On March 18, Joshua Blank (LL.M. '07), professor of tax practice and faculty director of the Graduate Tax Program, presented his forthcoming article, "Collateral Compliance," as an invited special lecture at the Institute for Austrian and International Tax Law at the Vienna University of Economics and Business in Vienna, Austria. The article will be published in the University of Pennsylvania Law Review later this year.
Most taxpayers are aware that the failure to comply with the tax law can lead to civil and criminal tax penalties. But, as Blank notes, tax noncompliance has other consequences as well. Blank describes these consequences as “collateral tax sanctions.” These sanctions revoke non-monetary government benefits and services, are imposed in addition to monetary tax penalties and are often administered by agencies other than the taxing authority. Blank shows that collateral tax sanctions increasingly apply to individuals who have failed to obey the tax law. They range from denial of hunting permits to suspension of driver’s licenses to revocation of passports. He also shows that as a result of the 2012 U.S. Supreme Court case Kawashima v. Holder, some individuals who are subject to tax penalties for committing tax offenses involving “fraud or deceit” may even face deportation from the United States. While criminal law scholars have written dozens of articles on the collateral consequences of convictions, Blank notes that tax scholars have virtually ignored collateral tax sanctions, even though their use by the federal and state governments is growing.
Drawing on behavioral research and experiments that have been conducted in the tax context and other areas, Blank argues that collateral tax sanctions can promote voluntary compliance with the tax system more effectively than traditional monetary tax penalties, especially if governments increase public awareness of these sanctions. Governments, he argues, should embrace these sanctions as a means of tax enforcement and taxing authorities should publicize them affirmatively. Blank proposes principles that governments should consider when designing collateral tax sanctions. His principles suggest, for example, that initiatives to revoke driver’s licenses from individuals who have failed to pay outstanding taxes or professional licenses from individuals who have failed to file tax returns would likely promote tax compliance. However, he cautions that whether the sanction of deportation for tax offenses involving fraud or deceit will have positive compliance effects is far less certain. Blank concludes by suggesting how taxing authorities should publicize collateral tax sanctions to foster voluntary compliance.
Posted on March 25, 2013