You know what they say about death and taxes.
It looks like
Vanguard is facing its own taxation grim reaper via a complaint filed in New York State Supreme Court under the whistleblower
False Claims Act, as first reported by the
the Wall Street Journal.
The complaint, filed by former Vanguard associate counsel
David Danon, alleges that the low cost giant evaded $1 billion in federal incomes taxes and at least $20 million in New York state taxes during the past ten years, according to the
Journal.
According to the complaint, Vanguard violated tax laws by making its fees "artificially low," and that it made false filings claiming that it paid taxes. However, Danon alleges in the complaint, Vanguard made no filings between 2004 and 2011.
To be sure, the news caught like fire in the financial press, catching the attention of outlets such as
InvestmentNews;
Reuters, and the
the Philadelphia Daily News. It also caught the attention of noted tax academic
Paul Caron.
A second
Philadelphia Daily News article quoted
Daniel Wiener, editor of the
Independent Advisor for Vanguard Investors, about the possible implications of the suit -- should Vanguard lose:
Let’s start by saying I’m not a tax attorney. I can’t debate the merits of the lawsuit or some of the allegations presented in it.
But from a broader perspective, this assault on Vanguard’s “at cost” operating principle could, if successfully challenged, have seismic implications for the fund industry and possibly put competitors on a more level playing field with Vanguard as far as costs are concerned...
A Vanguard spokesperson told
InvestmentNews that the case was without merit.
 
Edited by:
Tommy Fernandez
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