Tax Authority as Regulator and Equity Holder: How Shareholders' Control Rights Could Be Adapted to Serve the Tax Authority

Authors

Ilya Beylin

Document Type

Article

Abstract

(Excerpt)

If taxes served solely the goal of generating revenues, the tax authority could simply be granted nonvoting common shares in every corporation and rely on assertive shareholders to safeguard its interest.14 As is, however, taxes are designed to do more than raise revenues—they are also used to encourage congressionally favored behavior.15 In other words, the tax authority as interest holder does not only care about how much the taxpayer earns but also about how the taxpayer earns it. As a result, the interests of shareholders and the tax authority are not always aligned, as the latter operates under statutory directives that balance raising revenue with encouraging congressionally favored enterprise. If it were not allowed distinct control rights, the tax authority could not steer firm strategy when private and public policy diverged.