Enforcing the tax laws effectively requires not just a civil component, but strong criminal enforcement. To help achieve uniformity in nationwide standards for criminal tax prosecutions, the Tax Division’s criminal prosecutors authorize almost all grand jury investigations and prosecutions involving violations of the internal revenue laws. Alone or in conjunction with Assistant United States Attorneys, Tax Division prosecutors investigate and prosecute the crimes. In the last few years, the Division has authorized between 1,300 and 1,800 criminal tax investigations and prosecutions per year.
2. Improving Voluntary Compliance. The Tax Division’s success rate in its litigation – more than 90% – has an enormous effect on voluntary tax compliance.2 By law, the IRS cannot make public the fact of an IRS audit, nor its result. By contrast, the Tax Division’s important tax litigation victories receive wide media coverage, leading to a significant multiplier effect on voluntary compliance.3 Efforts of the IRS and the Tax Division are having a positive effect on voluntary compliance. According to the most recent survey by the IRS Oversight Board, 89 percent of those surveyed think it is “not at all” acceptable to cheat on taxes – the highest level ever recorded for this question on the survey.4 As an integral part of the IRS’s enforcement efforts, the Tax Division is partially responsible for the IRS’ ability to collect over $2 trillion in taxes each year.5
n2 A widely regarded study concluded that the marginal indirect revenue-to-cost ratio of a criminal conviction is more than 16 to 1. While no comparable study of civil litigation exists, the same research suggests that IRS civil audits -- the results of which are not publicly disclosed -- have an indirect effect on revenue that is more than 10 times the adjustments proposed in those audits. Alan H. Plumley, The Determinants of Individual Income Tax Compliance, pp. 35, 40, Internal Revenue Service Publication 1916 (1996).
n3 “The IRS ... found that taxpayers who heard about IRS audit activity via the media [rather than through word of mouth] were less likely to cheat...” Leandra Lederman, The Interplay Between Norms and Compliance, 64 Ohio. St. L. J. 1453, 1494-95 (2003), quoting Robert M. Melia, Is the Pen Mightier than the Audit?, 34 Tax Notes 1309, 1310 (1987).
n4 See IRS Oversight Board 2008 Taxpayer Attitude Survey, February, 2009, http://www.treas.gov/irsob/board-reports.shtml.
n5 See Internal Revenue Service Data Book, 2008, Table 1, available at www.irs.taxstats. From the website, select “IRS Data Books” in the “Products, Publications, & Papers” section.
Thursday, February 11, 2010
DOJ Tax Budget Request - The Criminal Parts #1
DOJ Tax has submitted its FYE 2011 Congressional Budget. Blog readers can click on the link and review the whole thing. In several installments, I will "cut and paste -- and perhaps comment on -- the parts I think my readers of this criminal tax blog might be interested in. The numbers in brackets with an asterisk indicates the page number for the material after the number in bracket.