Tax Administration:

IRS' Administration of the International Boycott Tax Code Provisions

GGD-91-105: Published: Jul 11, 1991. Publicly Released: Jul 11, 1991.

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Pursuant to a congressional request, GAO provided information on the Internal Revenue Service's (IRS) administration of provisions requiring businesses to report their activities with countries participating in the Arab League's economic boycott of Israel, focusing on: (1) IRS audits of tax returns of businesses involved in trade with boycotting countries; (2) prosecutions for failing to file, filing late, or filing false returns; (3) IRS use of the Department of Commerce's boycott information in audits; (4) the timeliness of Department of the Treasury boycott reports; (5) tax benefits losses suffered by boycott participants; and (6) trends in reported boycott activities since 1976.

GAO found that: (1) in 1991, Treasury reported that tax audits of boycott issues involved an average of 350 taxpayers in 1983 and 1984, but there was no evidence of a taxpayer ever being fined or prosecuted for filing late or not filing a report; (2) the Department of Commerce provides IRS examiners with boycott-related data, but law prohibited IRS from providing confidential tax information to Commerce; (3) IRS could not use the results of Commerce's boycott investigations as conclusive evidence of boycott participation in tax audits due to legislative differences between the definitions of boycott participation; (4) although it is possible to issue boycott reports more frequently than every 4 years, the data that IRS made available to Congress would still be at least 2 years old because of the time needed to process information and to audit tax returns; (5) Treasury reports did not provide detailed information on the results of IRS audits of boycott issues and did not always provide such key information as the number of corporations filing reports by industry or by country or operation; (6) the estimated tax benefit losses of boycott participants appeared to be small, and most boycott participants were large manufacturing companies; and (7) boycotting countries' requests to U.S. businesses to refrain from doing business with or employing individuals of a particular nationality, race, or religion more than doubled from 498 in 1976 to 1,076 in 1986.

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