March 4 (Bloomberg) -- Treasury Secretary Timothy Geithner said the U.S. government will mount an “ambitious” program to crack down on companies that use offshore locales to avoid paying taxes.

Closing loopholes and hunting tax evaders are especially important at a time when the economy is deteriorating and the government is running a record budget deficit, Geithner told the Senate Finance Committee today in Washington.

“We’re going to have a much more ambitious effort to deal with offshore tax havens,” Geithner said in response to questions from the panel. Allowing companies and individuals to escape paying their share “isn’t fair, particularly given the scale of the fiscal challenges we inherited,” he said.

A congressional report released in January found that in 2007 83 of the 100 largest publicly traded U.S. companies had units in low-tax or no-tax jurisdictions like the Cayman Islands or the Isle of Man. They included American International Group Inc., Citigroup Inc., Bank of America Corp. and Morgan Stanley, all of which were given taxpayer money through the $700 billion financial rescue.

Some of Geithner’s counterparts in Europe have vowed to take similar action, and the issue may be discussed when finance ministers for the Group of 20 industrial and developing nations meet next week in the U.K.

Yesterday, German Finance Minister Peer Steinbrueck said Switzerland should change laws that shield foreign tax dodgers from investigation in their home countries.

Brown’s Call

British Prime Minister Gordon Brown, speaking to a joint session of the U.S. Congress today, urged world governments to “outlaw shadow banking systems and offshore tax havens.”

In his Senate testimony, Geithner said the Internal Revenue Service is asking for increased funds to pursue tax cheats and noted that the Obama administration is “going to look at the full range of ideas” for reining in offshore abuses.

He also expressed support for legislation introduced this week by Finance Committee member Bill Nelson, a Florida Democrat, and other senators that would treat foreign companies managed and controlled in the U.S. as domestic corporations for income tax purposes. The bill would also impose tougher requirements on U.S. taxpayers using offshore accounts.

“The only way to get ourselves back to a fiscally responsible path is do a better job dealing with this challenge,” Geithner told Nelson.

The Treasury chief’s confirmation before the Senate Finance panel was stalled earlier this year after he agreed to pay almost $50,000 in back taxes and interest. As secretary, Geithner oversees the IRS.

Record Deficit

Geithner’s prepared testimony was similar to his remarks yesterday before the House Ways and Means Committee.

He pressed lawmakers to work with the administration to cut the $1.3 trillion budget shortfall this year and reiterated the administration’s pledge to cut the deficit to $533 billion, or 3 percent of gross domestic product, by 2013.

Last week, President Barack Obama sent Congress a $3.55 trillion budget for the fiscal year beginning Oct. 1. It would increase spending by 32 percent over this year, resulting in a deficit of $1.17 trillion.

Obama left a $250 billion “placeholder” in the budget for additional aid to the financial industry. In his prepared remarks, Geithner said that “doesn’t represent a specific request” and he said again that the cost of the rescue could exceed the $700 billion already approved by Congress.

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.

Last Updated: March 4, 2009 16:35 EST