WASHINGTON (AP) _ The Clinton administration is proposing new penalties and increased scrutiny of corporate tax shelters that rob the government of billions of dollars a year, Deputy Treasury Secretary Lawrence Summers said today.
Summers told a Tax Executives Institute conference that the Treasury Department will strive for a ``culture of compliance″ focusing on both the peddlers of tax shelters and their purchasers.
``This is not about demagoguing. This is not about anything that will seize revenue,″ Summers said. ``This is about a fairer tax system.″
The Treasury Department plans as early as next month to release a major paper outlining the scope of the tax shelter problem. Estimates of losses in federal revenue are sketchy, but a single example cited by Summers was pegged at some $30 billion a year.
In his fiscal 2000 budget plan, President Clinton proposed to eliminate several specific tax shelters. But Summers said the administration is not stopping there.
To create ``real financial risks″ for people who devise and use tax shelters, Summers said, the administration wants Congress to approve a 25 percent excise tax on promoter and lawyer fees. In addition, an unspecified excise tax would be imposed on contingency fees, sometimes used when part of the deal depends upon a favorable ruling by the Internal Revenue Service.
Without such deterrents, Summers said, ``The temptation for some taxpayers to play the audit lottery is just too great.″
Other actions the Treasury Department is taking on its own include guidelines on specific questionable transactions that would be retroactive, stepped-up compliance efforts within the IRS and possible suggestions for new standards of conduct within professional legal and accounting groups.
The administration’s tax shelter proposals have met with resistance from many tax practitioners, and several questioners in the audience today complained that they are vague and too broad. But Summers said it would be wise for professionals to do more than simply criticize the ideas.
``It is not in our interest to subject taxpayers to out-of-control enforcement actions,″ he said. ``Conversely, we do believe there is a major problem.″