What's A Tax Scam or Scheme?  By Vernon K. Jacobs, CPA  & J. Richard Duke, J.D., LLM

Citizens or permanent residents of the high tax countries are often motivated to seek ways to reduce their tax burden – particularly on their investment income.  Each country with an income tax has an assortment of deductions, exemptions and exclusions by which different taxpayers may reduce their tax burden with the full sanction of their tax law. In addition, there are always numerous opportunists who will take advantage of those who want to reduce their taxes but are not on  intimate terms with the complexities of the tax law of their country. Professional advisors who study the law and counsel taxpayers on the methods of tax reduction that are permitted (or even tolerated) by the law are not “promoters” because such advisors generally are not advocates of a particular method of tax reduction. Promoters are those who find a way to save taxes that might be legal for one taxpayer but they then attempt to market the idea to as many other taxpayers as possible. In effect, the prescription for one person is turned into a product to be sold to everyone who can be persuaded to buy the product. The tax avoidance method then becomes a “cure-all” without regard to the specific circumstances of the buyer. In many ways, it’s like selling a cancer medication to someone who has a broken arm. The packaged solutions of such promoters are not necessarily scams or illegal, but the more aggressive promoters may turn them into scams. A tax avoidance method becomes a scam when it is clearly illegal, but the promoter is not deterred from “bending the truth” to get someone to buy his or her cure-all.  Tax scams can range from those that are border-line illegal to those that are beyond any reasonable doubt as to being an illegal form of  tax avoidance. Richard Duke is a tax attorney with a focus on international tax law. I’m a tax accountant and a professional writer with a focus on international tax law. For three years, we wrote and I published a monthly newsletter called “Offshore Tax Strategies”. In that newsletter, we explained the legal and the illegal methods being used to pay less taxes – with an emphasis on cross border arrangements. We discontinued our monthly newsletter in order to devote more time to write and update a comprehensive tax guide on international tax law and to use that guide as a reference manual for a series of seminars. However, during the three years when we wrote our newsletter, we discussed a wide range of illegal tax scams and we will be sharing some of those stories and articles  with visitors to this web site. We offer the following expose' of offshore tax scams and schemes because many taxpayers and advisors are honestly confused about what is legal and what is not legal in the U.S. tax system, relative to offshore transactions and structures. Our purpose here is to describe the more common offshore tax schemes that are not justified by the law and are not sanctioned by the U.S. Government. We are not in favor of helping the government to collect more taxes and we have written an extensive guide to legal methods of tax avoidance for U.S. taxpayers.  However, as professional tax advisors, it is also our professional duty and concern to help our clients and subscribers to stay out of jail.  Hopefully, this information will help you to avoid the kind of illegal scams and schemes that could either result in some time in jail or in some severe financial penalties. Vernon Jacobs & Richard Duke Reprinted in part from The Offshore Tax Seminar Manual Copyright, 2002, All rights reserved. Co-authors of The Offshore Tax Seminar Manual http://www.offshorepress.com/offshoretaxmanual.htm

About the authors: Vernon Jacobs is a CPA who provides tax accounting and consulting services for clients with international interests. He edits and publishes the online International Wealth Protection Reports ..  J. Richard Duke , JD, LLM is an attorney who specializes in international tax law and is an Adjunct J. Richard Duke is a Professor of international tax law. and a practicing attorney in the international specialty.  He is a Consulting Editor for the online International Wealth Protection Reports Sponsored by Offshore Press, Inc .., Copyright, 2004, All rights reserved. Offshore Press, Inc., Box 8194, Prairie Village, KS 66208. Phone (913) 362-9667. Email to Offshore Press  Vernon K. Jacobs, Webauthor .