TEI urges rejection of proposal for IRS to use private collection agencies.

On July 27, 1995, Tax Executives Institute filed the following comments with the Senate Appropriations Committee, urging rejection of a provision in the Treasury Department appropriations bill that would require the Internal Revenue Service to spend $13 million on a pilot program using private firms to collect delinquent taxes. Subsequently, the proposal was defeated on the Senate floor, but reinstated in the House-Senate conference. TEI's comments, which took the form of a letter by 1994-1995 TEI President Linda B. Burke, were prepared under the aegis of its IRS Administrative Affairs Committee, whose 1994-1995 chair was Robert D. Adams of Halliburton Company.

Tax Executives Institute has long supported the appropriation of sufficient funds to the Internal Revenue Service to perform the essential government services that are assigned to it (including funds for tax systems modernization). I am writing to oppose a provision in the Treasury Department's appropriations bill that would require the IRS to spend $13 million on a pilot program using private firms to collect delinquent taxes.

TEI opposes the provision because the use of private firms to collect taxes represents bad tax policy, could imperil taxpayer rights, and likely would erode taxpayer confidence in the fairness of the tax system.

TEI is a volunteer association of nearly 5,000 professionals who are responsible for managing the tax affairs of their companies. We represent more than 2,700 companies -- a cross-section of the business community -- and believe the diversity and training enable us to bring a uniquely balanced and practical perspective to your attention.

Taxpayers' perception that the tax system is fair is absolutely essential to voluntary compliance. For the tax system to work, taxpayers need to know that, when they deal with their government, they will be treated in a fair and impartial manner. The use of private firms to perform a core function of the government -- collection of taxes due -- is inimical to this goal. Moreover, using outside, for-profit contractors could impede taxpayer privacy and hence further undermine the perception of fairness. In this regard, some commentators have rightfully criticized these contractors as "bounty hunters."

TEI urges the Senate to reject this requirement in the appropriations bill to implement a pilot program to use private firms in the collection of delinquent taxes. If you have any questions, please do not hesitate to call either me at [phone] or Timothy J. McCormally of the Institute's professional staff at [phone].