Income tax crime and government responses in the United States 1998‐2007

Abstract

Purpose -The most recent IRS estimate puts the individual tax gap at $245 billion per year. This study seeks to develop and review performance measures for the seven most important IRS programs aimed at reducing the tax gap. Design/methodology/approach -The study develops and analyzes performance measures for the last ten years. The performance measures include discovery rates, penalty rates, penalty dollars, abatement rates, abatement dollars, collection activity rates, and criminal enforcement activities (number of special agents, investigations, referrals, indictments, sentences, and length of sentences). Findings -The results are mixed regarding changes in performance measures. There was almost no change in audit rates and increases in other IRS discovery programs. There was a steady decrease in civil penalties for the first seven years followed by increases in latest three years. There were decreases in abatements for most penalties, a dramatic decrease in seizures, and significant increases in liens and levies. There were noteworthy decreases in the number of special agents and criminal investigations. The relatively small number of criminal investigation activities is surprising given the amount of the tax gap. Originality/value -This study examines all major programs aimed at the individual tax gap.