Daily Tax Update - March 20, 2007

IRS COMMISSIONER TESTIFIES ON THE TAX GAPToday, IRS Commissioner Mark  Everson testified before the House Ways and Means Subcommittee on Oversight on the issues of taxpayer service and enforcement, the IRS FY 2008 budget request, and efforts to improve voluntary compliance and reduce the tax gap.

  • On the issue of compliance, Everson said, “The FY 2008 Budget request includes significant increases for IRS enforcement efforts.  Fully funding that request will help us make progress in greatly improving voluntary compliance.  Based on our analysis covering the most recent 11 years of collection experience, we estimate that every dollar we have spent on enforcement has generated a direct return of an average of four dollars in increased revenue to the Federal Treasury.  This return can be expected to occur when the full productive benefit of the investment is realized.”  Everson added, “Our role is not unlike that of a highway patrolman.  He will never be able to ticket every speeder, but he attempts to position himself in areas where he knows that his time is more likely to be spent productively.  He also knows that every time he pulls a speeder over, other motorists see that and slow down as well.” 
  • Everson addressed the issue of the tax gap.  The Commissioner said, “[F]ull funding of the budget request will enable the IRS to improve our research with respect to compliance.  Despite all of our progress, there is still much we do not know about the tax gap.  Although the updated estimates provided by the NRP (National Research Program) study are more accurate than our previous estimates, and more accurate than the estimates made at various times by others using more indirect methods, they have many limitations.  These estimates are useful for understanding the general areas and levels of noncompliance and the scope of the problem, but they are far from exact measurements.  With the exception of the individual income tax gap, the estimates do not adjust for noncompliance that goes undetected during examination, and estimates are not even available for certain (minor) components of the tax gap.  Beginning in October 2007, the IRS will begin ongoing annual research activities that will ensure we have the most up to date compliance data possible to measure portions of the tax gap, focus our resources, and improve our audit selection criteria.”
  • Everson’s testimony can be accessed via: http://waysandmeans.house.gov/hearings.asp?formmode=view&id=5717