TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, May 30, 2014

Today's Law, Society & Taxation Panels

Law & SocietyToday's Law, Society, and Taxation panels at the 2014 Law & Society Association Annual Meeting in Minneapolis:

  • Panel #6:  Comparative Issues in Taxation
  • Panel #7:  Corporate Taxation
  • Panel #8:  Rules Versus Standards in Taxation
  • Panel #9:  Businesses and Taxation
  • Panel #10:  The Administration of Tax Systems

Today's paper presenters, topics, and abstracts are below the fold:

Panel #6:  Comparative Issues in Taxation (Ajay Mehrotra (Indiana), Chair & Discussant)

  • José-Manuel Martin Coronado, The OECD's Base Erosion and Profit Shifting Plan in Latam Countries: "The case of Peru The paper provides a first review about the "Action plane Base Erosion Profit Shifting (BEPS) from OCDE and its direct effects on Peruvian Taxation. It addresses how this plan apparently changes the model favorable to enterprises (non-double taxation) to protect the public finances (avoid double non-taxation). We find that subject useful for recent "peruvian" Multinational Enterprises (MNE) which don't benefit from that case, due the lack of Double Taxation Treaties for Peru. Moreover, it doesn't have to be restricted to them, because of the increasing presence of Small Business called "Pymes" whose globalization is just as likely as a MNE. Thus, the concepts "avoidance" and "evasion " should be redefined to provided similar space among the so called freedom of tax planning, tax payers´s rights, and measures to combat aggressive tax planning, in the context of emerging small country like Peru. Therefore, the peruvian context should adapt this proposal, as it did with the GAARs for implementation of multilateral instruments based on principles rather than persecutory tax regulations national or international."
  • Lotta Björklund Larsen (Linköping University), Legitimate Praxis at the Swedish Tax Agency:  "The purpose of this paper is to describe how the notion of "praxis" is created and recreated at the Swedish Tax Agency (the Agency) in light of its continuous effort to be seen as legitimate in Swedish society. Praxis consists of explicit laws and court decisions (legal praxis) on the one hand, and those practices established by tacit knowledge and traditions (common praxis) on the other. The outset is that this Swedish version of praxis has been and is formed over the years, adapts to changes in the law but slowly adjusts to insights of the Agency's role in Swedish society. To understand how praxis in a broad sense is made and applied at the Agency is adamant in order to understand the workings of the Swedish tax system. The Agency is an interesting object of study as it collects a considerable amount of income from each individual while still being one of the most highly regarded and respected governmental institutions in Sweden (Ekonomistyrningsverket 2012). Thus, the empirical focus regards praxis referring to income tax."
  • Melina Rocha Lukic, Taxation in the Context of Crisis in Brazil: Changes by Instruments and Federal Conflicts:  "From Lula's second term (2007-2010), facing fiscal stability and due to the 2008 crisis, the orientation of fiscal and tax policies change to international competitiveness and development of the country. Unlike most countries, Lula has adopted anti-cyclical monetary and fiscal measures to recover the level of economic activity as quickly as possible. This turning point was made by changes in the instruments of taxation, including tax exemptions and reduction of some taxes. In addition, a new tax reform proposal is presented to the Parliament, with the consumption tax at the center of discussions. However, this reform did not make consensus among the federal actors, especially from the richer States. The main argument of those States to not support the reform was the uncertain context of the crisis and the fear of revenue loss. The assumption is that, contrary to what happened during the Cardoso government, the crisis was not the decisive reason for the failure of reform, but disputes over federal relations."
  • Henry Ordower (Saint Louis), Retreat from Progressive Taxation in the Swedish Welfare State: Does Immigration Matter?:  "The Swedish (Scandinavian) welfare state model developed under taxation systems that redistributed wealth from the wealthy and well-to-do to the less wealthy. Those systems included steeply progressive income tax rate structures under Sweden's schedular income tax and taxes on wealth and the transmission of wealth at death (estate tax). Today Sweden has neither an estate tax nor a wealth tax. Its current, internationally lauded income tax is dual, but only moderately progressive, and the income tax imposes substantially lower rates on income from capital than it imposes on income from labor. Other regressive taxes on labor and consumption carry much more of the overall Swedish tax burden than they did in earlier decades. The paper will describe the changes in the Swedish tax system during the latter half of the twentieth century and into the 21st century in the context of changing global tax structures. While the changes are consistent with global trends and may be a necessary response to international tax competition, the paper also explores whether Sweden's loss of societal homogeneity facilitated development of a political climate that protected largely white-owned capital from taxation."
