From July 5 to July 7, Joshua Blank, faculty director of the Graduate Tax Program, participated in a conference in Rust, Austria, titled “Tax Secrecy and Tax Transparency--The Relevance of Confidentiality in Tax Law.” The conference examined the impact of tax secrecy rules on taxpayer behavior in different countries, as well as approaches to the collection of taxpayer data, the sharing of tax return information domestically and internationally, and access to taxpayer data by the general public. Blank was selected to serve as the national reporter for the United States from a call for participants. Approximately 40 other countries were represented, including China, New Zealand, France, Czech Republic, Brazil, Argentina, Nigeria, India, Finland, Canada, and Australia. The event was co-hosted by the Institute for Austrian and International Tax Law at the Vienna University of Economics and Business and by Örebro University, Sweden.
Blank’s report to the conference featured aspects of his recent scholarship on the relationship of tax privacy and tax compliance. Earlier this year, he published “In Defense of Individual Tax Privacy” in the Emory Law Journal. While most tax privacy scholars have focused on how a taxpayer would comply with the tax system if he knew other taxpayers could see his personal tax return, Blank investigated the converse question: How would seeing other taxpayers’ returns affect whether a taxpayer complies? Blank argues that tax privacy enables the government to influence individuals’ perceptions of its tax-enforcement capabilities by publicizing specific examples of its tax enforcement strengths strategically without exposing specific examples of its tax enforcement weaknesses.
As an example, Blank considers the health care mandate’s tax penalty, which Congress enacted in 2010 and which the U.S. Supreme Court upheld last month. Blank notes that, for a variety of political reasons, Congress enacted a penalty that will be difficult for the Internal Revenue Service to enforce. Congress restricted the ability of the IRS to apply criminal tax penalties, liens, and levies against non-compliant individuals. However, Blank argues that by publicizing just one or two memorable examples of a taxpayer whom it penalizes for failing to maintain minimum essential coverage, the IRS could cause taxpayers to perceive that its ability to detect failure to maintain health insurance is significant. Meanwhile, the identities of thousands, or even millions, of specific individual taxpayers who failed to maintain health insurance yet escaped IRS detection would remain hidden behind the curtain of tax privacy.
Blank’s Rusk conference report will be published in a volume on tax secrecy and tax transparency.
Posted on July 9, 2012