GAO questions IRS collection plan

[deadparrot]

WASHINGTON - The Internal Revenue Service must improve oversight of a new program using private agencies to collect taxes before expanding the effort, congressional investigators say.

Critics of the program said Tuesday that the Government Accountability Office report supported arguments that the tax agency was moving too quickly to incorporate an unworkable program.

"I've been concerned all along about the use of private contractors to collect federal taxes," said Sen. Max Baucus (news, bio, voting record) of Montana, top Democrat on the Senate Finance Committee. Baucus requested the GAO study with committee chairman Charles Grassley, R-Iowa.

"Tax collection is an inherent government function and the IRS ought to take care of it in-house," Baucus said.

http://news.yahoo.com/s/ap/20061031/ap_on_go_ot/irs_debt_collection

[54anickel]

1. Good. I doubt they'll stop them from "privatizing" collections, but they

might slow it down and shine a light on what's been going on at the IRS. There was a story not long ago about the IRS letting a bunch of auditors go - they were the ones that went after the "big" offenders. They were cutting back in that department and wouldn't transfer them to another. Sorry, I can't remember the details of the one. But a lot of "monkey business" at the IRS these days.

Bit more from the article:

The report cited preliminary IRS data showing that the three companies expected to collect $56 million to $92 million through the end of next year, at a cost of $61 million. Under the program, the private agencies are entitled to up to 24 percent of the tax money they collect.

The IRS program, said Colleen M. Kelley, president of the National Treasury Employees Union, the largest independent federal union, "is a direct handout to the private sector, which won't generate an appreciable return to the Treasury and will cost taxpayers money."

...

The private debt collection program is starting at a time that Congress has balked at giving the IRS more money to hire additional agents needed to close the gap between taxes legally owed and taxes actually collected. Baucus estimated that gap at $345 billion annually.

[54anickel]

2. I found this from 2003 when they were first looking at doing it. Not a very

impressive return on the dollar.

http://moneycentral.msn.com/content/Taxes/P53027.asp

snip>

A report by former IRS Commissioner Charles Rossotti estimated that spending $296 million to hire more IRS compliance employees to focus on accounts receivable would result in additional collections of $9.47 billion in known tax debts per year -- a return of $31 for each dollar spent. In comparison, using private agencies would cost $3.25 billion to collect $13 billion -- a return of only $3 for each dollar spent.

more...


Here's a more recent article by David Cay Johnson http://www.corpwatch.org/article.php?id=14030

snip>

The move, an initiative of the Bush administration, represents the first step in a broader plan to outsource the collection of smaller tax debts to private companies over time. Although I.R.S. officials acknowledge that this will be much more expensive than doing it internally, they say that Congress has forced their hand by refusing to let them hire more revenue officers, who could pull in a lot of easy-to-collect money.

The private debt collection program is expected to bring in $1.4 billion over 10 years, with the collection agencies keeping about $330 million of that, or 22 to 24 cents on the dollar.

By hiring more revenue officers, the I.R.S. could collect more than $9 billion each year and spend only $296 million — or about three cents on the dollar — to do so, Charles O. Rossotti, the computer systems entrepreneur who was commissioner from 1997 to 2002, told Congress four years ago.

I.R.S. officials on Friday characterized those figures as correct, but said that the plan Mr. Rossotti had proposed had been forestalled by Congress, which declined to authorize it to hire more revenue officers.

snip>

Privatizing government services is often promoted as a way to cut costs. But the government would probably net $1.1 billion from private debt collectors over 10 years, compared with the $87 billion that could be reaped if the agency hired more revenue officers, as Mr. Rossotti had recommended.

more...