  • Duoqi Xu (Jiaotong Univerisity), Constitutional Reflection on the Tax Distribution Reform in China:  "In spite that tax distribution reform in China has made great institutional improvements which increase the proportion of central government's fiscal revenue and restructure the fiscal relationship between the central and the local, some problems still remain unsolved from the perspective of constitutionalism. In respect of institutional arrangement, the reform lacks explicit constitutional basis; in respect of value-orientation, the reform does not truly undertake the sacred mission of protecting and promoting human rights for the lack of democratic foundation; in respect of practical implications, the reform disturbs the balanced and rational operation of fiscal power for the lack of check mechanism. At the current stage, further reform of tax distribution system must be combined with the construction of constitutional state that has already taken off, which requires constitutional confirm of fiscal relation between the central and local governments, strict adherence to the principle of statutory taxation and statutory budge, and moderate distribution of fiscal power. Key words: tax distribution reform, fiscal democracy, statutory budget, fiscal power distribution Ⅰ The historical background and realistic rationality of the tax reform in China Eight years after its proposal, tax distribution reform was finally carried out in 1990s in China. As the economic development later proves, the reform, under the background of so-called socialist market economy, is of necessity as well as rationality. Briefly speaking, the direct cause of tax distribution reform was to relieve fiscal pressure of the central government, and thus it aimed to increase the proportion of central fiscal revenue; actually, the reform is a necessary transition we must make to develop the so-called socialist market economy. ⅡConstitutional deficiency of tax distribution reform Tax distribution reform should be examined on both economic and constitutional dimensions. The reform can be seen as a constitutional issue for it concerns whether the operation of tax power, one of the state's basic powers, accords with the constitutional principle of check and balance. Though the tax distribution reform can be regarded as a successful measure from an economic point of view, it has several constitutional deficiencies as follows: Firstly, in aspect of institutional arrangement, tax distribution reform lacks constitutional basis and legal foundation. Secondly, in aspect of value preferences, tax distribution reform lacks democratic foundation, and cannot truly undertake the sacred mission of protecting and promoting human rights. Thirdly, in aspect of practical implications, the tax distribution reform cannot achieve rational operation of fiscal power for the lack of check mechanism which in a constitutional structure, the key lies in reasonable division of fiscal power and rational settings of its working procedure by correctly positioning power bodies, so as to ensure that the government is responsible to representative institutions, representative institutions are responsible to the people, and judicial organs and the judicial review authority are only responsible to the constitution. The tax distribution reform in China still has a long way to go before reaching the goals above. Though the tax distribution reform has brought us some positive effects since it came into effect in 1994, the tax distribution system established is not perfect, especially far away from fiscal constitutionalism, an object that aims to turn over fiscal power to taxpayers. Therefore, further reform of tax distribution system must be combined with the construction of constitutional state that has already taken off. Ⅲ. Constitutional Roadmap to deepen the reform of tax distribution Firstly, the fundamental change is the constitutional confirm of fiscal relations between central and local governments. Secondly, the key steps are to gradually accomplish the moderate sharing of fiscal power. Thirdly, institutional safeguards are statutory taxation and statutory budget. The basic meaning of statutory taxation is that legislation is the only criterion that both tax leviers and taxpayers should follow. As stated above, further reform of tax system and construction of a socialist constitutional state are the two aspects of a single problem: on one hand, implementation of constitutionalism is the basic way to establish a scientific, standardized fiscal relation between central and local governments; on the other hand, the realization of fiscal constitutionalism is the basic policy to promote our constitutionalism construction. It is a common task for both the government and the people to promote constitutional reform of fiscal system and to create a limited constitutional government with high efficiency."

