IRS Shuts Down Tax Loophole, But Not Before It Saves IBM Over $1 Billion
from the just-in-time dept
The government may be slow footed with respect to most things, but it moves awfully fast anytime its tax revenue is threatened. This week, IBM announced that it had avoided paying $1.6 billion in income taxes by using a loophole that involved foreign subsidiaries buying up company stock and using it to pay executives. Following this announcement, the IRS needed only two days to announce that this loophole would henceforth be disallowed. Apparently, variations on this loophole have been in place for 45 years, and each time a company comes up with a new one, the IRS moves quickly to stamp it out, so there's not much reason to think that this will never be done again in some form or another. The incident also serves to demonstrate the inherent regressiveness of a complex tax code, as large multinationals like IBM have the resources to continually discover new loopholes, while smaller firms (without armies of lawyers and accountants) have fewer ways of avoiding their obligations.