Taxpayers everywhere are fuming over the news that the recently bailed-out financial giant Citigroup is being granted permission to withhold billions of dollars in potential tax payments to the IRS. Usually when the government takes partial ownership of a company through a federal bail-out they are forced to give up many of the tax breaks they were used to receiving. However, in this case Citigroup is being allowed to take advantage of these breaks with the hope that it will outweigh the expected losses when the government begins selling their shares of the company to private investors.
While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.
The IRS, an arm of the Treasury Department, has changed a number of rules during the financial crisis to reduce the tax burden on financial firms. The rule changed Friday also was altered last fall by the Bush administration to encourage mergers, letting Wells Fargo cut billions of dollars from its tax bill by buying the ailing Wachovia.
"The government is consciously forfeiting future tax revenues. It's another form of assistance, maybe not as obvious as direct assistance but certainly another form," said Robert Willens, an expert on tax accounting who runs a firm of the same name. "I've been doing taxes for almost 40 years, and I've never seen anything like this, where the IRS and Treasury acted unilaterally on so many fronts."