Panel #7:  Corporate Taxation (Diane Ring (Boston College), Chair & Discussant)

  • Adam Chodorow (Arizona State), The Debate Over Book/Tax Discrepancy:  "Every few years, an outcry arises over the fact that large companies, reporting billions of dollars of income on their financial statements, pay little or nothing in taxes. This outcry is typically followed by calls to align book and tax accounting so that the income a firm reports to the IRS matches the income it reports to investors. Others oppose alignment and argue instead that greater disclosure of differences between book and tax should be required. Still others suggest that Congress impose an alternative minimum tax or other mechanism be developed whereby additional tax is imposed whenever book and tax earning diverge by some preset amount. This chapter canvasses the many arguments in favor of and against book/tax alignment and reviews the various proposals advanced to date. One of the key arguments against strict alignment is that book and tax serve different purposes, with the former requiring conservatism and accommodating a wide range of possible approaches, and the latter requiring certainty and uniform treatment of similarly situated taxpayers. In fact, the differences go far deeper than this, with the income tax focused on a variety of issues irrelevant for financial accounting purposes, such as tracking previously taxed dollars and distinguishing between ordinary income and capital gains. During the early years of the income tax, the IRS and courts struggled with a number of accounting terms and concepts that had been imported wholesale into the income tax to develop tax-specific rules. This early history further suggests that policymakers should be cautious in their efforts to conform book and tax."
  • Anthony Infanti (Pittsburgh), A Critical Take on Repealing the Corporate Income Tax:  "This paper deconstructs the public-private divide as it manifests itself in the differing rhetoric surrounding debates over reforming corporate taxation and debates over reforming taxation of the family."
  • Lily Kahng (Seattle), One Pair of Matching Bookends, Different as Night and Day:  "This Essay analyzes similarities and differences between financial and tax accounting systems with a view toward understanding how each might inform and improve the other. It begins with a brief overview of the historical relationship of the two systems. It then examines what I call the "modern era", in which the traditional values and policies promoted by each system have been reversed. Finally, the Essay turns to an exploration of how financial and tax accounting systems treat intellectual capital. It finds that financial accounting is poised to make significant changes that will more accurately measure income from intellectual capital while tax accounting has regressed to a less accurate treatment of intellectual capital. The Essay argues that tax accounting for intellectual capital can and should be informed by the research and reforms taking place in financial accounting.
  • Ajay Mehrotra (Indiana), Corporate Taxation and the Regulation of Modern Business:  "At the turn of the twentieth century, the taxation of modern business corporations became increasingly important to the development of American democracy. During that time, governments at all levels – from the local to the national – began to view business corporations not only as sources of badly needed public revenue, but also as potentially dangerous wielders of concentrated economic power. To combat the growing importance of corporations, many fiscal reformers sought to use corporate taxation as a mode of regulatory governance. This paper, which is scheduled to be part of an edited volume on The Corporation and American Democracy (eds. Naomi Lamoreaux and William Novak), explores the motives and intentions of fiscal reformers. It seeks to explain why activists in the late nineteenth and early twentieth century turned to taxation as a technique of corporate regulation and why those efforts ultimately fell short. By focusing on the critical ideas and actions of key contemporary political economists, jurists, and lawmakers, this paper attempts to answer the question: why did reformers see taxation as a viable form of public control over corporate power?

