TEI opposes Virginia legislation to permit contingency fee audits.

• Position: Tax Executives Institute

On January 31, 1996, Tax Executives Institute filed the following comments with the Virginia legislature opposing proposed legislation to permit localities to hire accounting firms to conduct audits of local taxes. TEI's comments were prepared under the aegis of its State and Local Tax Committee whose chair is Christopher W. Baldwin of Gannett Co., Inc.

As President of Tax Executives Institute, I am writing to express the Institute's policy objections to House Bill No. 768, which would authorize localities to hire accounting firms to conduct audits of local taxes. TEI has fundamental concerns about such a proposal, which we believe would seriously undermine the integrity of, and public confidence in, local tax administration.

Background

Tax Executives Institute is a volunteer, professional association of nearly 5,000 accountants, lawyers, and other professionals who are responsible for managing the tax affairs of their companies. TEI members must contend daily with the interpretation, application, and enforcement of business tax laws. We represent a cross-section of the business community - in Virginia and across North America - and are dedicated to the development and effective implementation of sound tax policy. We are similarly committed to the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike. TEI believes that the diversity, training, and experience of its members enable it to bring a unique and balanced perspective to the policy issues raised by House Bill No. 768.

Discussion

House Bill No. 768 would amend the Code of Virginia by adding section 58.1-3902.1, relating to the use of professional accounting firms for performing audits of local taxes. Specifically, the legislation would authorize the commissioner of the revenue or director of finance for any county or city, or the tax-assessing officer of any town, to "employ, upon such terms as may be agreed upon, the services of professional accounting firms to assist with the audit of any local taxes." Hence, the bill would authorize the hiring of contract auditors on a contingency fee basis.

Tax Executives Institute strongly objects to the proposed legislation. We believe the use of so-called bounty hunters by local jurisdictions in Virginia could deprive taxpayers of due process and significantly undermine the public's perception of the tax system's fairness. We also...