National Taxpayer Advocate Nina E. Olson recently released her annual report to Congress, urging the Internal Revenue Service to adopt a comprehensive Taxpayer Bill of Rights (TBOR) — a step she said would increase trust in the agency and, more generally, strengthen its ability to serve taxpayers and collect tax. The Advocate also expressed deep concern that the IRS is not adequately funded to serve taxpayers, pointing out that the IRS annually receives more than 100 million telephone calls from taxpayers and that, in fiscal year 2013, the IRS could only answer 61% of calls from taxpayers seeking to speak with an IRS customer service representative.
The report reiterates the Advocate’s longstanding recommendation that the IRS adopt a TBOR. In a prior report, Olson analyzed the IRS’s processing of applications for tax-exempt status and concluded its procedures violated eight of the ten taxpayer rights she has proposed. The report argues that the rationale for a TBOR is much broader.
“Taxpayer rights are central to voluntary compliance,” the report says. “If taxpayers believe they are treated, or can be treated, in an arbitrary and capricious manner, they will mistrust the tax system and be less likely to comply with the laws voluntarily. If taxpayers have confidence in the fairness and integrity of the system, they will be more likely to comply.”
The report emphasizes that the U.S. tax system is built on voluntary compliance. Of all tax revenue the IRS collects, 98% is paid timely and voluntarily. Only 2% results from IRS enforcement actions. For the taxpayer, voluntary compliance means not having to face IRS enforcement. For the government, voluntary compliance is cheapest, because enforced compliance requires the IRS to devote resources to detecting and collecting amounts that are not voluntarily reported or paid.
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