Panel #8:  Rules Versus Standards in Taxation (Mirit Eyal-Cohen (Alabama), Chair & Discussant)

  • Alice Abreu (Temple), The Rule of Law as a Law of Standards: Interpreting the Internal Revenue Code:  "Although fields of law ordinarily comprise both rules and standards tax scholars and professionals seem to regard federal tax law as consisting principally of rules. Among the explanations for this rule-oriented approach is the association of rules with rule-of-law values, coupled with a perception that the rule of law has a special importance in the field of taxation. There is also the Code, the girth and complexity of which invites classification as a system of rules. In this piece, we develop further a claim that we have made previously and which has generated important scholarly response: namely, that federal tax law can flourish only if the IRS and the courts can respond nimbly to unforeseen cases and this flexibility demands that many Code provisions be interpreted as standards. We begin in by discussing the relationship between rules and the rule of law and explaining why we think so many tax experts are drawn to a view of the tax law as consisting principally of rules. We then address the descriptive dimension of this claim as well as the normative dimension, teasing out the functions served by interpreting the definition of income as a standard and examining the question of where interpretive authority lies with respect to the Code. We claim that income ought to be interpreted as a standard. As part of this normative analysis we situate the rule of law as one of a triumvirate of transcendent values – the others being justice and administrability – which all fields of law, including tax law, must respect and which demand a mix of rules and standards. We conclude that rule-of-law concerns in federal tax law can be, and are, properly accommodated with just such a mix, as they are in other fields. Tax is not exceptional in this way."
  • Bobby Dexter (Chapman), Tax Transparency:  "This paper discusses special codified and non-codified tax provisions in general and devotes specific attention to the issues presented by the non-codification and hypothetical expansion of a statute providing an exclusion for specific amounts received as restitution for persecution (on account of various traits) by Nazi Germany."
  • Richard Greenstein (Temple), Defining Income:  "In this article we tackle a fundamental problem in tax law: the resistance of the core concept of "income" to a coherent definition. It has long been recognized that there is a substantial gap between the formal definition of income adopted in 1955 by the Supreme Court in Commissioner v. Glenshaw Glass and the IRS's actual determinations of what constitutes income. Among various examples described in the article, the IRS has not taxed as income either valuable, record breaking home run baseballs caught by fans or expensive meals provided by lawyers to prospective clients, even though both appear to meet the Glenshaw Glass definition. Scholars have consistently failed either to explain this dissonance or to offer a theoretically and practically satisfying definition of income to replace the one announced in Glenshaw Glass. We do both and more. Specifically, we develop a new way of thinking about definitions in the law – an approach we call "aptness" – and apply this approach to understanding what "income" means in tax law. The aptness of a legal definition describes the extent to which it reflects the values that are important in the relevant field, which in turn minimizes the number of controversial applications of the definition. We conclude that the Glenshaw Glass definition is apt, but in a highly unusual way. Instead of reflecting by its own terms tax law's defining values, its breadth gives the IRS the flexibility to navigate social opinion regarding income taxation, thereby both providing stability in the administration of the income tax and permitting the evolution of a concept of income that serves the important values – both economic and noneconomic – in taxation."
  • Lawrence Zelenak (Duke), Custom and the Rule of Law in the Administration of the Income Tax:  From the early years of the federal income tax to the present, the IRS has engaged in what might be termed "customary deviations" from the dictates of the Internal Revenue Code, always in a taxpayer-favorable direction. A prominent current example is the IRS's "don't ask, don't tell" policy with respect to employee-retained frequent flier miles; in a 2002 announcement the IRS indicated that such miles were technically within the scope of the statutory definition of gross income, but that the IRS had no intention of enforcing the law. This paper describes and evaluates the phenomenon of administratively-created customary deviations from the Code. After defining the concept of customary deviations and explaining why such deviations are sometimes attractive to tax administrators, the paper offers a brief historical survey of customary deviations, paying particular attention to the pre-1984 treatment of a miscellany of fringe benefits of employment, and to a spate of recent announcements that the IRS would not enforce the Code's anti-loss-trafficking rules in certain contexts. The paper also explains how the development of customary deviations has depended on the absence of third-party standing in tax litigation, and how the lack of any judicial check on unauthorized giveaways by tax administrators threatens rule-of-law values. It concludes with a proposal for legislation aimed at retaining the practical advantages of customary deviations while assauging rule-of-law concerns. This paper has been published at 62 Duke L. J. 829 (2012). This proposal is made in conjunction with the proposal of Alice Abreu and Richard Greenstein (also submitted today), with the idea that both papers would be on the same panel.

