In my last column, I mentioned how governments are becoming desperate to collect taxes and are imposing severe sentences on those who evade taxes; the most frequent offence is simply failing to declare income. I had listed some of the most famous tax evaders of all time. Some more, this week, to complete my Top 10.
Most did not actively set out to evade taxes; they were just careless, misinformed, badly advised or all three. They assumed tax payment somewhere removed the obligation to declare and pay tax elsewhere. This was a big mistake. Get the proper advice. It may cost a bit but it will be a lot cheaper then getting it wrong.
Boris Becker
The tennis champion was fined €300,000 (HK$3.47 million) and sentenced to two years' probation for tax evasion. Becker admitted that from 1991 to 1993, he claimed to be living in Monte Carlo but was living at his sister's house in Munich. His lawyers claimed it was his advisers who filed the incorrect returns and pleaded for leniency. The court gave it to him. His legal residence in Monte Carlo did not prevent him from being resident elsewhere. It is possible to be tax resident in several places at the same time. Tax treaties or the kind attitude of tax authorities (that's not a joke) would normally give you a credit for tax paid in one place against tax due on the same income in another. But the income must be declared in both places. Becker didn't.
Luciano Pavarotti
One of the biggest tax evaders ever. In 1999 he was convicted of tax evasion and fined US$4.55 million and in 2000 paid 74 billion lire to the Italian government in fines and back taxes. In 2001, he was again accused of evading US$18 million in taxes. He had taken out legal residency in Monaco but spent up to 179 days a year in the US, avoiding becoming tax resident there by one day. The authorities claimed he had houses and business interests in Modena, sufficient to establish tax residency there. He was eventually exonerated on those charges.
Wesley Snipes
Snipes had an odd choice of friends. He started sending money to the American Rights Litigators (ARL), a protest group that claimed tax legislation was unconstitutional, that it was voluntary to pay taxes, and other stuff such as Florida was not part of the United States and therefore could not charge taxes. Snipes decided to send more than US$15 million to offshore accounts and, apparently on their advice, failed to declare that money as being taxable. He claimed the ARL had advised him that he did not need to file returns or pay taxes on the amounts he sent them. The courts did not sympathise and sentenced him to three years in jail although they acquitted him on the more serious tax fraud offences. He had to pay around US$17 million in back taxes, penalties and interest.
Martha Stewart
Stewart isn't so hot at getting her own house in order. She owned a house in New York but didn't think she needed to pay taxes on it. Her excuse: she thought she didn't need to pay tax in New York as she didn't spend much time there and most of her friends lived in Connecticut. This was listed as one of the seven worst excuses of all time for not paying taxes.
Tim Geithner
As you know, he is head of the US Treasury and therefore the de facto head of the Internal Revenue Service (IRS). In 2006, the IRS found he had not paid taxes in 2003 and 2004 because he believed the tax had been deducted at source while he was working at the International Monetary Fund. After he was selected to head the Treasury last year, it was discovered he owed a further US$25,970 for 2001 and 2002. No explanation of how these debts had gone unpaid has been given except he suggested "careless mistakes".
Valentino
The fashion designer was recently fined US$39 million for tax evasion in Italy - despite the fact that he had relocated to London with his partner Giancarlo Giammetti some 10 years earlier. It was alleged that despite his relocation, he continued to operate from Italy but paid no taxes there. Not long ago, Domenico Dolce, Stefano Gabbana, and Roberto Cavalli were similarly accused but cleared. Italian law states anyone who earns more than half their income in Italy must pay tax there and anyone whose centre of economic interest lies in Italy must also pay tax irrespective of whether they are legally resident and taxable elsewhere.
TAX FILE
