Wednesday, November 15, 2017
Diane Ring (Boston College), Cybersecurity and Tax Information: A Vicious Cycle? (JOTWELL) (reviewing Michael Hatfield (University of Washington), Cybersecurity and Tax Reform, 93 Ind. L.J. ___ (2018)):
The international tax arena is awash with calls for tax transparency, and a variety of reforms are underway at the national, regional and global level to bring such transparency to fruition. See, e.g., Joshua Blank’s recent article The Timing of Tax Transparency [90 S. Cal. L. Rev. 449 (2017)], reviewed by Omri Marian earlier this year. Of course, with great caches of information comes great potential for security breaches of all types. Michael Hatfield, in his forthcoming article, Cybersecurity and Tax Reform, draws attention to the immensely important cybersecurity risks and challenges of a tax system founded on government collection and use of significant quantities of information. Quoting a former FBI Assistant Director, Hatfield describes IRS taxpayer information as “the gold standard” for being a “treasure trove of information” from the perspective of cyber criminals—large quantities of very valuable data housed in one agency. Is the IRS ready? Maybe not.
Hatfield’s solution to these cyber risks (given the operational demands of running a tax system and the constraints faced by the IRS) is substantive law reform and not merely more security. To be clear, security is a great idea, but at some point, reality must step in and when it does, Hatfield argues that it points to a remedy grounded in tax design and not just cybersecurity. His bold proposal—to have the tax system collect less data—relies on the marriage of substantive law changes and a rethinking of the sources of data security.