5 ms·

In a surprising turn of events, bureaucrats believe that bolstering their own bureaucracy is the panacea they’ve been looking for! More seriously, based on the

In a surprising turn of events, bureaucrats believe that bolstering their own bureaucracy is the panacea they’ve been looking for! More seriously, based on the level of digitization that has happened in the financial sector over the last 20 years, I think it would be truly shocking if we didn’t have a tremendous reduction in manpower associated with auditing records. Firstly, most American file their taxes using software that all but makes it impossible for them to be wrong in any significant way. Secondly, that is aided by the fact that all major financial institutions pipe their customers data straight into the government and into each other. There is very little space for lying or hiding assets. The whole system is computerized. And to be frank, I doubt that the pursuit of major tax evaders is really a function of lack of resources. I’d strongly wager that it’s a lack of political will. If the authors are being truthful about the existence of a small number of large, known entities simply not filing returns, then we can assume that somebody in the chain of authority has made the explicit decision to not pursue. Adding more bodies without changing that fundamental decision won’t help.

Retric 5y ago
It’s become more expensive to audit records not less. The IRS computerized collecting payroll information decades ago, so any recent reductions have simply been politically motivated.
- rjzzleep 5y ago
  True, but if Tax systems are anything like government healthcare systems, then the reason why it's more expensive to audit records isn't because what data is available, but rather because of how that data is available and how its processed. In Germany, while you do submit everything digitally it's all scanned and filed on paper, and to some extent the digitally some digitally submitted information is printed at tax office before processing. Obviously when you have nonlinear data, i.e. paper receipts and invoices and a lot of other paper data, more data means more physical labour.
  - Retric 5y ago
    The problem with audits is it’s an adversarial relationship in that you can’t trust the other party. The wealth of computerized records would be great if you could trust them, but anything the IRS automates is begging to be gamed. On top of this internal systems aren’t forced to use a constant standard. In effect the IRS is stuck at some level doing audits by hand while handed a deluge of low level data.
    - rjzzleep 5y ago
      That isn't the issue. The issue is that these records are not computerized to begin with, THAT is why you can't trust. You're looking at the wrong end of the problem. Taiwan has a centralized digital receipt standard and apparently had it for years. Lot's of people still like paper, but in general that digital receipt is easy to check. Germany on the other hand rolled out standardized tamper proof paper receipts. So of course you have audit paper records when the source of the information is paper.
      - Retric 5y ago
        Receipts aren’t the only issue. Take something as simple as a family restaurant, a purchase of say rice may look completely legit but if the family takes it home for personal use then that’s not a business expense. It’s hard to track that stuff down, but misclassification is the most common form of tax fraud rather than falsified records which simply take more effort.
        rjzzleep 5y ago
        Complete myth that those things are what makes the companies bleed money. It's like when people said we have remove paper money because small coffee shops in italy don't report their earnings. Added it's hard to imagine that those stores steel more money than Starbucks. And just in case you come back with a calculation on the estimated number of coffee shops in italy compared to just Starbucks. Starbucks is obviously just of the institutionalized crooks. This discussion is basically the same as guilt tripping peoples straw usage when the biggest offender is obviously the plastic industry.
- CityOfThrowaway 5y ago
  Do you have a source for that claim?
slg 5y ago
>Firstly, most American file their taxes using software that all but makes it impossible for them to be wrong in any significant way. >Secondly, that is aided by the fact that all major financial institutions pipe their customers data straight into the government and into each other. There is very little space for lying or hiding assets. The whole system is computerized. That is true for me and you, but is it true for the people who they are actually trying to catch? Someone with hundreds of millions or billions isn't going to be using TurboTax or have most of their income funneling through a checking account at Wells Fargo. >And to be frank, I doubt that the pursuit of major tax evaders is really a function of lack of resources. I’d strongly wager that it’s a lack of political will. These are the same reasons. They have a lack of resources because there is a lack of political will.
- CityOfThrowaway 5y ago
  It’s probably not true about people with hundreds of millions or billions. Yet, intuitively I’d still assume that the digitization efforts of the last few decades would still result in a net-decrease in audit headcount. Before the 2000s, it was not uncommon for average earners to get a visit from an auditor. Based on some of the publications by the IRS I have read, it’s now significantly less likely for average earners to get audited than high-income earners. Beyond that, the probability that a high-income earner is growing relative to average income earners. Given the sheer volume of people in the average-and-below bucket, it makes intuitive sense that changes to the audit rate in that group would have an outsized impact on the overall headcount requirements.
sroussey 5y ago
Crypto companies don’t report…

