Why was the Commission created?
The IRS has the difficult job of administering a complex set of laws and processing 200 million tax returns and more than one billion return-related documents annually. Many functions are performed well, but there are also a number of widely acknowledged problems. The Commission will carefully examine these problems and make specific recommendations to address them. Among the problems are as follows:
ASQC and the University of Michigan Business School's Customer Satisfaction Index show that taxpayers gave the IRS customer satisfaction ratings lower than any of the other 200 companies and government agencies measured in the index. More importantly, customer satisfaction is dropping at the IRS: from 55% in 1994 to 50% in 1996. Trust must be rebuilt.
There is a concern that the current management and governance structure established in th 1950's does not allow for long-term planning and implementation of more efficient and effective quality services at the IRS.
Taxpayers deserve prompt attention to their questions and inquiries with a timely and accurate resolution. The IRS is seen by many as poorly equipped to assist taxpayers. As an example, in today's fast-paced, information-driven world, taxpayers need a real-time full report of their account status with the IRS. It is clear that the IRS must become more customer driven and agile.
There is a perception that the IRS follows a double standard regarding taxpayers. For example, the GAO has found the accounting records of the IRS to be unable to be certified as accurate, but if a taxpayer had such records, he or she could be subject to penalties.
The Tax Systems Modernization (TSM) program has not yet been achieved, and there is a concern that several billion dollars has been spent on an effort that has failed. TSM must be thoroughly analyzed and revamped.
Issues To Be Addressed
In order to fulfill its objectives, the National Commission on Restructuring the Internal Revenue Service has segmented its work into six core components. While issues may overlap and narrow as the Commission proceeds, the following are foundational matters which must be addressed to ensure an effective and user-friendly federal tax administration system into the next century. The foundational issues provide a framework which will enable the Commission to accomplish its task within a year.
Core Issue One: The U.S. Taxpayer Deserves High Quality, Courteous Service from the Internal Revenue Service
The Commission will focus on efforts that ensure superior service. This foundational issue will involve investigating the current and potential implementation of quality control programs and a review of resource allocation between service centers, regional offices, district offices, and the central headquarters. Taxpayer services will be examined; including taxpayer account management, computerized collection methods, phone bank resources, paperless returns and other functions of the tax system. In addition, the Commission will review the role of the taxpayer advocate and examine the compliance function of the IRS to ensure the appropriate professional treatment of the taxpayer by examinations and collections. The Commission will examine ways to strengthen the protections provided to taxpayers. The Commission will consider management and systemic reforms that ensure civil liberties are given first consideration by IRS management and front-line employees.
Core Issue Two: The Commission Must Look at the Current Management and Governance Structure of the Agency
Simply stated, this will require a review of the organizational structure, the role of the IRS Commissioner, the function and role of political appointees, and the current and potential governance and oversight mechanisms to ensure accountability of the IRS. The question will be asked: "Does the current management and governance structure allow for long-term planning and implementation of high quality, responsive services and programs at the IRS?"
Core Issue Three: The Work Force at the IRS Should Be of the Highest Quality
The Commission must review current hiring and evaluation practices at the IRS to ensure that a high caliber work force is in place. This objective also necessitates looking at employee training issues and incentive for retaining quality employees. Within this core issue, the Commission will examine whether privatization of certain IRS functions would better serve the taxpayer.
Core Issue Four: The IRS Should Employ State-of-the-Art Technology at the IRS
So that its strategic objectives can be met, the IRS' Tax Systems Modernization must be aligned with a focus on quality customer service. The Commission must look at four aspects of automating the current paper-driven system. First, how can the IRS best plan for technological advancements? Second, what development and implementation procedures can be adopted to guarantee effective progress toward a more efficient and paperless environment? Third, what is the best oversight process for modernization in the move toward greater automation? Fourth, and perhaps of primary concern to the taxpayer, will be the issue of confidentiality of on-line interactions between the individual taxpayer and the IRS and the security of the computer infrastructure.
Core Issue Five: Making the IRS an Institution Which the U.S. Taxpayer Knows is Financially Accountable
The Commission will review the annual audit process and the budget process for the IRS. In addition, the issue of the tax gap -- revenues owed but not collected -- will be addressed.
Core Issue Six: Addressing the Complexity of Tax Administration
The Commission will review ways of simplifying the hence reducing taxpayer burden and costs associated with every level of tax administration. Issues previously discussed, such as automation, are certain to come into play here. The Commission will also review non-tax functions of the IRS. Within this core issue, the Commission will examine the extent to which Congress itself, through laws that are overly complex, adds to the difficulty of tax administration. We will also look at specific examples in the tax code of provisions that cause particular difficulties. The Commission must look at consistency and turn-around time in tax administration across all regions and at all levels of the revenue collection process.