Comments on the report of National Commission on Restructuring the Internal Revenue Service - Tax Executives Institute's comments of June 25, 1997

On June 25, 1997, the National Commission on Restructuring the Internal Revenue Service issued its final report, including recommendations relating to, among other things, whether the Commissioner of Internal Revenue should be appointed for a fixed term, streamlining congressional oversight, establishing an independent Board of Directors to provide effective Executive Branch oversight, providing the IRS with a stable budget, enhancing taxpayer protections, and promoting tax simplification. The Commission's report prompted the following response by Tax Executives Institute's International President, James R. Murray.

Tax Executives Institute commends the National Commission on Restructuring the Internal Revenue Service and its dedicated staff for their extraordinary efforts in identifying issues of concern, in seeking out the views of interested parties, and in developing proposed solutions. TEI is pleased that the Commission recognizes that there is no single solution to what ails the IRS. What is needed -- and what the Commission's report confirms is needed -- is a balanced, integrated approach. One change -- say, the appointment of an independent board of directors -- will not transform the agency unless it is effectively coupled with others (including coordinated and streamlined oversight, stronger leadership by the Commissioner and senior IRS management, an increased focus on customer service, and a meaningful restatement of balanced performance measures). Indeed, one of TEI's concerns is that the establishment of an independent board of directors not become merely the insertion of yet another layer of bureaucracy into the IRS; by itself, the board will not make the agency more responsive. In tandem with other changes, however, enhanced executive branch oversight of the IRS can contribute to a tax system that properly focuses on customer service without minimizing the importance of voluntary compliance.

From this point forward, the focus should be on the future -- on clearly defining expectations, on streamlining and strengthening oversight of the agency, and on providing the IRS with sufficient (and stable) budget resources to modernize its systems, to serve the public, and to ensure compliance with the tax laws. To the extent that we have a criticism of the report, it is that its language sometimes "plays to the gallery" and is unnecessarily critical of the Internal Revenue Service and its personnel. As TEI testified before the Commission last November, there is plenty of blame to go around. The key is to be forward-thinking, to seek and find common ground, and thereby to give the American people the tax system they deserve. We believe that, overall, the Commission report is a big step in the right direction.

TEI is in the process of reviewing the Commission's recommendations, and looks forward to forthcoming congressional hearings on the Commission's recommendations and to contributing positively to the process of translating the recommendations into legislation. At this point, we wish to emphasize our agreement with the following recommendations of the Commission:

* TEI agrees that the Commissioner of Internal Revenue should be appointed for a five-year term, and that the Commissioner should be given greater flexibility in hiring, firing, and salary decisions. The Institute is concerned, however, about the possibility of massive turnover in senior management ranks whenever a new Commissioner is appointed.

* TEI agrees that the IRS should receive stable funding for the next three years so that its leaders can undertake the proper planning to rebuild the agency's foundation. We also believe that congressional oversight of the agency must be streamlined.

* TEI agrees that the IRS must address training, operations, technology, culture, and taxpayer education if the agency is to operate efficiently and with customer focus. To this end, the IRS must refine its measurements of success.

* TEI agrees that further steps should be taken to preserve and strengthen taxpayer rights.

* TEI agrees that the IRS must update its technology and treat tax-payer information as a strategic asset to improve its customer service and compliance functions.

* TEI agrees that the IRS must develop a strategic marketing plan to make paperless filing the preferred and most convenient means of filing for individuals within the next ten years, and we strongly believe that electronic filing must become a viable option for corporate taxpayers as well.

* TEI absolutely agrees that simplification of the tax law is necessary to reduce taxpayer burden and facilitate improved tax administration.

* TEI also agrees that steps must be taken to improve the executive branch governance of the Internal Revenue Service. We note in this regard that the Clinton Administration has expressed its strong disagreement with the Commission's proposal that an independent board of directors be established. Everyone agrees, however, that the status quo will no longer do. Thus, although the Administration's actions in establishing an oversight panel (which was effected by executive order on June 24) are not as dramatic as those proposed by the Commission, it is clear that major changes are forthcoming in overseeing the IRS. There is clearly now a consensus that continuing oversight and managerial expertise are necessary. TEI does not wish to minimize the differences between the Commission and the Administration, and we wish to underscore our firm belief that private sector involvement -- in one form or another -- will benefit the cause of good tax administration. We also wish to express confidence that common ground will be found.

Tax Executives Institute intends to complete its analysis of the Commission's report and recommendations in short order. The Institute would be less than candid if it did not acknowledge concerns about some of the Commission's specific findings and recommendations. Those concerns will be fully explained in the coming weeks. Today, however, we wish to reiterate our strong belief that the Commission's report represents a positive step toward improving the administration of our tax laws.

Tax Executives Institute is the preeminent association of corporate tax executives in North America. Our 5,000 members work in the tax departments of the largest corporations in the United States and Canada, and are dedicated to improving both our tax laws and our tax administration system. For further information, please call Michael J. Murphy, TEI's Executive Director, at 202/638-5601.

RELATED ARTICLE: Task Force on TEI Members Overseas Established

Paul Cherecwich, Jr., TEI's incoming President, has announced the formation of a Task Force on TEI Members Overseas. The Task Force will "investigate the best way to keep active in TEI members who have been sent on overseas assignments, while providing expanded services and opportunities for education, networking, and advocacy for all TEI members," according to Mr. Cherecwich. Lisa Peschcke-Koedt, who is International Tax Counsel for Hewlett-Packard Company in Geneva, will chair the group.

The Task Force, which will operate under the aegis of the Institute's International Tax Committee, is charged with:

* Monitoring corporate tax activity in the country or geographic area in which the expatriate resides, and reporting items of interest to the chair of the International Tax Committee;

* Assisting the International Tax Committee in planning educational programs and in responding to U.S. tax activity;

* Identifying topics for the submission of comments to non-U.S. and non-Canadian officials, and drafting such submissions for consideration by the International Tax Committee and, ultimately, the Executive Committee; and

* Establishing liaison relations with local tax groups such as the European-American Tax Institute or the Corporate Tax Association in Australia

TEI members interested in joining the new group or otherwise contributing to the task force's work should contact:

Ms. Lisa Peschcke-Koedt
International Tax Counsel
Hewlett-Packard Europe
Europe-Middle East-Africa Operations
Route du Nant-d'Avril 150
CH-1217 Meyrin 2, Geneva, Switzerland

Telephone: 41-22-780-8586
Fax: 41-22-780-8785
E-mail: lisa [email protected]

COPYRIGHT 1997 Tax Executives Institute, Inc.
COPYRIGHT 2004 Gale Group