Draft IRS report on International Enforcement Program - Key Performance Indicators.

On August 9, 1993, Tax Executives Institute filed the following comments with the Internal Revenue Service on the IRS's June 1993 draft report on the International Enforcement Program's Key Performance Indicators. The comments took the form of a letter from TEI President Bob Periman to Marc Greenfield, IRS Regional CEP Manager for the Mid-Atlantic Region, who is heading a task force on IRS measurement systems. The letter supplements the Institute's March 15, 1993, comments on the measurement of a successful international audit, as well as several meetings between the IRS and TEI over the past six months. The comments were prepared under the aegis of its International Tax Committee. whose chair is Lisa Norton of Ingersoll-Rand Company. Robert L. Ashby of Northern Telecom Inc. and Alan Getz of Mitsui & Co. (USA) Inc. contributed materially to the development of the Institute's position.

On behalf of Tax Executives Institute, I am pleased to submit the following comments on the IRS's June 1993 Draft Report on the International Enforcement Program's Key Performance Indicators. The comments supplement the Institute's March 15, 1993, comments on the measurement of a successful international audit, as well as our discussions with members of your task force on December 22, 1992, February 22, 1993, and July 15, 1993.

General Comments

Although TEI supports the IRS's efforts to improve the quality of the examination process for multinational taxpayers, we must reiterate our basic concern with the project's thesis. As we stated at the outset, the Institute questions whether measurements for international audits should be divorced from the standards applied to domestic audits. The draft report states that "a separate management measurement system is necessary" for international audits because the IRS's "customers and regulators have required separate and unique accountability [in respect of international operations]." We respectfully disagree.

TEI recognizes that certain aspects of an international audit--particularly the information-gathering challenges--may be different from those of a domestic audit. These differences, however, do not by themselves require "separate and unique accountability." While the techniques for auditing multinational corporations may vary, the institutional standards for judging the success of that audit should not. We believe that differences between international and domestic audits can be properly analogized to differences among various industries. Certain industries may similarly require different knowledge, skills, and audit techniques, but these differences do not by themselves dictate the need for a separate measurement system. Thus, although the Industry Specialization Program recognizes, and indeed owes itself to, cross-industry differences, the success or failure of the ISP program is not--so far as we are aware--judged in accordance with a different set of standards. Rather...