Panel #9:  Businesses and Taxation (Kristin Hickman (Minnesota), Chair & Discussant)

  • Samuel Brunson (Loyola-Chicago), Just Passing Through: Eliminating the Mutual Fund Distribution Requirement:  "This article will further address problems I first raised in Mutual Funds, Fairness, and the Income Gap. As I discussed in that article, the distribution requirements for regulated investment companies ("RICs") create significant problems for shareholders. In that article, I explored ways to roughly eliminate shareholders' receipt of "forced realization income" by providing an exemption for some portion of the capital gains dividends shareholders receive. As Professor John Morley has convincingly argued, though, there is no compelling justification for the RIC distribution requirement. Rather, it-along with other RIC tax rules-was enacted in large part to lend legitimacy to open-ended RICs. Ultimately, though, what the tax law wants is to provide a diversified investment that does not add an extra layer of taxation over what a shareholder would have if she invested directly in the portfolio securities. In this article, I look at RIC taxation free from the constraints of this history. RIC shareholders should not be taxed at a higher or lower rate than those who directly hold the underlying securities. While partnership taxation would likely prove too complex and unwieldy, designing a tax regime modeled after the passive foreign investment company rules could provide similar tax treatment without requiring often-illusory annual dividend distributions. Instead, when shareholders sell or redeem their shares, they would be required to pay taxes plus interest on the gains that they would have had. Alternatively, they should be able to elect to mark their shares to market."
  • Mirit Eyal-Cohen (Alabama), Super-Sized Invstment Tax Incentives:  "Under today's section 179 of the Internal Revenue Code, businesses of all sizes, are able to elect to expense their cost of qualified equipment the first year it was placed in service. An examination of the legislative intent and rhetoric throughout the years reveal that section 179 super-accelerated depreciation mechanism has been continuously advocated and portrayed as a small business preference. Yet, this benefit was soon expanded and was utilized mainly by medium and large businesses. Accordingly, a section initially enacted in 1958 to spur small business expansion is today used by all size corporations and have far exceeded his legislative mandate. Moreover, the latest Tax Relief Act and The Jobs Act of 2010, which continued to declare section 179 as a vital "small business incentive", persisted to increase the access of bigger firms. A distant cousin, the investment tax was enacted in 1962, suspended in 1966, reinstated in 1967, and repealed in 1969. Both mechanisms were enacted at the midst of the cold war years, in the name of economic stimuli and global competitiveness by way of encouraging expansion through investment in equipment and machinery. Congress sought, at that time, to enable the American industry to compete on an equal basis with the rapidly growing industrial nations. Indeed, the investment tax credit did stimulate economic growth and apparently to such an extent as after a short period of remarkable success demand for machinery and equipment exceeded the nation's capacity to produce such goods. Thereafter, the investment tax credit was suspended to cool down economic expansion and then reinstated to speed it up again. When inflationary forces began to proliferate, monetary restrictions developed with increasing severity. As a result, section 179 survived the recession that followed at the 1970s, but the investment tax credit did not. While occasional bills suggested reintroducing the investment tax credit throughout the years, none have succeeded in passing the legislative hurdle. In contrast, section 179 deduction expanse limits have been increased exponentially over the years, so has the section's maximum phase-out. What is the reason for these differing legislative histories? Size. This paper aims at scrutinizing immediate expensing tax rules through the lenses of comparative history. The analysis of section 179 cannot be complete without a parallel consideration of the origins of his late "companion", the investment tax credit. Using historical methodology, the paper tells the story of section 179 as initially created to assist small businesses and included small caps on the amount of deductible business investments."
  • Calvin Johnson (Texas), Repeal Qualified Plans, Now:  "Qualified retirement plans are an extraordinarily complicated and expensive government program that misses its appropriate beneficiaries and decreases national savings. The purported justification for qualified retirement plans is to prevent standards of living from dropping in retirement. The tax advantages are distributed, however, prorata to salary, at a time in which top salaries are reaching astronomical heights, and by negating the progressive income tax. That distribution does not identify a distressed group. Indeed, the group getting most benefits are also making large voluntary gifts thereby displaying that they do not think they are under economic stress. Retirees in distress do not get anything from the program. Nondiscrimination rules purportedly represent a bargain whereby pensions will be given to rank and file, but a plan fully satisfying "nondiscrimination" can be expected to give zero benefits to the median worker. The nondiscrimination rules are over- the-top complicated even by tax standards. A replacement, if any, should be outside of the tax system, and depend neither on tax bracket nor proration to salary. Subsidies are not called for because retirement is a target savings, and subsidies reduce the amount saved for a target. Myopia of workers can be met, if at all, either by mandating set asides or by the soft paternalism of set asides for retirement unless the worker overrides the default. The proposal is made as a part of the Shelf Project which is a collaboration of tax practitioners to develop proposals that raise revenue in ways that will improve the efficiency and fairness of the tax system. Repeal of qualified plans could yield $200 billion a year, about 40 percent of current deficit."
  • Tamara Larre (University of Saskatchewan), The Role of Intention in Determining Employee Versus Independent Con(tractor Status under Tax Laws:  "Whether an individual is an employee or an independent contractor has implications for various tax laws in many jurisdictions. In Canada, for example, the status is important for determining the requirements to withhold and remit payroll taxes and to determine the income tax deductions that may be taken. Under Canadian law, the intention of the parties as to the individual's status has traditionally played a minor role, but now has become increasingly important. This paper will determine the extent to which this shift is taking place in the case law and will explore the appropriate role for intention in determining employee versus independent contractor status."

