Munich, Germany.

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