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Taxation has been a hot topic for as long as civilizations have existed. Where there is a government there is a taxation of the people for services provided.

The problem is that many people are easily, and increasingly, disaffected by the lack of tax-funded services provided such as health and education. As a result, many people have tried to either reduce their tax bills legally or evade their obligation to pay taxes illegally.

Defining tax avoidance and evasion.

• Tax avoidance - minimizing your taxes within legally working within the bounds of tax legislation to reduce tax
• Tax evasion - taking illegal measures to evade paying tax, punishable by law

Most people on an average salary will simply pay out what they owe to the IRS, get it over and done with and then get on with life. Others take reducing their tax bill a lot more seriously and go as far as setting up fake corporations, banking offshore in tax-free havens and even becoming a citizen in another country.

Will Rogers, the famed American humorist, put it nicely:

“The income tax has made more liars out of the American people than golf has. Even when you make a tax form out on the level, you don’t know when it’s through if you are a crook or a martyr.”

So without further ado, here’s a list of 9 huge tax frauds from around the world.

1. Chinese VAT Receipt Gang Evades Yuan 32.3b Tax
The new millennium brought to light the largest tax fraud case in China’s long history involving non-payment of VAT to the tune of Yuan 32.3 billion or $3.6 billion. 16 months of investigation yielded 172,000 counterfeit value-added tax receipts printed by criminals in Shantou and Puning in Guangdong province. The modus operandi of the gang was to sell the fake VAT receipts to businesses around China, who used it to evade taxes.

In the end the scam was exposed by a disgruntled member who felt he was not getting a big enough return. The case ended with 30 of the accused getting life imprisonment and 19 receiving capital punishment. The Jude Shao case is also an interesting case dealing with tax fraud in China and how the government cracks down on it.

2. US Tax Loophole Discovered? Enright Evades $140m Tax
In June 1998, the US Department of Transportation’s Office of Inspector General (OIG) convicted four defendants; chief among them Daniel Enright, for tax evasion totaling $140 million in combined state and federal taxes. Enright’s tax evasion was based on the belief that his oil distribution company PetroPlus did not have any tax obligations.

His belief that he had discovered a tax loophole was further buttressed by the various letters of agreement that he received from his attorneys. Furthermore, Enright was emboldened by the fact that he did not hide what he was doing. However, the FBI executed a search warrant against him and launched a case charging him with tax evasion that resulted in him being convicted and sentenced to 17 years in prison.

3. Operation Wickenby Uncovers Australian Tax Evasion Network
A sustained operation against tax evaders in Australia has already seen enough twists and turns to merit a mini-series on television or a court-room drama straight out of Hollywood. Operation Wickenby has led to the profiling of more than 1,100 wealthy individuals involved in tax evasion including actor Paul Hogan, cricket legend Shane Warne and showbiz promoter Glenn Wheatley.

The matter has threatened to strain relations between Australia and Switzerland, where the money was stashed. To understand how the accused manipulated tax laws and made use of bogus trusts to put money into Swiss banks, go here.

4. Walter Anderson Evades $200m Tax Via Offshore Companies
The biggest personal tax evasion case in the United Sates. In March 2005, the Justice Department filed a case against Walter Anderson for not paying more than $200 million in personal income taxes by doing the usual thing, keeping the money in offshore accounts. This is the largest criminal tax case against an individual in the US.

Anderson made his millions in the telecom business and had even tried to salvage the fate of the down and out Mir space station. Anderson is alleged to have run businesses by proxy to make it appear that it wasn’t him who was making the money. His offshore corporations were based in Panama and the British Virgin Islands. Anderson faces up to 80 years in prison upon conviction.

5. Sri Lankan VAT Tax Scam Uncovered, Evades Rupees 360b Tax
In 2005, Sri Lankan authorities uncovered a VAT-related tax scam that encompassed Rupees 10 billion, which was thought to be the biggest tax scam of it’s type in South Asia for a short time. In 2006 the team of investigators working on that case discovered another scam amounting to a staggering Rupees 360 billion in lost rax revenue.

The scam involved misappropriation of VAT funds under the noses of the state officials, which has raised serious questions regarding the functioning, or lack of thereof within the state administration.

6. Money Laundering Network Evades EUR 400m in Belgium
In January 2006, the trial for the biggest ever tax fraud in Belgium started after the Belgian tax office was allegedly cheated out of a mind boggling EUR 400 million. 37 people and 2 big banks (KB Lux and KBC) faced accusations of money laundering and tax evasion as part of the investigation into financial impropriety. In an interesting twist, some 14 defendants asked for an enquiry into the investigating agencies as they contended that much of the evidence had been gathered in an illegal manner.

The defendants include respected names such as Remi Vermeiren, ex-president of KBC’s board, Damien Wigny, KB Lux’s ex-president of the board and Rita Verstrateen and a hairdresser who inherited a fortune of EUR 500 million from Roget Gosset, a cigarette baron. Around 8,000 accounts have been examined as a part of the investigation.

7. Spanish Network Busted for EUR 400m VAT Evasion
Forty people were investigated in the closing months of 2006 in Spain regarding their involvement in a tax evasion scheme that has the dubious distinction of being the grandest such scheme in Spanish history.

After searching thirty properties and tapping several phone lines, the Spanish tax office concluded that approximately EUR 400 million had been lost because VAT-exempt mobile telephone and computing equipment was purchased from other EU countries and sold on within Spain without paying the Spanish VAT. The accused ran several phantom companies that billed each other below the original prices of the commodities they traded in.

8. Marc Rich Evades $48m, Offered Presidential Pardon
A fascinating saga of a kid called Marc Rich who fled war-torn Europe to become a multimillionaire in the US and whom President Clinton offered a presidential pardon in his final hours in the White House. Pardon for what? For tax evasion, illegal oil deals with Iran and for being America’s number one white collar fugitive, that’s what!

Rich was charged way back in 1983 for evading more than $48 million in taxes, which was a huge amount back then. Rich fled the US when the heat grew too much and landed in the cooler climes of Switzerland from where he could not be extradited.

9. Garbo, Gable and Casablanca Evade CAN $23m Tax
Although the amount that the government got swindled of is quite small, a mere $23 million, this case still managed to top the record books for the biggest tax fraud in Canadian history. In February 2000, a Toronto judge pronounced the toughest sentence possible for tax fraud in Canada with Einar Bellfield copping a 10-year sentence and CAN $1 million fine.

Bellfield offered Canadians, and 613 people fell for it, the chance to invest in luxury yachts and promised tax write-offs. However, the yachts were never built and if the government had not been tipped off, Bellfield would have declared bankruptcy and disappeared from Canada.

This entry was posted on Thursday, March 1st, 2007 at 12:11 am and is filed under Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.