Retric 5y ago

It’s become more expensive to audit records not less. The IRS computerized collecting payroll information decades ago, so any recent reductions have simply been politically motivated.

rjzzleep 5y ago
True, but if Tax systems are anything like government healthcare systems, then the reason why it's more expensive to audit records isn't because what data is available, but rather because of how that data is available and how its processed. In Germany, while you do submit everything digitally it's all scanned and filed on paper, and to some extent the digitally some digitally submitted information is printed at tax office before processing. Obviously when you have nonlinear data, i.e. paper receipts and invoices and a lot of other paper data, more data means more physical labour.
- Retric 5y ago
  The problem with audits is it’s an adversarial relationship in that you can’t trust the other party. The wealth of computerized records would be great if you could trust them, but anything the IRS automates is begging to be gamed. On top of this internal systems aren’t forced to use a constant standard. In effect the IRS is stuck at some level doing audits by hand while handed a deluge of low level data.
  - rjzzleep 5y ago
    That isn't the issue. The issue is that these records are not computerized to begin with, THAT is why you can't trust. You're looking at the wrong end of the problem. Taiwan has a centralized digital receipt standard and apparently had it for years. Lot's of people still like paper, but in general that digital receipt is easy to check. Germany on the other hand rolled out standardized tamper proof paper receipts. So of course you have audit paper records when the source of the information is paper.
    - Retric 5y ago
      Receipts aren’t the only issue. Take something as simple as a family restaurant, a purchase of say rice may look completely legit but if the family takes it home for personal use then that’s not a business expense. It’s hard to track that stuff down, but misclassification is the most common form of tax fraud rather than falsified records which simply take more effort.
      - rjzzleep 5y ago
        Complete myth that those things are what makes the companies bleed money. It's like when people said we have remove paper money because small coffee shops in italy don't report their earnings. Added it's hard to imagine that those stores steel more money than Starbucks. And just in case you come back with a calculation on the estimated number of coffee shops in italy compared to just Starbucks. Starbucks is obviously just of the institutionalized crooks. This discussion is basically the same as guilt tripping peoples straw usage when the biggest offender is obviously the plastic industry.
CityOfThrowaway 5y ago
Do you have a source for that claim?

slg 5y ago

>Firstly, most American file their taxes using software that all but makes it impossible for them to be wrong in any significant way. >Secondly, that is aided by the fact that all major financial institutions pipe their customers data straight into the government and into each other. There is very little space for lying or hiding assets. The whole system is computerized. That is true for me and you, but is it true for the people who they are actually trying to catch? Someone with hundreds of millions or billions isn't going to be using TurboTax or have most of their income funneling through a checking account at Wells Fargo. >And to be frank, I doubt that the pursuit of major tax evaders is really a function of lack of resources. I’d strongly wager that it’s a lack of political will. These are the same reasons. They have a lack of resources because there is a lack of political will.

CityOfThrowaway 5y ago
It’s probably not true about people with hundreds of millions or billions. Yet, intuitively I’d still assume that the digitization efforts of the last few decades would still result in a net-decrease in audit headcount. Before the 2000s, it was not uncommon for average earners to get a visit from an auditor. Based on some of the publications by the IRS I have read, it’s now significantly less likely for average earners to get audited than high-income earners. Beyond that, the probability that a high-income earner is growing relative to average income earners. Given the sheer volume of people in the average-and-below bucket, it makes intuitive sense that changes to the audit rate in that group would have an outsized impact on the overall headcount requirements.

sroussey 5y ago

Crypto companies don’t report…