FROM THE OFFICE OF PUBLIC AFFAIRS

Treasury Assistant Secretary for Tax Policy Pam Olson met with the new members of the Taxpayer Advocacy Panel yesterday. The new Taxpayer Advocacy Panel members are here in Washington for three days of orientation and meetings.

Good morning. I appreciate the opportunity to be with you today.

The IRS is the largest bureau within the Treasury Department.  It touches more citizens on a regular basis than any other agency in the federal government. It is often the only point of contact citizens have with the federal government. No other agency has a greater capacity to affect the way our countrymen feel about their government.  The IRS serves an important, but sometimes unpopular role in our country - it collects the funds necessary for our government to operate.  Americans must rely on the IRS to administer our tax system in a fair and efficient manner, with as little intrusion into peoples’ lives as possible. Our goal, in which you join us, is to ensure that is the case.
  
Secretary O’Neill and Commissioner Rossotti have challenged the IRS to deliver world class customer service to America’s taxpayers.  Under Commissioner Rossotti’s leadership, the IRS has taken important steps in that direction.  Attitudes and practices have changed in ways that will improve tax administration for years to come.  The agency is being reshaped to make it more friendly and accessible to taxpayers.  Commissioner Rossotti is leaving a legacy of customer service at the IRS, and this program is part of that legacy.  Nevertheless, much remains to be done, and that is where you come in.

The government often loses touch with the needs and concerns of the citizenry. The IRS is no exception. For example, taxpayers need to know up-front what their tax paying responsibilities are so they can comply with the law.  But, the tax law is far too complex for that to be possible. 

Individuals and businesses face significant challenges in understanding the tax laws, keeping required records, and filling out numerous complicated and detailed tax forms, which often require working through lengthy and difficult instructions, ending in cumbersome calculations.
 It is imperative that the government simplify the tax law and its administration to make compliance easier for taxpayers.  

Although much simplification depends on congressional action, there is much the IRS and Treasury can accomplish without such action. Unfortunately, rather than simplifying things for taxpayer, the IRS often makes the problem worse by interpreting the law in a manner that is literally or theoretically correct, but that is divorced from reality and that offends common sense.  Problems arise when the IRS spends too much time trying to get the perfect answer for every possible situation – the rules become unnecessarily complicated, with too many specialized rules, exceptions, and exceptions to the exceptions.  The IRS gets bogged down with too many rules, too many procedures, and too much rigidity.  And the taxpayers suffer.

 
When the IRS loses touch with taxpayer needs and concerns, the tax system cannot operate in an efficient and taxpayer friendly manner.  Let me give you an example. I’m sure you’re familiar with the timely mailing is timely filing rule. You rush to the post office before midnight on April 15th and so long as the return is postmarked on April 15th, it’s considered timely. A few years ago, a taxpayer did the same thing with a tax court petition, which you’re allowed to do, but did the government a favor by shipping it Federal Express so it would be there the next day. That was a mistake! The IRS took the position that a petition is not timely filed if sent by Federal Express because it had not been “postmarked,” as required by the Internal Revenue Code.  From the taxpayers’ perspective, this made no sense – he had spent more money to get the petition filed faster and ensured its safe arrival.  Eventually, Congress stepped in and clarified that the IRS could recognize documents timely “postmarked” by Federal Express as timely filed.  In the meantime, however, rigid adherence to the rules caused an unnecessary problem. The IRS should help Americans comply with their taxpaying responsibilities, not make them more difficult.
 
To keep the faith of the taxpaying public, the IRS must use its resources more efficiently in its exam and collection functions by focusing on more egregious taxpayer conduct.  The IRS might be compared to a village cop.  The job of both is to protect and serve the citizenry.  We wouldn’t think the village cop was doing his job correctly if he spent all his time giving speeding tickets to drivers traveling one mile per hour over the limit while robbers held up the bank. Too often, however, resources are spent pursuing taxpayers who are the equivalent of the village speeders, while ignoring taxpayers who are thumbing their noses at the tax system.  This causes a loss of trust in the tax system. 

Under Commissioner Rossotti’s leadership, the IRS has begun to use its resources in a more balanced manner, by focusing attention on egregious taxpayer behavior.  Since President Bush took office, Commissioner Rossotti’s efforts to transform the IRS and use its resources effectively have accelerated.  Rather than what was surely regarded by the taxpayers as nitpicking over methods of accounting, the IRS is reallocating resources to the pursuit of taxpayers hiding income in secret bank accounts.  This reallocation of resources helps ensure that everyone pays the taxes Congress has imposed on them.

It will be a continual challenge, however, for the IRS both to deter the speeders and capture the bank robbers, a task made more difficult by the increasing sophistication of taxpayers and the sophistication of advisors who aid them in avoiding paying the taxes they owe.  The IRS must continue to be sensible with its resources and focus them where they will have the biggest impact.  With requests for additional funding must come a demonstration that existing resources are being used as effectively as possible.

We must be aware of the burdens the tax law imposes on taxpayers, to ensure the burdens don’t outweigh the benefits.  At times, the IRS asks taxpayers to take on responsibilities that are impractical and don’t make sense from the taxpayer’s perspective. For example, to claim some family related credits, taxpayers must maintain all their grocery receipts for the year.  This is an unrealistic requirement, and sets taxpayers up for problems with the IRS, even though their family situation makes them eligible for the credit.  We must be more realistic about what we expect taxpayers to do.
 

The IRS is different from a business which has no lock on its customers. If a customer does not like the service or product a business provides, the customer can take his patronage elsewhere.  Taxpayers can’t do that with the IRS.  Consequently, it is essential to the integrity of the tax system that the IRS strive to treat taxpayers in the same manner that a business treats customers it wants to return.  The IRS must strive to make its product user friendly – within the constraints laid out by Congress - by giving taxpayers simpler forms and simpler rules with which to comply.  The IRS needs to provide guidance that corresponds with common sense.  In addition, the IRS always must treat taxpayers in a courteous and responsive manner.  

Although Commissioner Rossotti has put the IRS on a positive course, enormous challenges lie ahead.  The only way the IRS can meet those challenges is if it stays in tune with taxpayers.  This program is essential to ensuring that the voice of the customer is heard at the IRS, and factored in on a regular, consistent basis to help continuously improve service.  Commissioner Rossotti has referred to these panels as “listening posts.”  I think that’s an apt description, so I urge you to comment, to advise.  Your insights will help bridge the gap between the taxpayer’s expectations and IRS practices.  You will help the IRS understand the taxpayer’s point of view.  You will help keep the IRS grounded.

To meet the Secretary’s challenge to deliver world class customer service to America’s taxpayers, the IRS must continue to do everything it is doing now and find new ways to improve the delivery of its products and services to America’s taxpayers.  You are a part of that effort, and we are counting on each of you to provide the kind of advice and guidance the IRS needs to stay on a positive course.  With your help and your fresh perspective, we can make the IRS a better organization than it has ever been before.

The President has spoken of the value of volunteerism in America, and he has urged Americans to volunteer to help their neighbors, their communities, and their government.  Never has this been more important.  You have all volunteered to serve, to do this important work, to advise America’s tax agency, and to continue to help it improve and become more efficient and more responsive to America’s taxpayers.

On behalf of President Bush, Secretary O’Neill, and the Treasury Department, thank you for volunteering your time, your energy, your talent, your experience - not to mention your sense of humor - to this effort.

Thank you.