Wide Range of Tax Shelters Draws Senate Inquiry
Unidentified witness testifies at Senate Finance Committee hearing that major companies have leased parts of subway systems in Washington, Boston and Chicago, to be joined soon by water mains in New York City, in deals intended to cut companies' tax bills and to get around rules prohibiting abusive tax shelters; says big American corporations are also receiving tax breaks for leasing public assets in Canada and much of Europe in similarly circumspect deals; says deals are sham and bad for economy because they reduce federal and state corporate tax revenues by far more than money they generate for local governments; no current law or Treasury rule specifically prohibits such deals; cites deal in which Bank of America paid $25 million to be able to deduct much of value of Canada's air traffic control system on its tax return; bank spokeswoman Eloise Hale confirms such deal exists, though she declines to discuss its terms; former tax officials of Levi Strauss and Michael Hamersley of KPMG say they were fired or disciplined for objecting to what they considered illegal conduct; Hamersley says his superiors openly expressed disregard for law; KPMG spokesman George Ledwith says Hamersley is in no position to make observations; Henry Camferdam, Indianapolis executive whose company was client of Ernst & Young, says he paid $7 million in fees for what turned out to be fraudulent tax shelter; committee chairman Sen Charles Grassley characterizes tax abuses as widespread; General Accounting Office report says that as of Sept 30 abusive tax shelters cost government $85 billion; criticizes Internal Revenue Service for lacking goals and plan to measure its success in combating abusive tax shelters; Public Company Accounting Oversight Board chairman William J McDonough says major accounting firms have suffered complete ethical collapse; photo (M)