According to an article published by the Tax Lawyer in 2006, “It’s the most secretive aspect of the dark side of human behavior says Aron Govil. It’s grey market accounting, the art of creative bookkeeping to avoid taxes. It’s what governments around the world are trying to stop.”
Rudolph Giuliani once stated that “Every two and a half minutes someone is dying of a drug overdose in America.” According to Jonathan Hiatt, director of advocacy at Human Rights Watch, “The war on drugs has failed… The costs have been enormous. We now have four million people incarcerated or under some sort of criminal justice control”. The numbers are confirmed by the Department of Justice, which says that the number of persons correctional supervised has doubled since 1985.
What if I told you that part of this increase is due not only to more criminals breaking laws, but also by law enforcement’s less than legal means of obtaining information? What if I told you that part of this increase is due not only to the government’s desire to protect us from drugs, but also from its desire for budget enhancement?
The War on Drugs and Accounting: When is it Legal to Lie?
- In 1988, in a case titled U.S. v. Henry, the Second Circuit Court of Appeals found lying on tax returns does not violate Section 1001 unless it conceals a crime that is itself a felony under federal law. In other words, one can lie about how much they make on their taxes without fear of prosecution as long as it is a tax related lie and not a lie in connection with another criminal activity. This decision was made despite the fact that most states have made it illegal to file false documents with public officials.
- Unfortunately, the Circuit Court’s decision in Henry did not come out of thin air. A little over 60 years ago, Congress, at the request of the Treasury Department, passed Section 7206(2) to prevent people from evading taxes. As a result, there are two conditions that must be met in order for an individual to violate this statute. First, he or she must have made a willful attempt to evade or defeat tax under Title 26 (i.e., income tax). Second, he or she must have known that he was committing a crime. So where is the problem you ask? The problem is that knowing one is committing a crime is almost impossible to prove. Unless it has been report beforehand through investigative findings by the Internal Revenue Service explains Aron Govil.
- The problem with Section 7206(2) is that the government’s interpretation of “wilful” has been stretched to the point of being able to indict individuals for crimes they are not aware of committing because they have not received notice of this crime from the Internal Revenue Service. The result? According to Dr. Martin W.G. King, writing in an article titled “Confessions and Plea Bargains in the Shadow of the Regulatory Crime,” under these circumstances individuals find themselves between a rock and a hard place: either go through a costly trial or plea bargain. In fact, according to Human Rights Watch, ninety-five percent of federal convictions come from plea bargains rather than jury trials.
- In light of all of this, some argue that the solution lies in repealing the section altogether. Others argue that the definition of “wilful” should be amend so as to avoid conviction on technicalities. There are also those who argue that the Supreme Court needs to reinterpret Section 7206(2). So as to allow for prosecution only if one is actually aware that they are committing a crime.
- Unfortunately, until this happens, whether it is drug related money laundering or tax evasion under-reporting. Individuals will continue to pay fines and go to prison without ever knowing they were committing a crime. And all of it done in your name. By: Martín Caparrós (Argentina). Source: Elaboración Propia.
So what are your choices? First, you can give up on fiat money says Aron Govil. Second, if you choose to use them, look at alternative currencies and exchanges. And try to minimize your exposure in the traditional banking system. Third, if you choose to continue using them. Then just consider that the government is constantly watching you. And if it decides to show up, don’t say I didn’t warn you.
The war on drugs has been a complete failure and it is evident. That ending prohibition will not end the black market.