Adjusting Civil Penalties for Inflation
GAO found that certain civil penalties available to the Internal Revenue Service (IRS) when taxpayers do not meet their tax obligations had decreased substantially in value over time due to inflation. If the penalties had been adjusted for inflation, GAO estimated that IRS's collections would have increased between $38 million and $61 million annually from 2000 to 2005. To maintain the deterrent value of penalties, GAO said that Congress
- should consider requiring IRS to periodically adjust for inflation, and round appropriately, the fixed-dollar amounts of the civil penalties to account for the decrease in real value over time and so that penalties for the same infraction are consistent over time.
Although Congress partially adjusted certain civil penalties since GAO reported, the penalties remain well below the levels that would fully adjust for inflation.
^ Back to topKey Reports
- Tax Compliance: Inflation Has Significantly Decreased the Real Value of Some Penalties
- GAO-07-1062, August 23, 2007
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 19 pages) Accessible Text Recommendations (HTML)
