1970 Appropriation Enacted by Congress Adjustments: ANALYSIS OF AUTHORIZED LEVEL FOR FISCAL YEAR 1970 (Dollars in Thousands) (1) Supplemental appropriation required for pay increasesProposed Authorized Level for 1970 Compliance, Internal Revenue Service Compliance, Internal Revenue Service (cont'd.) AP Activity 1 Activity 2 Activity 3 SUMMARY EXPLANATION OF CHANGES REQUESTED FOR FISCAL YEAR 1971 Internal Revenue Service, Compliance SUMMARY JUSTIFICATION OF FY 1971 BUDGET ESTIMATES This appropriation funds the Internal Revenue Service's Compliance activities. The Compliance element of the tax administration system is charged with responsibility for enforcement of the Internal Revenue laws and for informing taxpayers of their responsibilities under those laws. Its objective is to do this in a way that will encourage and maintain voluntary compliance with the Internal Revenue laws, thus enhancing the Fiscal capacity of the Government and contributing to an environment of public morality and respect for law. The general objective of tax administration is to bring the American self-assessment tax system to full fruition, so that Government programs are adequately and equitably financed. The first requisite of this is the preservation of the soundness of the voluntary compliance system of taxation. Viewed in this light the Service's Compliance program must be addressed to broader objectives than "enforcement" of the Internal Revenue laws. In fact, such a narrow view of the Compliance program would very likely not help to achieve our real objectives. Rather, the primary purpose of the program must be to foster an environment in which voluntary compliance will flourish. This requires effective efforts to inform and educate the taxpayer, as well as compliance and enforcement action that is so thorough, equitable, and reasonable that it all but makes the law self-enforcing. The lack of an effective Compliance program would have serious consequences to the nation, both from an equity and an economic viewpoint. Three facets of this national need for an effective tax administration system are worthy of special illumination. First, equity in tax administration is basic to the system. The great majority of the American people are willing to pay their share of the tax burden--but in turn, the tax administration system must be able to assure them that their fellow citizens are paying their share as well. The taxpayer must be assured that the system is operating effectively, honestly, and impartially. The most important aspect of tax administration from an economic point of view is the simple fact that it is necessary to financing the Government's activities and programs. Inadequate tax administration contributes to larger deficit financing and so adds to the difficulty of maintaining stable Government policies and programs. Therefore, Revenue administration should not be regarded as competitive with other Government programs. Reductions to the Service's proposed plan for tax administration will not release funds for application to other needs. Rather, they force the funding of these needs on a larger deficit basis. Further, they may damage the overall level of compliance and thus have even greater effect on available funds over the long term. The third aspect of the problem is that additional taxation is not an Our tax system is truly one of our nation's assets--one which is the envy The Compliance program presented by this budget is designed to meet the nation's need for an effective tax administration system. Each year the Service proposes in its budget a plan for tax administration. This plan represents the best judgment of the Commissioner and the Service's program managers of what can be done within the resources available to meet the problem of collecting the revenue and maintaining high levels of compliance. Limits on the resources available for the Compliance program in recent years have forced its effectiveness to a lower level than called for in the Service's plan. The present situation requires corrective action to provide the manpower needed by the IRS. The great danger is that a spirit of unwillingness to comply with the taxing statute, if encouraged by inadequate enforcement, can accelerate in a way that defies a statistical estimate of the consequences to the fiscal soundness of the country. The "tax revolt" could easily swing in substantial proportions into large scale covert noncompliance. Any public misapprehension that the service was to investigate returns needing investigation, or collect accounts needing collection (inventories are going up), or follow-up leads on delinquency and fraud would only contribute to this. Limits on the resources available in recent years have impaired the effectiveness of our Compliance programs. Augmentation of manpower for this operation is the most direct and telling way to retard the erosion which has set in. Internal Revenue Service, Compliance Unfortunately, the willingness of some taxpayers to comply with Specifically, expenditure limitations and hiring restrictions have These conditions have resulted in direct revenue losses over the Need for Stability in Funding Along the same lines, there is a strong argument to be made for relThe deteatively stable and consistent funding of Service programs rioration which has been described reflects under-funding of given operations. The problems are compounded by wide-swinging fluctuations in funding from year to year. The Service is a relatively large organization. Significant shifts In the light of the improvements realized in FY 1970, the appro- The increases in the Compliance appropriation's workload and As discussed under the Revenue Accounting and Processing appro- In taxpayer services, the number of taxpayers seeking assistance In legal services, Treasury has made a commitment that pending |