Lion of the Blogosphere

Did Paul Manafort really commit criminal tax fraud?

Let’s remember that big corporations like Apple hardly pay any federal income tax because of the fiction (or maybe the reality) that their profits actually belong to overseas subsidiaries, and according to the tax laws, the profits are only subject to U.S. income tax when the subsidiary pays a dividend to the parent corporation in the United States.

Paul Manafort presumably set up the same sort of structure for his international consulting business.

The primary illegality alleged in the indictments is that he had these foreign corporations spend millions of dollars on a mansion in the Hamptons, an apartment in Arlington Virginia, etc, and these were personal expenses not business expenses, and therefor were in the nature of dividends for which he didn’t pay income tax. (Also expensive cars, rugs, clothes, artwork.)

I don’t practice tax law in real life, so I have no idea if this would normally be a criminal fraud prosecution, or just a civil action by the IRS.

Written by Lion of the Blogosphere

October 31, 2017 at 5:03 PM

Posted in Politics, Taxes

18 Responses

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  1. I think the key is that he spent millions on luxury items here in the U.S. without reporting and paying income taxes on that money. If he kept it in overseas accounts and never used it, that would be more like what Apple does.


    October 31, 2017 at 5:06 PM

  2. Did Paul Manafort really commit criminal tax fraud?

    That is so far down the list of questions that the commentors on this site are even remotely qualified to answer….


    October 31, 2017 at 5:17 PM

    • JS lives in Canada, does taxes for US citizens while not paying any himself but is the only commenter that has committed himself to paying taxes on cash transactions. He should be qualified. I mean, why not?


      October 31, 2017 at 6:38 PM

      • Because tax law is really complicated and Manaforts tax situation is both really complicated and confidential.


        November 1, 2017 at 8:19 AM

      • I take the foreign earned-income exclusion, in addition to writing off my expenses, which wipes out tax owed to the IRS. However, I need to pay a small amount of FICA (Social Security and Medicare tax), but no income tax (which is a useless tax that only goes to the gov’t and you have no share in it)


        November 1, 2017 at 7:09 PM

    • I don’t know what Manafort did when he was setting up his business. It seems like he was trying to be like Hugh Hefner without reporting any profits, which is a red flag to the IRS.


      November 1, 2017 at 7:04 PM

  3. Terror attack today in Manhattan?


    October 31, 2017 at 5:19 PM

  4. Criminal action by the IRS is extremely rare. It’s usually reserved for those facilitating tax fraud for others (i.e. not personal tax filers), extremely gross violations, or people trying to make political statements like Wesley Snipes.

    The vast majority of cases are settled civilly. Pay the penalty and interest, and expect to be audited for the next ten years. If there’s any ambiguity about the legality or rules, criminal prosecution is virtually unheard of. Therefore Manafort’s case is highly atypical.

    In fact there’s even a good bit of economic research that if Americans were rational they’d be engaging in much more tax avoidance than they currently do. The probability of being audited times the relatively minor penalties means that there’s far more economic value to tax evasion. High rates of compliance can only be explained by high rates irrationality and/or patriotism among Americans.


    Click to access dp3103.pdf


    October 31, 2017 at 9:12 PM

    • Most people just have their regular job so there isn’t that much opportunity to not pay taxes. If people had a business , then there might be a better chance to not report income, but even most small businesses don’t make that much money.

      Spain is prosecuting a lot of soccer players including Messi. They just pay a fine and pay taxes owed. None of these guys are getting jail time and there are pretty large amounts, Messi and his dad owed 4.7 miliion Euros.


      November 1, 2017 at 11:26 PM

  5. I’m not sure what to make of this argument. I do know that if you have any kind of international dealing or complex business dealings an “aggressive” federal prosecutor can absolutely destroy your life.

    Remember Arthur Anderson? They were legally vindicated AFTER executives went jail, had their lives destroyed along with thousands of partners who lost everything. The same prosecutor is now working for Mueller.

  6. Oh, and to answer your question, we all know there is no way in hell Manafort would ever have been prosecuted if he hadn’t briefly been Trump’s campaign manager.

  7. “I don’t practice tax law in real life…”

    I cant keep up. Wasnt there a blog post years ago that was a draft letter to an employer saying you wanted to spend the rest of your life doing tax law- which I thought at the time was an odd turn a phrase. I assumed you got the job and that is what you had been doing until your recent activity.

    Long time readers really are pulling for you to find happiness.

    Lion o' the Turambar

    November 1, 2017 at 1:58 PM


    November 1, 2017 at 5:40 PM

  9. It looks like nepotism is never good . I agree with Breitbart that most choices inspired by the Kushner /Ivanka team are very bad for Trump . Nomination of Kelly helped diminished the number of leaks . Trump needs better advisors .


    November 2, 2017 at 4:44 AM

  10. manafort’s indictments were all tax related. the resolution of that is paying back taxes, with interest and fees. that’s what timothy geithner did after it was revealed he hadn’t paid fica taxes between 2001-2004

    the irs just wants your money because putting you in jail is a hassle. trump should pardon everyone on the condition they pay back taxes. mueller is out of control, and the special prosecutor position should be scrapped.

    • If that’s what would normally happen if Manafort had been an unknown rich person caught by the IRS because they audited him, then that should be his penalty and not jail time.

      Lion of the Blogosphere

      November 2, 2017 at 10:10 AM

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