A federal investigation has revealed that tax violators are going unpunished because agencies aren't sharing data with the Internal Revenue Service.
The Government Accountability Office (GAO) has found that about 25 percent of the businesses that applied to hire immigrant workers since 1997 owed back taxes, failed to file tax returns or never registered with the IRS.
According to the Washington Post, the Bureau of Citizenship and Immigration Services failed to verify financial data provided by businesses with the IRS. Businesses must show, usually through tax records, that they are legitimate and are able to pay wages and benefits. The GAO found violations that included using fake tax returns and the incorrect number of employees or bloated earnings.
"It's unbelievable," said Senate Finance Committee Chairman Charles E. Grassley (R-Iowa). "Tens of thousands of businesses get away without bothering to file tax returns, even when they report taxable income to another government agency. The message here is it's OK to cheat because odds are you won't get caught."
According to the GAO report, of the 413,723 businesses applying to sponsor immigrant workers from 1997 to 2004, about 5 percent were unknown to the IRS. The GAO also found unpaid tax assessments that totaled $5.6 billion. More than 16 percent of the businesses had not filed one or more tax returns.
"I'm a firm believer in the adage 'trust but verify,' " said Max Baucus (D-Mont.), the ranking Democrat on the Senate Finance Committee. "When it comes to tax law abuses, the GAO report confirms that there may be too much emphasis on the first and not the latter."
Immigration bureau spokesman Christopher Bentley told the Post that the agency was "always looking at ways to enhance not only our operations but the sharing of information between government agencies."
Finance Committee members said the case is just one example of the huge gap between how much is owed in taxes and how much is actually paid. That gap, now estimated at $311 billion, is almost enough to eliminate the federal budget deficit. Lawmakers say businesses should be required to fix their tax problems before receiving federal services.
"The GAO testimony highlights how just a simple thing such as requiring a taxpayer to confirm that he is current on his tax obligations will pay real dividends," Grassley said in a written statement.
The Bureau of Citizenship and Immigration Services could follow the example of the Social Security Administration, which has shared data with the IRS for almost 30 years to administer the benefit program and ensure compliance with the tax code.