Taxpayer Compliance: Reducing the Income Tax Gap (Testimony, 06/06/95,
GAO/T-GGD-95-176).

One of the biggest challenges facing the Internal Revenue Service (IRS)
is finding ways to reduce the income tax gap--the difference between
income taxes owed and taxes voluntarily paid.  This testimony makes
several points.  First, IRS estimates that taxpayers fail to voluntarily
pay in excess of $100 billion annually in taxes due on income from legal
sources.   IRS information suggests that U.S. taxpayers voluntarily pay
83 percent of the income taxes they owe--87 percent after IRS audits and
other efforts.  Second, compliance varies among taxpayers. Wage earners
report 97 percent of their wages, whereas self-employed persons who
operate on a cash basis report just 11 percent of theirs.  Third, IRS
data show that compliance is highest where tax withholding exists, a
little lower where there is information reporting to IRS, and much lower
where there is neither.  The complexity of tax rules may also influence
the level of tax compliance.  Finally, some of the tax gap may not be
collectible at an acceptable cost.  GAO believes that it is very
important for IRS to invest agency resources in measuring noncompliance
and use that information to balance the competing goals of (1)
maximizing tax revenues, (2) promoting uniform compliance, and (3)
minimizing taxpayer burden.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-GGD-95-176
     TITLE:  Taxpayer Compliance: Reducing the Income Tax Gap
      DATE:  06/06/95
   SUBJECT:  Tax administration
             Income taxes
             Tax law
             Noncompliance
             Taxpayers
             Tax nonpayment
             Government collections
             Reporting requirements
             Tax returns
             Tax evasion
IDENTIFIER:  IRS Taxpayer Compliance Measurement Program
             
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