Two senators criticized the nonpayment of federal taxes by many U.S. companies and foreign companies doing business in the U.S. after a report was issued this week.

Byron Dorgan, D-N.D., and Carl Levin, D-Mich., responded to a report they requested from the Government Accountability Office comparing the tax liabilities of foreign and U.S.-controlled corporations between 1998 and 2005 (see Most Companies Don't Pay Federal Taxes).

The report found that two-thirds of both American companies and foreign companies doing business in the U.S. end up avoiding all income tax obligations to the federal government despite sales of $2.5 trillion. From 1998 to 2005, an average of 68 percent of foreign companies doing business in the U.S. paid zero income taxes and 66 percent of U.S. domestic corporations paid no federal income taxes.

"It's shameful that so many corporations make big profits and pay nothing to support our country," said Dorgan in a statement. "The tax system that allows this wholesale tax avoidance is an embarrassment, and unfair to hardworking Americans who pay their fair share of taxes. We need to plug these tax loopholes and put these corporations back on the tax rolls."

"This report makes clear that too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States," said Levin.

Dean Zerbe, a former senior counsel to Sen. Charles Grassley, R-Iowa, when Grassley chaired the Senate Finance Committee, believes the IRS is spending too much time auditing small businesses instead of going after larger companies.

"We will continue to see a situation where there are increasing audit rates on small and medium businesses and decreasing audit rates on large corporations," he said.

Zerbe is now national managing director of AlliantGroup, a tax services provider for CPA firms. His former boss, Grassley, will be speaking at an AlliantGroup conference in Cedar Rapids, Iowa, on Oct. 17.

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