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IRS Aims to Stop Increase in Tax Evasion
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By MARY DALRYMPLE, AP Tax Writer

WASHINGTON - The Internal Revenue Service (news - web
sites) has been waging a high-profile attack on
corporate tax evaders, but the agency's new chief
warns that midlevel and low-income tax cheaters had
better watch out too.



"I think that we have to address this vigorously," IRS
Commissioner Mark Everson said in an interview with
The Associated Press.


Everson, who is six months into a five-year term, said
he wants to make enforcement just as important as
customer service, the agency's main focus for the past
five years.


The changed emphasis comes as a survey conducted for
the IRS Oversight Board shows the number of Americans
who believe it's OK to cheat "a little here and there"
on their taxes increased from 8 percent in 1999 to 12
percent in 2003.


The same survey showed Americans generally agree with
Everson. About 95 percent those surveyed in July by
RoperASW said it's "very important" or "somewhat
important" for the IRS to make sure corporations and
high-income taxpayers pay what they owe.


This year, the survey detected an increase, to 87
percent, in the number of Americans who believe it's
just as important for the IRS to make sure that
low-income taxpayers pay their fair share. The number
who believe that's "very important" jumped 7 percent
from last year.


At the top of the income scale, Everson said tax
shelter promoters peddle potentially abusive products
not just in the United States, but increasingly
abroad, both to U.S. subsidiaries and foreign
companies, he said.


Among the lowest income brackets, Everson sees
challenges in educating new immigrants to a system of
taxation that requires people to step forward and
voluntarily assess and pay their taxes.


In the middle, he points to changing attitudes among
ordinary Americans.


The board describes the evidence of changing attitudes
among taxpayers as a "softening" of Americans'
commitments to pay what they owe and said the trend
merits a watchful eye. Everson said the trend must be
stopped before it spreads further.


"People are willing to pay their taxes," he said.
"They recognize that important obligation, but they
don't want to feel like they're paying when someone
else doesn't have to."


Those who believe it's acceptable to cheat "as much as
possible" remains small. But it also increased. Last
year, 3 percent of those surveyed agreed with the
statement. This year, it was 5 percent.


Overall, the number of Americans who believe it's
absolutely not acceptable at all to cheat on taxes has
declined. Last year, 86 percent of Americans polled
said it is not acceptable to cheat while paying income
taxes. This year, the number dropped to 81 percent.


Doug Shackelford, professor of taxation at the
University of North Carolina at Chapel Hill, said
taxpayers may be absorbing the examples of corporate
tax evasion and starting to wonder whether they should
pay their fair share.


The solution, Everson said, is more visible
enforcement. Although most people report that personal
integrity is the biggest reason they pay their taxes,
the fear of being audited has risen sharply.


Actions already taken against those who promote and
use abusive tax shelters appear to be having an
effect. Everson said the number of shelter
transactions registered with the IRS has leveled off.


Congress and the Bush administration have exerted
pressure to stop companies from relocating a shell
headquarters in a tax haven such as Bermuda to cut
their U.S. tax liabilities by millions of dollars.


"It's tricky because some are intentionally hiding
things behind the curtain," Everson said.
"Understanding whether this problem behind the curtain
is getting smaller or staying the same size is
undoubtedly difficult."

Shackelford said the dual missions of the IRS -
enforcement and service - put the agency in a tough
spot.

"I sometimes think we have way too high of
expectations for the IRS," he said.

"They're supposed to be sort of like the neighborhood
cop on the block. They're supposed to get the
criminals, and they're supposed to help little old
ladies get across the street, and they're supposed to
have answers to all your questions when you pick up
the phone and call them, and that's probably not
realistic."