GAO Reports  
GAO-04-104T October 21, 2003

Internal Revenue Service: Challenges Remain in
Combating Abusive Tax Shelters.

By their nature, abusive tax shelters are varied, complex, and difficult to detect and measure. Abusive shelters manipulate many parts of the tax code or regulations and may involve steps to hide the transaction within a tax return. In recent years, IRS has been accumulating information about them and, although it does not have a reliable measure of the size of the abusive shelter problem, has come to believe that abusive shelters deserve substantially increased attention. IRS continues to gather more information to better define the scope of the problem and has data sources, all with their own limitations, that suggest abusive tax shelters total tens of billions of dollars of potential tax losses over about a decade.

IRS´s broad-based strategy for addressing abusive shelters included:

  • targeting promoters to head off the proliferation of shelters;

  • making efforts to deter, detect, and resolve abuse;

  • offering inducements to individuals and businesses to disclose their use of questionable tax practices; and

  • using performance indicators to measure outputs and some outcomes and intending to go down the path it has started and develop long-term performance goals and measures linked to those goals. Without these latter elements, Congress would find gauging IRS´s progress difficult.

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