IRS Forms Special Team to Get Tough on Transfer Pricing

The US Internal Revenue Service is forming a special team of experts, in order to crack down on companies that use a special technique to lower the taxes payable to the US government.

The technique is called Transfer Pricing. Companies that want to lower the taxes that are due to the government, shift their earnings from one country to another. Many of the companies that indulge in these techniques include multinational corporations, which frequently move properties and resources between subsidiaries that are located in different countries.

The Internal Revenue Service has been aware of these techniques for years now, but has not been able to act, because its hands were tied. The agency did not have the kind of resources, and the kind of expert professionals needed for enforcement in this particular area.

Now, the Internal Revenue Service has hired some of the biggest audit firms in the country, including Ernst & Young LLP. Samuel Maruca who has been given the newly coined designation of ‘transfer pricing director’ will head the team.
According to Maruca, the Internal Revenue Service earlier had trouble sourcing, attracting and retaining the kind of talent that is necessary for a crackdown on these transactions. Tax specialists in this area tend to prefer private positions where the pay is significantly higher. However, since the recession, the agency has been able to attract high-quality talent.

However, California tax lawyers are a little skeptical about how successful the agency will be in cracking down on these kinds of sophisticated practices, even with the new team. After all, the agency struggles with meager resources. Currently, there are 90,000 officers working with the Internal Revenue Service, and the agency recently suffered a 2.5% funding cut by Congress. With these significantly depleted resources, the agency is likely to have its hands tied.