The following letter was submitted to the Senate Finance Committee on June 12, 2006.
In connection with the Committee on Finance's June 13 hearing on several "hot button" issues including "disclosure of corporate returns," I write to express Tax Executives Institute's opposition to public disclosure of corporate tax returns. In a background release dated June 9, the Committee stated that the June 13 hearing will include testimony by a witness on "how public disclosure of certain corporate tax return information would improve transparency and enhance both investor protection and tax compliance, without unduly harming taxpayer privacy concerns."
Protecting taxpayer confidentiality lies at the core of America's tax system, and Tax Executives Institute urges the Committee to preserve the confidentiality of tax returns and return-related information. Specifically, the Committee should proceed only after receiving testimony from a cross-section of witnesses and should resist unsupported assertions that wholesale or even partial public disclosure of tax return information will enhance tax compliance. Stated simply, no compelling case has been made for reversing the carefully balanced privacy protections that have undergirded the tax system for more than 30 years.
Tax Executives Institute is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the costs and burdens of administration and compliance to the benefit of taxpayers and government alike. TEI's 6,000 members represent 2,800 of the leading companies in the United States, Canada, Europe, and Asia. The Institute is committed to maintaining a system that works--one that builds upon the principle of voluntary compliance and is consistent with sound tax policy, one that taxpayers can comply with, and one in which the Internal Revenue Service can effectively perform its audit function without unduly burdening taxpayers.
Proposals to disclose all or part of the information on corporate tax returns are not new. The IRS Restructuring and Reform Act of 1998 instructed the Joint Committee on Taxation and the U.S. Department of the Treasury to prepare studies on the confidentiality of tax returns and tax return information. (1) Four years ago, Chairman Grassley asked both the Department of the Treasury and the Securities and Exchange Commission for their views on the topic and in remarks to the National Press Club this spring, IRS Commissioner Everson said:
[I]t makes sense to discuss whether corporate tax returns should be public. There are important public policy arguments to be made in favor of maintaining the privacy of corporate returns. Nevertheless, making corporate tax returns or a portion thereof public, would likely improve compliance. SEC Chairman Cox has subsequently made similar comments.
Although it is wholly appropriate for Congress to periodically assess whether the tax system's core values --including the sacrosanct nature of taxpayer information--should be revised, refined, or even rejected, Tax Executives Institute cautions against proceeding in haste, based on unsupported assertions and inflammatory rhetoric. We are convinced that a careful weighing of the country's interests in preserving taxpayer confidentiality against the presumed benefits flowing from abandoning those interests will result in the preservation of...