Baucus Welcomes New Efforts To Shrink US Tax Gap

by Leroy Baker, Tax-News.com, New York

07 September 2007

Senate Finance Chairman Max Baucus has welcomed new information from Congressional agencies regarding the 'tax gap' between federal taxes legally owed and the amounts actually collected, which the latest estimates have put at $345 billion.

At a forum held on September 6, entitled “Tax Compliance: Options for Improvement and Their Budgetary Potential”, experts from the Joint Committee on Taxation, the Government Accountability Office, and the Congressional Budget Office examined the accuracy of current tax gap projections and the potential efficacy of proposed solutions. These experts concluded that the size of the annual tax gap is probably understated, and that an overall strategy is needed to solve the problem.

Baucus, who has long petitioned the US Treasury to put together a more effective strategy aimed at narrowing the tax gap, commented:

“Getting a handle on taxes that are owed but unpaid is vital, because those dollars are needed for health care, education, and other vital national priorities. Today, experts confirmed what I’ve always maintained – that if we’re ever going to get at the tax gap, we have to know whether we’re working with the right numbers or not. We have to make sure our resources are being targeted in the most effective way. And we need a comprehensive, long-term strategy to get the job done."

“I said last month that if the Treasury Department sticks to its plan to improve compliance with our tax laws, significant progress can be made. The discussion among the congressional agencies today can help the IRS to move the ball forward, and it will certainly inform the Finance Committee’s oversight of tax gap efforts.”

According to Baucus, the JCT, GAO, and CBO experts advocated an "open-minded, flexible approach toward improving tax administration", including better Federal-State partnerships, a focus on training of IRS personnel, and a rapid response from the agency when Congress makes new laws aimed at closing the tax gap.

In April of this year, Baucus informed Treasury and the IRS that he would expect the agency to achieve a 90% rate of voluntary compliance by 2017. The Treasury Department delivered a “tax gap strategy” to Baucus on August 2 that contained specific action items, benchmarks, and timelines to achieve more effective and efficient tax administration.

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