WASHINGTON ? Pursuant to the requirements of the IRS Reform and Restructuring Act of 1998, the Joint Committee on Taxation today held a joint hearing with the Senate Committee on Governmental Affairs, the Senate Committee on Finance, the House Committee on Government Reform, the House Committee on Ways and Means, and the Senate and House Committees on Appropriations on tax enforcement activities of the Internal Revenue Service (IRS).
“Management problems pervade everything the IRS does, and the increased emphasis and shift in resources of the past few years have not improved taxpayer service,” Senate Governmental Affairs Committee Chairman Fred Thompson (R-TN) recently stated. “Poor financial and information systems at the IRS benefit tax cheats and harm honest taxpayers. The IRS sometimes issues refund checks to delinquent taxpayers and goes after taxpayers who are owed refunds. It allows billions of dollars in erroneous Earned Income Tax Credits, while many low income taxpayers who are entitled to the Earned Income Credit don?t get it. The agency still fails to consistently release liens on a timely basis after tax debts have been paid off.”
Thompson continued, “I met with Commissioner Rossotti, and he assured me that he and his recently augmented staff are trying hard to fix the massive management problems at the IRS, but they have their work cut out for them.”
The attached statement was submitted for the joint review of the IRS today.
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STATEMENT OF SENATOR FRED THOMPSON, CHAIRMAN
STATEMENT OF SENATOR FRED THOMPSON
CHAIRMAN
SENATE COMMITTEE ON GOVERNMENTAL AFFAIRS
SUBMITTED FOR
THE JOINT REVIEW OF THE INTERNAL REVENUE SERVICE
May 8, 2001
Thank you, Mr. Chairman, for convening this joint review of the IRS. And thank you Commissioner Rossotti for being here today.
When we passed the IRS Restructuring and Reform Act of 1998, we were trying to rein in an agency that, in the eyes of many Americans, had gotten out of control. Its enforcement actions were seen as too aggressive. We in Congress also saw the immense waste that occurred at the hands of IRS management ? more than $3 billion in failed information technology investments ? and wanted to put a stop to it. So it is appropriate to take stock now in how far we have come.
Unfortunately, when it comes to the details, statistics regarding IRS? performance are often confusing and sometimes contradictory. The audit rate doesn?t necessarily encompass all audits performed by the IRS. The number of dollars reportedly recovered through its enforcement efforts may include monies recouped through discovering simple errors in tax returns rather than through ordinary audits. The level of customer service may not be as bad as the IRS says it is . . . it may be even worse.
Some things are clear. By any measure, IRS?s tax enforcement activities, as well as revenues collected from enforcement activities, have trended down dramatically in recent years. And although it has devoted ever more resources to its customer service activities, the American people do not receive an acceptable level of timely and accurate service from the IRS. In addition, despite the benefits brought about by the IRS Restructuring and Reform Act, massive management problems continue to plague everything it does. The complexity of the tax code doesn?t help.
The viability of our tax system depends on voluntary compliance. The steep decline in enforcement threatens to encourage those who are not inclined to comply voluntarily; it also poses fairness concerns from the perspective of those who do comply.
I am heartened to have at the helm of the IRS a man who has the vision and leadership capabilities to turn this agency around. Commissioner Rossotti has developed a plan, which, if effectively implemented, will bring about the level of productivity necessary to collect America?s taxes in a fair and efficient manner. Unfortunately, all we have today is that plan.
I hope Commissioner Rossotti will give us his assurances that we will see improvements in the administration of the tax code in the near future. And I hope he can tell us that those improvements will be reported to us in a valid, verifiable, and understandable fashion. I have submitted some questions for the record which address many of the concerns share by members of the Governmental Affairs Committee. We look forward to receiving your answers.