Tax Shelter Industry

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Long title: 
Confidence Games: Lawyers, Accountants and the Tax Shelter Industry
Author(s): 
Regan, Mitt
Author(s)' contact information: 
Georgetown University, USA
Conference title: 
International Legal Ethics Conference VI
Conference location: 
City University London
Country: 
USA
Year: 
2014

For most of the twentieth century, there was a general consensus within the elite tax bar in the United States that advice to clients should be tempered by concern for the integrity of the larger tax system. By the end of the century, the involvement of tax lawyers from elite law and accounting firms in the largest wave of abusive tax shelters in U.S. history revealed that this consensus had eroded. Fierce competition among law firms, and between law firms and accounting firms, placed pressure on informal professional norms and prompted more aggressive efforts to reduce the tax obligations of clients.
The regulatory response to these events has been the criminal prosecution of more than two dozen lawyers and the enactment of more stringent rules that purport to limit tax advisor discretion. Providing tax advice, however, ineluctably requires the exercise of considerable judgment that eludes precise formulation. Furthermore, much of the sense of ethical obligation among members of the tax bar historically has been dependent on the adoption of a certain disposition towards tax practice, rather than simply the desire to avoid sanctions. Relying solely on informal professional norms no longer is realistic under the conditions of modern tax practice. A regulatory system based principally on deterrence, however, may risk undermining the conditions that allow tax lawyers to cultivate a sense of ethical judgment. This paper examines the extent to which it is feasible to rely on a balance of both instrumental and aspirational approaches in regulating tax lawyers.

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