Tax study finds personal integrity pays

Residents who pay their taxes want fellow residents to do the same, according to a survey report that the Internal Revenue Service Oversight Board released today. That taxpayer sentiment aligns with IRS proposals for closing a significant gap between the amount of taxes collected on a timely basis and the amount of taxes owed.

The board reported that 88 percent of the survey participants said it was “not at all” acceptable to cheat on taxes. Another 82 percent said personal integrity was the greatest factor in people's decision not to cheat.

The survey report also found that a third of taxpayers said they do not cheat because of a possible audit.

The IRS' updated estimate of the overall gross tax gap for the 2001 tax year is $345 billion. The largest chunk of the tax gap—about $285 billion—is a result of individuals underreporting their income, according to IRS statistics.

IRS enforcement activities, coupled with late payments, have recovered about $55 billion of the gross tax gap. Still, the net tax gap stands at $290 billion for the 2001 tax year.

“The vast majority of Americans pay their taxes accurately and are shortchanged by those who don’t pay their fair share,” IRS Commissioner Mark W. Everson said in a statement issued by his office.

President Bush’s fiscal 2007 budget contains several proposed legislative changes aimed at narrowing the tax gap. The spending plan proposes authorizing the IRS to issue levies to collect employment-tax debts and expanding third-party information reporting to include certain government payments for property and services, and debt and credit card reimbursements paid to certain merchants.

“Simply stated, compliance is highest where there is third-party reporting,” Everson said.

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