No...your hang up with it is whether it's significant enough. Has no bearing on whether it's a significant problem because that has already been established...and it is a significant problem, so much so that in 2012, they had to change the entire set of regulation and rules surrounding the system of getting an ITIN to try and curb one PIECE of the fraud issue. Not the whole fraud issue, just one piece of it.
And again, that's just one piece of the list of things I put up top that are clear mismanagement issues, and what I put is just a handful that I could think of off the top of my head.
Here's another link giving some numbers for you to munch on since that seems to be your most pressing demand to this discussion...
http://www.snopes.com/politics/taxes/itin.asp
A political problem is not a significant problem. Again, imho the problem is the tax code in the U.S., not the IRS, it's complex and unruly making oversight difficult, expensive, and compounds the issue of managing fraud, imho.
The greatest fraud I've heard is from crime syndicates , who essentially file tax returns unbeknownst to people as part of the greater issue of identity theft. While I agree their is mismanagement to an effect in the IRS , I would argue the biggest concern is political , people don't like paying taxes, people are fearful of immigrants, so we scape goat this as a general IRS issue and immigration issue and this I think is simply politics at play.
You cited one story of 1000s of fraudulent tax returns linked to itin , for $50 million. Which sounds like a large number until you compare it to the overal fraud and overall nber of returns processed.
It's like NASA $15 billion budget sounds like a lot until you realize our annual budget is $3 trillion dollars and NASAs budget is half a percent,
.5% of the annual budget, it's pennies literally in comparison to what we spend overall in the budget.