US Senator Max Baucus (D-Mont), Ranking Member of the Senate Finance Committee, has called on the IRS to determine more accurately the size of the annual tax gap.
A new report from the Treasury Inspector General for Tax Administration (TIGTA) concluded on Tuesday that dated and incomplete information and questionable methodologies make it impossible for the agency to accurately estimate the tax gap, or how many people are voluntarily complying with tax laws. Without this information, the report notes, the IRS cannot make its best effort to reach the 90 percent voluntary compliance rate Baucus has called for since April 2004.
The Inspector General found that sample sizes were cut and some findings may not be reliable, indicating that “substantial amounts are not included in the estimates provided in the tax gap map projections”.
“The IRS will have a hard time closing the tax gap as long as they don’t know what the tax gap really is,” argued Baucus.
According to the IRS, the updated estimate of the overall gross tax gap for Tax Year 2001 – the difference between what taxpayers should have paid and what they actually paid on a timely basis – comes to $345 billion. This figure falls at the high end of the range of $312 billion to $353 billion per year, an estimate released in March 2005.
However, Baucus added that: “Since this report indicates that the annual gap between taxes owed and taxes collected may be even more than $345 billion, there’s really no more time for the IRS to waste.”
Two years ago this month, Baucus challenged the IRS to achieve a 90 percent voluntary compliance rate by 2010. He estimated at the time that this would raise as much as $100 billion each year without any tax increases at all.
The full text of the TIGTA Tax Gap report can be found in the Tax News Resources section.
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