Tax Administration:

Diesel Fuel Excise Tax Change

GGD-96-53: Published: Jan 16, 1996. Publicly Released: Feb 16, 1996.

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Pursuant to a congressional request, GAO reviewed the collection of diesel fuel excise taxes, focusing on: (1) changes in diesel fuel tax collections in 1994; (2) concerns about Internal Revenue Service (IRS) changes to diesel fuel taxation requirements; and (3) fraudulent claims involving excise tax refunds.

GAO found that: (1) IRS determined that diesel excise tax collections increased about $1.2 billion from 1993 to 1994; (2) this increase did not include amounts collected as a result of the Omnibus Budget Reconciliation Act 1993 fuel tax rate increase; (3) increased tax compliance accounted for between $600 million and $700 million of the increase; (4) IRS has addressed the two major concerns regarding the Environmental Protection Agency's dyeing requirements, but has not addressed concerns about the concentration of dye required and the impact of the requirements on fuel availability at marinas; (5) IRS has not addressed concerns about tax collection on products added to diesel fuel after leaving the terminal; and (6) the new diesel fuel taxation approach remains vulnerable to fraudulent excise tax refund claims, but IRS has not determined the extent of such fraud.

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