Learning To Love Tax Collectors

By Global Tax Weekly

The IRS, which like most tax authorities is subject to a regime of democratic accountability only indirectly, has not had a good week, after it was accused by the Treasury Inspector General for Tax Administration of paying bonuses to tax-deliquent employees, and told by the United States Government Accountability Office that it needs to sharpen up still further even after having had to deal with a series of past budget cuts. The GAO also criticized the IRS for failing to audit a sufficient number of large partnerships, a relatively new phenomenon in the investment sphere. Nobody much loves tax collectors, but you have to have a degree of sympathy with the IRS, which has become a victim of internecine political rivalry on the Hill, as sequestration and a series of unimplemented budgets have left it with yesterday’s level of resources to cope with today’s level of demands. Obamacare, right or wrong as a policy initiative, and who would be brave enough to say, may be the straw that breaks the camel’s back.

Mind you, the IRS is in clover compared to the tax collection authority in Europe’s proto-state, the European Union, which has no direct power to collect tax, and has to rely on percentage scrapings from Value Added Tax receipts and customs duties, for which it is beholden to national administrations, in addition to direct payments from member states based on a proportion of national income. Needless to say, national governments jealously guard their own income flows, and have always tried to prevent the Brussels bureaucracy from gaining any direct control over taxation. As part of its ambitions towards statehood for the EU, the European Parliament would of course like to change this system towards one in which the Union has direct tax-collecting power, and this week it was busy forwarding such an agenda, as it rolls towards the end of its term. For a while the Financial Transactions Tax was the great white hope of the EU’s tax centralizers, although they were deluding themselves if they believed that the countries collecting such a tax would willingly pass any of it over to the centre. Now that the FTT itself is under a cloud, they are left without any clear road forward. Hence the Parliament’s futile, last ditch attempt to lay down a marker for the future.

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