Panel #10:  The Administration of Tax Systems (Jennifer Bird-Pollan (Kentucky), Chair & Discussant)

  • Jared Burns (Temple), Issues Presented by the Taxation of E-Commerce:  "In the modern business space, e-commerce continues to be a prominent driver of growth and profit. Activities such as internet hosting, online advertising, and cloud computing often cross national borders and create issues with the interpretation and application of traditional income-sourcing rules. As technology has rapidly developed, the tax code has failed to keep pace. With business continuing to shift towards internet-based models, the tax code should provide certainty and continuity by dealing with the subject squarely. Thus, as e-commerce continues to develop and evolve, so too must associated tax practices. Resolving issues surrounding the taxation of e-commerce is quickly becoming a priority for many tax authorities around the globe. Advances in technology have made it possible for many enterprises, particularly in the financial services industry, to implement streamlined business models utilizing e-commerce. One such example is the use of servers physically located within a jurisdiction, which rarely give rise to taxable income within the jurisdiction that the server is located. These trends have led to reduced tax revenue for governments, and have left tax authorities searching for ways to recover the lost funds. This article looks at the issues presented by the use of servers in commerce, specifically with regard to the financial services industry. Questions of inequality arise between the taxation of business with e-commerce business structures and those with more traditional structures. The question of inequality also presents itself with respect to the loss of tax authorities' tax base, even while the company using the server continues to enjoy the protections and privileges of having a server physically located within that jurisdiction."
  • Emily Cauble (DePaul), Safe Harbors in Tax Law:  "Safe harbors pervade tax law. This Article begins to fashion an account of why they exist by discussing the functional purposes that safe harbors might serve. Studying the reasons for adopting safe harbors has important practical implications. For instance, analyzing the functions of safe harbors can shed light on the use of other rule-standard hybrids such as rebuttable or irrebuttable presumptions. In addition, this Article provides direction to lawmakers considering the enactment or redesign of a particular safe harbor."
  • Karie Davis-Nozemack (Georgia Tech), The Necessity of the Tax Whistleblower:  "After Bradley Birkenfeld blew the whistle on his employer UBS A.G., the bank agreed to pay $780 million in fines. While the numbers in the UBS case were extraordinary, Mr. Birkenfeld's role as a tax whistleblower is not unique. The Service receives thousands of tips of tax avoidance annually. The Service turns only a very small percentage of these tips into revenue; however, in a handful of instances, the resulting revenue has been staggering sums. Improving upon these patchy outcomes could help narrow the $385 billion tax gap. We cannot, however, determine how best to utilize tax whistleblowers until we understand the role, or lack thereof, that they play within U.S. tax compliance. In analyzing the role of the tax whistleblower, we can use the language and theories of political economics. In particular, Nobel economist Elinor Ostrom's institutional governance theories may illuminate the role of the tax whistleblower. Ostrom and the scholarship that builds upon her work provide a framework for thinking systemically about institutions, particularly