The US Internal Revenue Service is calling on the big guns to help clampdown on companies shifting earnings from country to country to lower the amount of taxes that are owed to the US government.
The group which is being dubbed an IRS “Swat Team,” is attempting to thwart the technique known as "transfer pricing."The issue has been on the agency’s radar since last May when Samuel Maruca took the role of the transfer pricing director.The position which didn’t exist before the arrival of Maruca, has been a demanding gig. The goal is to put an end to the thriving practice of companies evading global tax responsibilities.According to Reuters, the major players include worldwide corporations that are continuously exchanging properties, services and resources from one subsidiary to another in different countries."The economic crisis allowed the IRS to attract talented, experienced industry professionals who might not have been available previously," said ex-deputy IRS Commissioner Michael Dolan, now director of KPMG's Washington national tax practice to Reuters.With the acquisition of Maruca, 40 positions have been filled as of yet and the IRS plans to bring 60 more employees on board.Those who have already joined the task force include professionals from the Big Four audit firms KPMG, Ernst & Young, the law firm Mayer Brown and Horst Frisch.Many experts are critical of the recent attempt to crackdown on the tax evasion practices including Maruca himself.He expressed in an interview with Reuters that previously the IRS “had a difficult time attracting and retaining economists." Maruca also stated the Federal agency often struggles to match the pay for these positions with the IRS and the private-sector pay is significantly higher.Even though this newly acquired task force is full steam ahead, many feel this will merely put a dent on the international dilemma."Will he really have enough resources to change the game?" Dolan said.Currently the IRS employs approximately 90,000 people and saw a budget cut of roughly 2.5 percent by Congress for fiscal 2012 which equal to about 11.8 billion dollars.Maruca believes with the IRS's international group’s "significant external hiring authority," coupled with the government pursuing the ability to limit corporations' manipulation of these transfers, could give the IRS a real fighting chance.This isn’t the first time the IRS has tried something like this, two major transfer pricing court judgments went against the IRS in 2009 and 2010.With the new efforts many are certain that companies will fight back in an effort to keep control of the pricing of these moves and even if the IRS gets its way, some critics believe it will be a difficult task to enforce a potential new regulation especially for intangible assets, such as search-engine algorithms or trademarks, Reuters reported."Clearly, the IRS is trying to figure out what to do next on its litigation strategy in these important transfer pricing cases," said Eric Solomon, a director at Ernst & Young.
Many governments all over the global are hoping to profit from the initiative and gain corporate tax revenues.