IRS Could Better Protect U.S. Tax Interests in Determining the Income of Multinational Corporations
GGD-81-81
Published: Sep 30, 1981. Publicly Released: Sep 30, 1981.
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Highlights
GAO reported on the Internal Revenue Service's (IRS) administration of the Internal Revenue Code section 482 when auditing multinational corporations. Specific changes were discussed which would improve IRS enforcement of existing regulations. The larger question was explored of whether more fundamental changes in the regulations together with additional approaches to taxation of multinational corporations could alleviate some of the uncertainty and administrative burden presently being experienced by IRS and corporate taxpayers.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should amend section 6038 of the Internal Revenue Code to further provide that every U.S. person, as presently defined by the code, shall furnish such information as the Secretary of the Treasury may prescribe by regulation with respect to any foreign corporation which controls such person. | When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Treasury | The Secretary of the Treasury should adjust the safe-haven interest rate as frequently as necessary to realistically reflect the current costs of borrowing on the open market. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Department of the Treasury | The Secretary of the Treasury should initiate a study to identify and evaluate the feasibility of ways to allocate income under section 482, including formula apportionment, which would lessen the present uncertainty and administrative burden created by the existing regulations. |
Treasury does not agree with this recommendation and does not intend to take any action.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should aggregate and analyze existing data from a management perspective, consider ways to get a better measure of noncompliance, and establish procedures for continuously assessing the appropriateness of the IRS section 482 enforcement strategy. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should reassess the appropriateness of the IRS criteria for requesting economists' participation in section 482 adjustments and require that participation be mandatory for all adjustments that meet the criteria established. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should require IRS economists to evaluate whether the information they develop in one examination would be useful in other examinations and establish a procedure for communicating such information to other audit teams which examine corporations having similar operations or products. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should clarify the description of the information that corporations should report concerning the sale and purchase of stock in trade and intercorporate loan transactions either by revising the form 2952 when current supplies are depleted or by issuing the new consolidated form currently being developed. In the interim, IRS should notify its examiners of the shortcomings in the present form. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
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Topics
AuditsForeign corporationsInformation disclosureInterest ratesLaw enforcementMultinational corporationsRegulationReports managementTax administrationTax evasion