The Government Accountability Office has released Suggested Areas for Oversight for the 110th Congress (GAO-07-235R) (11/17/06):
Reduce the Tax Gap:
The tax gap — the difference between the amounts taxpayers pay voluntarily and on time and what they should pay under the law — has been a long-standing problem. Most recently, the Internal Revenue Service (IRS) estimated a gross tax gap for tax year 2001 of $345 billion and, after enforcement efforts and late payments, a net tax gap of $290 billion. When some taxpayers fail to comply, the burden of funding the nation’s commitments falls more heavily on compliant taxpayers. Reducing the tax gap would help improve the nation’s fiscal stability. Based on IRS’s estimate, each 1 percent reduction in the net tax gap would likely yield $3 billion annually. The gap can be reduced, though not eliminated, through a multiprong strategy of better service and enforcement of existing tax laws, plus legislative actions.
Key Topics Needing Congressional Oversight:
- Provide IRS with additional tools, such as enhanced withholding and information returns authorities for sources of income like capital gains on securities sales.
- Require IRS to obtain data on the extent of, and reasons for, noncompliance.
- Ensure that IRS leverages technology to improve efficiency and effectiveness in its taxpayer service and enforcement efforts.
- Examine how IRS seeks to optimize the allocation of its resources, including how it balances enforcement and service efforts.
- Assess whether IRS’s tax-gap reduction goals are adequate and whether it has a data-based strategy for achieving its goals.
- Simplify the tax code and broaden the base by, for example, consolidating existing tax preferences (e.g., retirement).
Selected GAO Products:
- Capital Gains Tax Gap: Requiring Brokers to Report Securities Cost Basis Would Improve Compliance if Related Challenges Are Addressed (GAO-06-603) (6/13/06)
- Tax Gap: Making Significant Progress in Improving Tax Compliance Rests on Enhancing Current IRS Techniques and Adopting New Legislative Actions (GAO-06-453T) (2/15/06)
- Tax Compliance: Better Compliance Data and Long-term Goals Would Support a More Strategic IRS Approach to Reducing the Tax Gap (GAO-05-753) (7/18/05)
