TEI testifies before the IRS Oversight Board on customer service needs of taxpayers: February 8, 2006.
Good afternoon. I am Dave Bernard, Vice President--Taxes, Kimberly-Clark Corporation. I also serve as Senior Vice-President of the Tax Executives Institute, the preeminent association of business tax professionals and am pleased to participate in today's hearing of the IRS Oversight Board.
Tax Executives Institute was established in 1944 to serve the professional needs of in-house tax practitioners. Today, the Institute has 53 chapters in the United States, Canada, Europe, and Asia. Our 5,800 members are accountants, attorneys, and other business professionals who work for 2,800 of the leading global companies; they are responsible for conducting the tax affairs of their companies and ensuring their compliance with the tax laws. TEI represents the business community as a whole, and our members deal with the tax code in all its complexity, as well as with the Internal Revenue Service, on almost a daily basis. TEI is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike.
The companies that employ TEI's members have almost without exception been assigned to the IRS's Large and Mid-Size Business (LMSB) Division. The largest 1,600 taxpayers within LMSB are subject to ongoing audits as part of the Coordinated Industry Cases (CIC) program. The Institute's testimony is largely based upon our experience with this segment of IRS operations. We are pleased to offer our views on the customer service needs of taxpayers within the IRS and, more particularly, LMSB.
Defining Good IRS Customer Service
A. Currency. In its notice on this hearing, the IRS Oversight Board notes:
The IRS has shown considerable progress providing customer service during the past five years. Service levels have improved to the point where it is no longer axiomatic that service needs to be improved. The IRS may have arrived at the point where service levels are good enough, or close enough to the desired level, so that the IRS should strive to achieve these levels at less cost, or explore other dimensions of customer service that heretofore have not been analyzed in detail.
One measure of good customer service is the reduction of audit cycle time to improve audits and audit coverage. Since its inception in 1999 the IRS's Large and Mid-Size Business Division has striven to offer new and innovative services to taxpayers in an effort to achieve more current audits.
The key to achieving currency is cooperation with taxpayers. More than two years ago, TEI joined with LMSB to produce the Joint Audit Planning Process, whose goals are two-fold: (i) to establish accountability in executing a jointly developed audit plan, and (ii) to develop an issue-focused plan to, if you will, separate the wheat from the chaff and thereby increase audit efficiency. The process emphasizes that the keys to a successful audit are communication, trust, and openness.
The Division has also sought other ways to increase currency, offering taxpayers a variety of alternatives--such as Limited Issue Focused Examination (LIFE), Pre-Filing Agreements (PFAs), and Fast Track Settlement--to resolving disputes. LIFE in particular--with its focus on the resolution of material issues--holds great promise in reducing disputes and decreasing cycle time. Most recently, in 2005, 17 taxpayers--including many TEI members--enrolled in a pilot program, the Compliance Assurance Process (CAP), which employs real-time issue resolution and requires the IRS to work with the taxpayer to resolve issues prior to the filing of a tax return. The IRS has decided to continue the program in respect of 2006.
These processes all have one thing in common--the desire to settle cases at the lowest possible level. LMSB's efforts in this regard have begun to have some effect. According to one source, in fiscal year 2004, the IRS closed 1,500 more industry cases (ICs) than in FY 2003. The months-in-process declined by two and one-half months with no decrease in quality. There was also a four-month decline in months-in-process in the CIC group and 640 more tax returns were audited and closed. The currency rate increased from 37 percent to 47 percent in 2004 and was at 62 percent as of August 31, 2005. Closures for 2005 will likely exceed 2004 totals.
There is anecdotal evidence that the use of these processes may vary from region to region and industry to industry. In addition, the emphasis on becoming current at the Examination level may be increasing the number of issues sent to Appeals.
TEI urges the Oversight Board to encourage the IRS to make these issue resolution programs more widely available. Currency benefits both the government and taxpayers by conserving taxpayer resources and permitting the IRS to focus its resources on areas of noncompliance.
B. E-Filing Mandate. In January 2005, the IRS issued temporary abuses may be better addressed by the adoption of an "ordinary and reasonable" business expense requirement.
Finally, TEI believes that the compliance burdens and administrative costs of tracking the taxi fare or other transport reimbursement far outweigh the benefit of any revenue that may be collected by the Government. Because employees may be reluctant to travel extensively under the new guidelines, their employers may suffer increased costs in order to compensate the employees on the relevant personal tax suffered. The new reimbursement policy could well make companies hesitant about establishing regional headquarters in the jurisdiction. The new guidelines thus contradict the government's objective of lowering the cost of doing business in Singapore and encouraging companies to locate their headquarters there. Moreover, if employers must reimburse their employees for the extra tax burden, then the amount of taxable corporate profits will be reduced and the fisc will suffer.
For these reasons, TEI recommends that the government exempt the tax on these travel-related reimbursements via administrative concession. TEI also recommends that the effective date of the new tax changes be postponed to permit time for a more in-depth review of the effect of the proposals on Singapore businesses.
The Asia Chapter of Tax Executives Institute would like to express its appreciation for being able to comment on the proposed changes. Should you have any questions, please do not hesitate to contact David Sutherland, chair of TEI's Asia Taxes Subcommittee, at 852-2848-6801, email@example.com.
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|Title Annotation:||Tax Executives Institute|
|Date:||Mar 1, 2006|
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