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GGD-94-217R 1 (1994-09-30)

handle is hein.gao/gaobackrd0001 and id is 1 raw text is: ClA~k United States GTAOl General Accounting Office Washington, D.C. 20548 General Government Division B-258670 September 30, 1994 The Honorable J.J. Pickle Chairman, Subcommittee on Oversight Committee on Ways and Means House of Representatives Dear Mr. Chairman: Trade data have been provided by the U.S. Customs Service (Customs) to the Internal Revenue Service (IRS) under a working arrangement signed in 1992 that seeks to enhance both agencies' enforcement efforts. The arrangement was signed following hearings by your Subcommittee in which the two agencies were encouraged to share such information. This letter responds to your request for information on the use to date of the data in developing tax audits of transfer prices.' A separate report will respond to your interest in the quality of the data. To date, IRS has made 17 requests for Customs data. Of these, 14 were specifically for use in transfer pricing audits under section 482. In structured interviews, we discussed these 14 cases with the IRS field staff who requested the Customs data. We analyzed the reasonableness of the information we received by discussing it with IRS National Office representatives responsible for coordinating the use of the data. Our discussions, which are summarized in the enclosure, indicated that a substantial tax adjustment was obtained in one case and savings in audit time were obtained in six cases as a result of the use of Customs data. IRS field staff also said they would like to receive data in a more accessible form. In half the cases, IRS field staff said they received the data within a time period they perceived as only marginally adequate at best. 'Transfer prices are prices companies charge other related companies for goods and services transferred on an intercompany basis. Tax audits of transfer prices are done under section 482 of the Internal Revenue Code, which gives the Secretary of the Treasury broad authority to allocate income among related parties to prevent tax evasion or clearly reflect the income of the parties. GAO/GGD-94-217R IRS Use of Customs Data

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