COMPLEX TAX LAWS HAMPER EFFICIENCY, ERODE CONFIDENCE
ABA TESTIFIES BEFORE IRS OVERSIGHT BOARD

WASHINGTON, D.C., Jan. 26, 2004 – The American Bar Association told the Internal Revenue Service Oversight Board today that the IRS must aggressively promote meaningful tax simplification if it wants to improve service to taxpayers and enforcement of tax laws.

Testifying at a public hearing of the IRS Oversight Board, Richard A. Shaw, chair of the ABA Section of Taxation, said that despite recent efforts to make the IRS a more efficient and responsive agency, the overwhelming complexity of the tax code, combined with lack of adequate resources, continues to hamper the IRS’s ability to effectively administer the tax law. Shaw’s testimony was presented on behalf of the American Bar Association.

Shaw told the Oversight Board that complexity is the root of several significant obstacles facing the IRS.

"As the National Taxpayer Advocate and others have well documented, the scope and complexity of tax laws make it virtually certain that taxpayers will face procedural, technical and bureaucratic obstacles in meeting their tax obligations," said Shaw. "This not only creates problems on the front end, when taxpayers attempt to prepare and file returns, but also at the back end, when errors rooted in complexity result in audits and controversy with the Service."

Shaw testified that complexity also reduces the public’s perceptions of fairness of the federal tax system by creating different treatment of similarly situated taxpayers and generating opportunities for technical manipulation of the tax laws – often in ways never contemplated by Congress.

"Exploitation of ambiguities created by unnecessary complexity aggravates the perception problem. This forces the Service to divert resources from working with compliant taxpayers on legitimate issues to pursuing enforcement with aggressively noncompliant taxpayers," Shaw said.

While recognizing the limited ability of the IRS to impact tax legislation or appropriations, Shaw told the Oversight Board that part of the problem could be addressed by making simplification of the tax code the cornerstone of the IRS’s strategic plan for the next five years. This plan should include prompt issuance of guidance, additional training for auditors and appeals officers, and – most significantly – educating Congress and the public on how complexity adversely impacts the IRS’s ability to achieve its mission. The complete testimony can be found at www.abanet.org/tax.

The American Bar Association Section of Taxation has more than 20,000 tax lawyer members nationwide. Its goals include helping taxpayers better understand their rights and obligations under the tax laws and working to make the tax system fairer, simpler and easier to administer.

The American Bar Association is the largest voluntary professional membership organization in the world. With more than 400,000 members, the ABA provides law school accreditation, continuing legal education, information about the law, programs to assist lawyers and judges in their work, and initiatives to improve the legal system for the public.