Andy — I agree that DOJ should be congratulated for not going nuclear against KPMG, but the best I can muster is one or two cheers.
The righteous stupidity which brought down Arthur Andersen does not exactly set a high bar for DOJ to match. Moreover, while I’ll hold my breath to see whether the individual indictments yield actual convictions, it cannot be seriously disputed that this whole mess is the product of an idiotically complex tax code. The real remedy isn’t going after companies which try to do their best for their clients within the law, but changing the law. What constitutes an “abusive” tax shelter is often a metaphysical question. And one must enjoy the irony that congressional liberals are embracing the doctrine of original intent to make the distinction.
As the Journal notes in an excellent editorial on the subject:
The IRS’s standard in evaluating tax shelters is whether the transaction serves a “legitimate economic purpose,” or is crafted entirely to avoid taxes. Senators Carl Levin (D., Mich.) and Norm Coleman (R., Minn.) have proposed legislation that would enshrine that doctrine in law.
Speaking on the Senate floor last month, Mr. Levin described the distinction: “Abusive tax shelters are very different from legitimate tax shelters, such as deducting the interest paid on home mortgage or Congressionally approved tax deductions for building affordable housing. Abusive tax shelters are complicated transactions promoted to provide large tax benefits unintended by the tax code” (our emphasis). In other words, it’s OK to avoid taxes in any of the myriad ways Congress approves of. It’s abusive if Congress didn’t intend it — assuming anyone can ever figure out what Congress really intends.