Lawmaker urges a wary eye in monitoring business exemptions
OLYMPIA – While we go about the business of safeguarding our municipal treasury, according to a Clark County legislator, we’d better be mindful of misdeeds carried out on many different fronts. Monitors, for instance, should scrutinize individuals and businesses pilfering public-tax breaks as much as these watchdogs peruse citizens and families utilizing public-service programs.
State Rep. Jim Moeller is calling for the creation of an independent office of fraud-investigation in the Washington State Department of Revenue “to make sure the taxpayers of Washington aren’t being victimized by fraud and abuse carried out by unscrupulous individuals and corporate shenanigans.
“Whether it’s welfare fraud or corporate fraud – fraud is fraud. Rooting out all types of fraud must be the concern of every Washington taxpayer.”
Moeller noted an idea recently floated by a southwestern Washington Republican senator: The state needs an agency solely committed to investigating welfare abuse. The GOP legislator called for the state Department of Social & Health Services to establish an independent office whose mission is the hunt for welfare fraud.
“Great idea. I agree that we need to be on the alert for bad actors – and we need to prosecute them – who may be filching any level of public money,” Moeller said.
“It’s very appropriate that we keep relentless in our pursuit of fraud and abuse. All I am saying is let’s be on guard for unsavory activity at every point of the public, economic spectrum. Let’s be vigilant in rooting out misuse of tax breaks, too.”
Moeller said he’s aware of “ghost companies” that are set up in other states by existing Washington companies “as an underhanded way to dodge payment of our taxes. An existing Washington company can then lease back any art or equipment or vehicles or whatever from the bogus company that has purchased it – without paying Washington’s taxes.
“I’ve heard that there is an entire industry in Montana consisting of dummy corporations set up to purchase motor homes and then lease them back to Washington citizens and businesses who thus escape paying Washington taxes,” Moeller said.
People can license their vehicles or yachts or jets or whatever in other states to avoid our taxes. A person must pay the use tax only when the person actually uses the property, even though the person may for all practical purposes own the object.
“Now, today – especially at a time when our state budget is in such rotten shape and we should by rights be even more attentive than ever before at spending money wisely – we need to make sure that people and companies are paying their fair share and carrying their fair weight.”
Moeller cited examples of Washington citizens schooling the existing system:
* A person loaned to the Seattle Art Museum some very pricey art on which the person didn’t pay taxes because he leased it to himself through a ghost, out-of-state corporation.
* A person registered one of the world’s largest yachts in the Cayman Islands through a limited-liability company. The individual pays use tax on the fair-market lease value only for the portion of time the yacht is actually used in Washington.
* A person purchased an $800,000 motor home solely for personal use and registered it through a Montana corporation to avoid Washington’s use tax.
* A person bought a Learjet, placed the ownership in a limited liability company, and claimed the aircraft was purchased for resale leasing. The company then leased the aircraft back to the individual for personal use.
The Department of Revenue estimates that tax-avoidance schemes will result in lost state revenues of $8.2 million in 2011, $12.7 million in 2012, and $17.7 million in 2013.
When a Washington resident buys or uses personal property in Washington, he or she must pay retail sales tax or use tax on the full value of that property. When the property in question is a large “luxury” item (e.g., an airplane, motor home, or yacht), the retail-sales or use tax due can be substantial.