those with collective action problems. Collective action, in which many people must cooperate to achieve joint outcomes, is often plagued by free-riders. Ostrom suggests that, in some circumstances, polycentric systems of governance are an effective means for solving collective action problems. One of the hallmarks of polycentricism is overlapping jurisdiction from the public, private, voluntary, and community-based organizations. This paper views the U.S. tax system's quasi-voluntary tax compliance as a collective action problem. For tax compliance, free riders are those taxpayers who underreport, underpay or otherwise avoid their tax obligations without detection. In other words, free-riders are those who contribute to the tax gap. Tax compliance is governed under a polycentric system through (1) quasi-voluntary taxpayer assessment and payment, (2) which is sporadically verified through Service examination. Other roles are played by (3) some third party reporting, (4) preparer regulation and ethical standards, and (5) whistleblower tips. Taxpayer self-assessment and Service examinations bear the governance burden in the tax system because third party reporting, preparer regulation and ethical standards, and whistleblower involvement are underdeveloped mechanisms. If these three mechanisms were more robust, the resulting improved governance would likely enhance revenue collection. This is particularly true for whistleblowers. Third party and non-profit monitoring is not permitted within the tax system due to statutorily required taxpayer privacy under 26 U.S.C. § 6103. This lack of third party/non-profit involvement artificially restricts healthy polycentricism. It is possible, however, that tax whistleblowers may step into the role often reserved for non-profits in polycentricism. This paper builds upon the literature of polycentrism, tax compliance, and whistleblower law to recommend specific changes to tax whistleblower law. The purpose of these changes would be to reshape the role of tax whistleblowers to provide the benefits often provided by non-profits in healthy polycentricism."
  • Toni Robinson (Quinnipiac), Unscrupulous Tax Preparers Continue to Cause Problems for Taxpayers:  "Some taxpayers choose to hire paid preparers to assist them with preparation of their returns. Sometimes these preparers offer refund anticipation payments to the taxpayers they serve. Much has been written about the unconscionable interest rates charged by some unscrupulous preparers. But, a growing trend represents another way in which some preparers cheat their clients, often low income taxpayers. After the preparer gathers all the information, he or she creates what appears to be a return consistent with the information given by the taxpayer. The preparer then tells the taxpayer that he or she is entitled to a refund of, for example, $800. The taxpayer signs the return and leaves, happy with the $800 less fees and interest the preparer advances. The return preparer then alters the return, claiming additional dependents and/or deductions. The changes result in a far higher refund. Some time later, when the fraud section of the Service comes calling to reclaim the overpayment, the taxpayer is on the hook for the undeserved amount plus interest and penalties. This paper will argue that the current practice of the Service of collecting, or trying to collect, from the taxpayer should change. At present, the Service tries to collect from the taxpayer, who often cannot pay. In a case like this of outright fraud, the Service should attempt to collect from the preparer."

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