For this week’s post I was going to write about the Commerce Department’s decision to impose tariffs on Chinese solar panel imports, but then I came across this: U.S. IRS forms ‘SWAT team’ for tax dodger crackdown. How could I resist writing about an IRS ‘Swat team?’ Anyways, upon reading the article I was slightly disappointed to learn that the ‘Swat team’ formed by the IRS was not a swat team in the colloquial sense, but rather, a group of private industry professionals contracted by the IRS to deal with the issue of tax avoidance by means of manipulating transfer pricing procedures.

While I recognize the difficulties the IRS faces in trying to apply transfer pricing rules to difficult to value assets like trademarks, I was very surprised to learn that “[i]n fiscal 2011, 85 percent of transfer pricing audit adjustments were initiated by a foreign country, rather than by the IRS, according to IRS statistics.” It seems to me that foreign countries are doing a better job of enforcing the transfer pricing rules than the United States. I must note, however, that different countries implement different transfer pricing rules, meaning perhaps that the difference in audit adjustments could be due in part to more stringent regulations rather than purely better enforcement.

Nevertheless, if the IRS is to look at the situation from a positive standpoint, it could interpret this data as an indication of potentially untapped sources of tax revenues. Obviously, the IRS recognizes there is an issue with transfer pricing related tax evasion, or it would not have gone out and brought in the ‘Swat team.’ Perhaps if the IRS is able to better and more efficiently tap into its pools of “potential revenues,” the United States could begin to erase the deficit, and the IRS could gain some face in the process.