Obama seeks to double tax law enforcement budget

WASHINGTON (Reuters) - President Barack Obama proposed on Thursday nearly doubling funds to enforce U.S. tax laws next year, with an aim of more than quadrupling funding for tax compliance to $2.1 billion within five years.

The budget plan seeks $12.1 billion for the Internal Revenue Service, responsible for collecting and enforcing individual and corporate tax laws, for fiscal 2010, which begins October 1. That amounts to a roughly 5.2 percent increase over the IRS budget for 2009, which was $11.5 billion.

The budget proposal, which must be approved by Congress, includes a $890 million request to boost tax enforcement, including in the international arena, an increase of $400 million from 2009.

Underreporting of income by individuals and businesses led to a “tax gap” of $345 billion in 2001, the most recent year available, according to the government. Of that, corporate income tax and employment tax underreporting made up about $84 billion, according to a report by the Government Accountability Office.

The Obama administration said it would use the funds to further expand its efforts to boost compliance outside the U.S., “placing greater scrutiny on cross-border transactions and tax issues.”

Earlier this week, Obama unveiled a series of proposals to overhaul mainly corporate tax rules and close loopholes in an effort he said would raise $210 billion over 10 years.

Included was a proposal to tighten rules on financial institutions which hold money abroad for U.S. citizens.

The U.S. government is currently suing giant Swiss bank UBS AG to get the names of thousands of mostly wealthy U.S. clients who may be trying to evade tax laws by keeping their money overseas.

Reporting by Kim Dixon; Editing by Tim Dobbyn and Gerald E. McCormick