TEI cosponsors Conference on Tax Gap: familiar issues, few solutions.

Current and former government officials, academics, practitioners, and industry stakeholders, including TEI 2006-2007 President David L. Bernard, came together in Washington in mid-June to discuss the causes, consequences, and possible solutions for the nation's growing tax gap.

The National Conference on the Tax Gap, styled as a discussion forum for policymakers, and legislative and executive branch staff, centered on the research of five prominent academics, each evaluating a different aspect of the tax gap problem. Phillip L. Mann, former ABA Section of Taxation chair and tax partner at Miller & Chevalier, chaired the conference, which was co-sponsored by TEI, the ABA Section of Taxation, American Institute of Certified Public Accountants' Federal Tax Division, American Tax Policy Institute, and American College of Tax Counsel.

Not surprisingly, tax gap measurements garnered substantial attention. Several speakers noted the need to develop new ways to approach the issue. Urban Institute Senior Fellow Eric J. Toder, for example, observed that aspects of the current estimate pertaining to corporate noncompliance were particularly unreliable owing to the lack of any new research in that area since the 1980s. And, unlike the 1980s, when audit coverage was so high for the largest corporations that operational data were comprehensive, the audit rate for corporations as a whole has dropped substantially.

Further, while individual taxpayers and small businesses operating in the cash economy remain a major part of the tax gap (perhaps as much as 80 percent), measuring the level of noncompliance remains difficult. Compounding that problem are the steep compliance costs associated with collecting additional information from that sector. Conference speakers were in general agreement that the increase in tax revenue gained from stepped-up compliance would not be that great.

Few speakers held out realistic hope that legislative "fixes" would materialize to adequately address the tax gap. Harry L. Gutman, former Joint Committee on Taxation chief of staff and currently a...