In testimony before the Senate Finance Committee, Comptroller General David Walker said that it is impossible to know th e total amount of corporate tax avoidance for a number of reasons.
Walker said that the country's complex tax code, complex business transactions and often-multinational corporate structures make determining corporate tax liabilities and the extent of corporate tax avoidance a major challenge.
The Internal Revenue Services has estimated the total amount of corporate tax noncompliance to be about $32 billion. Corporate income taxes are expected to bring in about $277 billion in 2006.
Among the methods Walker suggested to improve compliance were simplifying the tax code, obtaining better data on noncompliance, continuing to oversee the effectiveness of IRS enforcement, leveraging technology and increasing collections of taxes owed.
In a companion report, the Government Accountability Office said that many taxpayers misreport capital gains or losses, sometimes inappropriately underpaying their taxes and sometimes overpaying them. The GAO said that expanding third-party information reporting on the cost basis of capital assets could help address the problem.
The GAO also suggested that Congress consider requiring brokers to report adjusted basis to taxpayers and the IRS, and require the IRS to work with the securities industry to develop cost-effective ways to mitigate reporting challenges and clarify its guidance on reporting capital gains and losses.
Walker's full testimony, which was largely based on published GAO work, is available at www.gao.gov/new.items/d06851t.pdf.
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