Boosting Tax Revenues --
Without Raising Taxes
The IRS has become a key player in this numbing age of trillion dollar budget deficits. The Obama Administration says the number for 2009 will be $1.6 trillion, almost four times that of the largest prior deficit. The Administration also estimates the cumulative deficit for the next ten years will be $9.0 trillion. As guardian of the revenue side of the budget, the IRS should be looking for new and creative ways to both accelerate and increase the collection of badly needed tax revenues.
Why not import to the IRS proven Alternative Dispute Resolution principles and practices used in the commercial world and at other federal agencies? ADR for more than 30 years has been the tool of choice to resolve commercial disputes and there is no reason why it wouldn't be equally effective in the tax world. This initiative's purpose is to exhort the IRS to heed a Congressional mandate and encourage the Agency to overhaul and modernize its dispute resolution system.
More than a decade ago Congress in the Taxpayer Bill of Rights told the IRS to develop mediation and arbitration procedures. The Agency has cobbled together an á la carte menu of six ADR programs – for which taxpayers have little appetite. During 2008, of the hundreds of thousands of cases that got resolved at the IRS, a paltry 165 taxpayer disputes were wrapped up using an ADR program. This number is actually lower than prior years (the ADR Data page shows the detail).
There are two reasons ADR hasn’t caught on at the IRS: The Agency hasn’t shown a serious commitment to ADR principles – its enforcement culture clings to the vintage, outdated model of timeless two-party adversarial negotiations. And its ADR offerings are conceptually flawed, so taxpayers find them unattractive and not compelling.
New ideas for change are captured in a Special Report recently published in Tax Notes Magazine, Jousting with the Tax Man: ADR at the IRS. Two key recommendations include using truly independent third-party neutrals, rather than IRS employees, to serve as mediators and arbitrators, and making a non-binding mediation process mandatory as it is in most state and federal courts.
This initiative is a call for the IRS to take seriously its 1998 Congressional mandate; to seize ADR as a strategic dispute resolution tool; and to make needed and meaningful changes to its ADR programs. It's time to put in place modern, proven, efficient and cost-effective resolution tools, and the changes proposed here will do just that. They will also promote the IRS’s overarching Mission of maximizing tax compliance through more collaboration and less confrontation, and address the hemorrhaging federal budget deficits.