Report: Efficacy of Tax Credits Is Unclear; A State Review Finds That There Isn't Enough Data on Business Incentives
Jones, Walter C., The Florida Times Union
Byline: WALTER C. JONES
ATLANTA - There's no way to tell whether the state's annual $114 million giveaway to businesses has any payoff for taxpayers because agency records aren't adequate, according to a recent state report.
The amount of money the state lets companies keep in the form of income-tax credits is roughly equal to the entire tax payments of 70,000 average Georgians. Politicians justified the amount in coming up with 24 separate tax credits over many years because they thought giving companies a break on what they owed the state would encourage employers to hire more workers.
But no one knows whether it really works.
Credits are available for research, manufacturing, exporting cigarettes, using of the state's ports and even for moving a headquarters to Georgia. Most often claimed are credits for businesses that create a set number of jobs in rural counties, claimed by 416 companies over five years, and credits for retraining workers, claimed by 304 companies in that period.
The problem with tracing results lies with the Department of Revenue, according to a report done by another state agency, the Department of Audits and Accounts, and released last month.
Revenue Commissioner Bart Graham defends his staff and points to the recovery of bigger pockets of money gotten from tax cheats and deadbeats. However, he acknowledges improvement is possible and said he accepts many of the recommendations in the report.
While the idea of the tax auditors getting audited themselves may spark a snicker or two, the report identified several weaknesses in the way the Revenue Department oversees compliance in the tax-credit program.
Murky laws, overlapping responsibilities with other state agencies and constantly shifting eligibility rules also complicate matters, according to the report.
REPORT CRITICIZES COLLECTORS
Nevertheless, the authors target most of their criticism at the tax collectors.
"As a result of having limited internal controls over its review of tax credits and record keeping, the Department of Revenue cannot ensure that the credits have been accurately and consistently earned and used," the authors wrote.
Their complaints include a lack of procedure manuals for Revenue Department staff and hodgepodge of computers that store taxpayer data that are prone to errors and lack security safeguards to protect companies' privacy. Graham said Friday that changes are being made to address those issues.
He didn't agree, though, with the authors' recommendation that businesses be required to submit more proof that they're entitled to the tax credits they claim. Graham notes that the law doesn't require added documents and that few examples of cheating have been uncovered.
Indeed, Graham's staff audited 71 companies claiming investment tax credits and found only $8,094 in assessments as a result. Audits of 48 claims of job-tax credits resulted in a single assessment of $76,384 while the remaining 47 were found to be in compliance. Yet the cost to administer tax credits is $381,000 per year.
"Yes, we know we need a more sophisticated system with more controls on it, but we're comfortable that we're not being taken advantage of - other than people being aggressive in what they seek," he said.
His view is shared by some outside tax professionals, such as Kathleen Thies, writer and analyst for CCH Inc., a publisher of state-by-state tax guides for accountants and corporate finance officers.
"They're pretty fair about letting the taxpayer know what to do, but they're not going to let anyone get away with things," she said.
From the standpoint of the companies that must report to the Department of Revenue, Thies says the state's approach to tax credits is smart. …