The full text of this volume is available here in Adobe Acrobat PDF format.

“Corporate tax shelters are usually thought of as impenetrable transactions, devoid of economic substance, devised by very smart people to confuse everyone through aggressive gaming of labyrinthine legal and tax rules. Dan Shaviro, a very smart person, has managed to produce a lucid tract on corporate tax shelters that combines economic substance and clear legal principles in a gamely manner. His contribution is accessible to scholars, practitioners, and policymakers and should serve as their roadmap in this increasingly important area.”

—Mihir A. Desai, Rock Center Associate Professor, Harvard Business School and faculty research fellow, National Bureau of Economic Research

Tax reform proposals often include alterations to the corporate tax code. There are two main motivations for this. First, taxes that treat consumption as the base require extensive revisions to existing law. Depreciation rules, for example, are often replaced with expensing provisions. Second, it is widely acknowledged that the complexity of our existing tax code encourages aggressive tax management or “evasion” activities. Reform proposals often seek to make the code simpler and more transparent.

Tax reform proposals generated by economists often assume that the legal aspects will miraculously work themselves out—that the reform, if enacted, will work exactly as planned. But can any tax system eliminate costly evasion activity? In this volume, AEI visiting scholar Daniel N. Shaviro explores the causes and costs of tax avoidance and provides a useful guide to the key conceptual issues that must be addressed in order to design a truly effective tax reform.

In the first chapter, Shaviro attempts to identify the specific aspects of U.S. tax law that lead to extensive “paper pushing” in the interest of tax minimization, as well as a metric by which a tax authority can establish whether a particular tax planning action should be considered abusive or wasteful. In the second chapter, Shaviro explores tax arbitrages that are common among U.S. multinationals and discusses their economic consequences. Throughout, the author discusses policies that can soften the economic blow from avoidance activities.

Any fundamental tax reform will require rules to ensure that taxpayers face the incentives that are intended by reformers. This study is a valuable guide for those who must establish these rules.

Daniel Shaviro is the Wayne Perry Professor of Taxation at New York University Law School and a visiting scholar at the American Enterprise Institute.