Thursday, August 16, 2007

Pope Benedict to Address Tax Evasion and Tax Havens

It was reported today that the Pope's second encyclical letter will address tax evasion and tax havens. As a tax lawyer, I considered going into my group head and saying that I needed to be excused from work, but then thought better of it.

This is not a new requirement. The Catechism (of which Pope Benedict was an important contributor) lists tax evasion as a morally illicit business practice. US law recognizes the difference between tax evasion (which is illegally arranging your affairs to evade paying taxes) and legal tax avoidance (which is arranging your affairs so that you pay the minimum amount of tax due). Someone owning Microsoft stock purchased in 1982 is not required to sell it to pay tax -- the taxpayer is perfectly permitted to hold the stock, borrow against it, and use it in such a way that no tax is due.

It will be interesting to see what the letter says. I believe it probably must be read in the European and specifically the Italian milieu where money is transferred secretly offshore into haven jurisdictions.

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