A New Mess Bigger Than Enron?

[Maple]

SNIP....

"Tue October 21, 2003 01:56 PM ET
By Donna Smith
WASHINGTON (Reuters) - American taxpayers are subsidizing bridges, subway systems and other infrastructure in Europe and elsewhere through corporate tax shelters that cost the U.S. Treasury billions of dollars, industry experts told a Senate panel on Tuesday.

Testifying before the Senate Finance Committee from behind a screen, a former leasing industry executive described complex transactions that involve companies paying lump sums to foreign towns and cities to lease bridges, dams, subways and other infrastructure.

They then lease the property back to the town or city for the sole purpose of cutting their U.S. tax bill by depreciating the asset. No lease payments are ever made and the town or city is in no danger of losing control of the subway or other asset, he explained."

SNIP..."With his voice distorted, the former leasing industry executive described by the committee only as "Mr. Janet," said the transactions are arranged by some of the biggest financial advisors in Europe and the United States."

http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=3658780

[Wickerman]

1. Dammit, Janet, what the hell does this mean

Not sure I get it, but it does appear to be a significant problem:

"Sen. Max Baucus of Montana, the top Democrat on the committee, said abusive tax shelters cost the federal treasury about $14 billion to $18 billion a year."

[Maple]

2. Yeah,

it's definitely not chump change we're talking about here.

[mhr]

3. By Creating Phony Assets, US Corporations Can Reduce

thier profits by the depreciated expense of each asset they neither purchased, leased, or use.

By reducing apparent profits, US corporations pay less taxes to the US Treasury.

Pretty simple and pretty devious.

[CWebster]

4. Probably never hear about it again.

Move along.

[Kellanved]

5. Extremely usual practice

Cities lease their transportation system (or some other vital infrastructure) to an US company and lease it back again. This is known as "Cross Border Leasing".
This is problematic for several reasons:
1. In the event of reduced services (for example due to reduced federal funding) the investors can pull out, leaving the city with a huge debt.
2. The US might change it's laws and regulations; see 1. for effect.
3. Should an investor go bankcrupty the outcome for the city can be catastrophal.
4. As often as not the cities are tricked; the city of Aachen for example : they tried to pull this stunt with a Waste processing plant- instead of saving €15 million Aachen had to pay €9.5 million.
5. The investor might hijack the transportation system : manage it; even sell the infrastructure.
6. The setup can be used to obtain (German) federal funds.
7. US courts can decide what to do in the case of disagreements (for example due to extreme exchange rate changes)
8. Banks, Investors and brokers don't care about cities in another nation
9. in case of a disaster the city has to pay for the damage.
10. one-sided-risks: the investor can pull-out almost any moment
11. essential city assets are used as bargaining chips
...

For this reasons most German states are preparing laws to stop this kind of action. Several projects were already stopped by citizens organizing protests/ collecting signatures.

[linazelle]

6. Did anybody see 60 Minutes Sunday? They had a similar story

about investors and accounting firms basically helping those shield capital gains from tax dollars. One guy made $50 million selling his business and paid zero in taxes but paid nearly $10 million to the advisors who helped him to avoid taxes. He owed $13 million in taxes.

The 60 Minutes folks said that this is one case but that if all if the cases like this were investigated and prosecuted, we would not have to worry about the deficit or the $87 billion needed in Iraq.

It's a shame that people who realize the American dream don't want to give back something to this country.

[Maple]

7. So this is

commonplace??

[leftchick]

8. oh yes...

and as long as bunnypants squats in the Oval Office do not expect any change EVER to this rape of the taxpayers. Cuz, hey his brothers in "Corporate Criminal Mafia" (CCM for short)are reaping in the DOUGH!

That is what is is all about you dumbass freeperheads!!!!
(who may be lurking and get a clue)