Evening star., 1937-06-13
BY JOHN C. HENRY.

oressionnl investigation With legts-
lation to tighten la,ps.
BY JOHN C. HENRY.
Congressional sleuthing which
eventually may force some of the Ma
tion's vealthiest and best known citi-
Dens into temporary residence in Fed
eral penitentiaries will get under way
during the coming week when joint
committee opens its probe into prac-
tices of tax avoidance and evasion.
Although both Senate and House.
which are each contributing six men,
bers to the joint board Of inquiry,
have shown themselves hardly more
than lukewarm over the expected
public whipping sufficient determi-
nation exists at the White House and
the Treasury Department to turn the
yi1ole affair into the most spectacular
"circus" since j. P. Morgan dandled
a midget for the edification of the
Senate Banking and Currency Com
mittee.
Headlines featuring incorporated
yachts, personal holding companies
In the Bahamas, other spectacular de-
vices and perhaps even an occasional
champagne bill already are taking
shape under the thorough efficiency
of stan of expert accountants, at
torneys and investigators at the Treas
ury Department.
Individual Returns Studied.
Individual returns showing net In
~ thnSA
showing large gross income regardless
of amount of net already are being
scrutnized In minute detail in 81
revenue districts OF continental United
States and thirty-eighth In far-of
Hawaii
Key men In regular departmental
service have been placed in charge
OF the work with all findings kept
closely guarded until such time as
they may be laid before the Con-
gressional Committee
Although concerned primarily with
the returns for 1885, the files Of some
Individuals have been sufficiently in
tsiguing to the examiners to lure
them into a study Of figures for pre-
vious years. In some cases, also,
Information already submitted to the
Treasury Department has been cata-
logued as incomplete and field in
vestigators are to be delegated to the
task Of seeking out more facts about
Mr.. So-and-so's financial status.
Circumstances Leading to Loss.
Three specific circumstances lead
ing to loss of revenue are being
sought by the department examiners.
First, instances of deliberate fraud
on the part OF citizens making re-
turns; such fraud frequently con-
sAsting of willful failure to disclose
real income, false assertion OF losses,
false assertion of divided income, ETC.
IN such cases. it Is the quiet hope Of
the Treasury that the Justice Depart
nrent can be stirred to bring criminal
action against the perpetrators.
Second, are instances of honest re-
turns but failure to make proper pay
lnents because OF employment Of i'll
advised or at least questionable de-
vices of reducing tax liability Some
of these are the clever little schemes"
referred to by President Roosevelt
and recovery of taxes lost in this
category is held desirable as a deter
rent to future employment Of similar
devices
Third are instances where real
loopholes have been uncovered in
the tax laws and the individuals are
within full legal rights in their
avoidance OF payments.
For legislative purposes, Of course,
this latter classification Is most i'm
portant and is the one in which
the Treasury Department processes
the greatest interest.
That there is genuine desire on the
part OF Mr.. Morgenthau's department
to discourage employment OF evasion
devices and to correct by legislation
some OF the holes in the tax laws Is
indicated in circumstances leading to
the pending inquiry.
Honor" Of Department at Stake.
Bearing in mind that 1t was from
the Treasury experts that Congress
received its encouragement for en-
actment Of the tax reforms OF 1886.
t is obvious that the honor" Of
the department was placed at stake
when returns OF last March proved
so disappointing.
And since the department could
not Immediately admit that their
theories Of taxation may have been
erroneous it became necessary, there
lore, to uncover some other reason
Tor the shortage.
Accordingly Secretary Morgenthau
asked a quick check in the New York
and Philadelphia districts immedi-
etely upon receipt of the March re-
turns 10 determine the degree of eva
sion and avoidance,
MOI suhciently satisfied with re-
suiIs' ne asked Undersecretary Ros-
well Magill to make q personal study
soon alter. with the result that Ma.
gill and two aides spent nearly 1wo
months in the field preparing the eva.
SION complaint as laid before President
Roosevelt and the Congress,
Position Of Treasury.
with the impetus for the probe thu.
coming from the Treasury. there vas
an enort made to have Congress give
department ot'icers principal author
Aty IN conducting the inquiry.
rooaoly feeling that such an op-
portumty to turn some biR-income
c1tlzens into whipping boys at this
time was too valuable politically to
leave to other hands, even though
their own temper for the task wa.
extremely divided, the Senate and
House speedily agreed to make it their
party with the experts from downtown
merely standing by to furnish ammu-
nition
1t is expected, therefore, that Nor
eenthau and Magill both may be sum-
noned to present evidence Of the de-
plored evils rs early this week Is the
committee can decide.
Subsequent procedure Of the inquiry
still Is undetermined with only the