New IRS ‘SWAT Team’ To Crackdown On Tax Evaders
It appears that though the US Internal Revenue Service (IRS) has had its 2012 fiscal budget cut by 2.5% for 2012, it has determined to employee Samuel Maruca to fill a newly created post transfer pricing director. Maruca, heads up what Eric Solomon, a director at Ernst & Young calls the IRS’ “SWAT team”. Just what does the “SWAT team” do? they are cracking down on companies that shift their profits from country to country to lower their tax bills.
This is a strategy that the IRS has targeted in the past but have seem very limited results. The issue, known as “transfer pricing”, was elevated as a concern last May.
The process of “transfer pricing” can be complex, but is simply in theory. Companies are constantly moving goods, services and assets. The companies manipulate the pricing of the moves from one subsidiary to another. Their aim is to shift profits to low-tax countries from high-tax ones, which lower their overall costs.
According to an article appearing in Reuters, Maruca has brought on board a group of specialists from Big Four audit firms, law firm Mayer Brown and boutique consultancy Horst Frisch. He believes the IRS’s international group “has significant external hiring authority”.
The IRS already employees some 90,000 people. However, ex-deputy IRS Commissioner Micael Dolan said, “The economic crisis allowed the IRS to attract talented, experienced industry professionals who might not have been available previously.”
Ultimately, the IRS wants to regulate the transfer prices so that they cannot be artificially raised or lowered, but kept near market level. This is just the theory though. It is much easier to deal with in theory than in the real world.
Soloman said, “Clearly, the IRS is trying to figure out what to do next on its litigation strategy in these important transfer pricing cases.”
Of course, don’t expect businesses to roll over on this one. They most surely will fight back.
“Anybody who thinks the IRS can ultimately enforce transfer pricing is either an eternal optimist or delusional,” said Richard Harvey, a former senior adviser to the IRS and a tax professor at Villanova University. He continued saying that the changes in staff and hiring at the IRS, “will help them on the margins, But they’re still fighting a very difficult battle where the deck is stacked against them.”
Government has shown time and time again that they simply make a mess of things when they get involved in companies. They don’t make things better, they make them worse. No doubt all this will do is push more and more business out of America all for the purpose of trying to recoup every dollar the IRS can to justify its pathetic existence.
Tim Brown
FrontPorchPolitics.com
FrontPorchPolitics.com
Article by Tim
Husband of Denise. Father of 9. Jack of All Trades. Currently writing for FrontPorchPolitics.com and overseeing several other sites as well as video production.
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