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Wednesday, July 08, 2015

The IRS's Dual Role (and Other Agencies' As Well)

        In my last several posts, I have explored a trend toward tax law administration scholarship and how the interest in this topic may be connected with recent, important coverage of administrative discretion generally.  As study of tax law administration continues to develop, I think it will be important to keep in mind the connections between the IRS and other agencies.  Recognizing such connections will allow for fruitful cross-pollination of ideas.  To the extent that commonalities exist between the IRS’s exercise of its administrative discretion and other agencies’ exercises of their discretion, studies of each can inform the other.  Tax law scholars newly thinking about administrative discretion can build on the many decades that administrative scholars have spent thinking about these issues, and administrative scholars may benefit from fresh eyes and detailed study of the IRS as a means of thinking about agencies.

        For instance, one aspect of the IRS’s administrative discretion that I think is currently understudied is the IRS’s dual role as a service agency and an enforcement agency, and how the IRS exercises its discretion in its service capacity.  A number of tax scholars in recent years (including myself) have examined how the IRS can exercise its enforcement discretion to change the scope of the law.  This focus makes sense.  I think that, typically, the IRS is thought of as an enforcement agency.  It is, after all, the agency responsible for enforcing the tax law.  However, as the IRS’s own mission statement acknowledges (and even highlights up front), the IRS is also charged with serving the public.  In particular, the IRS is obligated to help taxpayers fulfill their taxpaying obligations.  As Josh Blank and I are exploring in a new project, as a result of this service role, the IRS expends significant resources explaining what the tax law is in plain writing that many taxpayers can understand.  In so doing, of course, the IRS also exercises significant discretion.  As we show, the IRS’s exercise of this discretion gives the IRS a powerful platform to shape taxpayers’ views of the tax law.

        Other enforcement agencies of course also take on a service role.  Take, for instance, OSHA, which has as its mission “setting and enforcing standards” and “providing training, outreach, education and assistance.”   Similarly to the IRS explaining the tax law, OSHA creates best practices guides for employers, such as a recent Guide to Restroom Access for Transgender Workers.  Like the IRS’s explanations of the law, these explanations help regulated parties comply.  And yet, OSHA's role in creating these best practices guides also provides OSHA a powerful ability to shape regulated parties' views of the law in practice.               

        I tend to think that the sheer extent of the IRS’s service task is greater than most (if not all) other agencies’, making how the IRS exercises its discretion in the service context particularly noteworthy.  Whether or not that is the case, however, the IRS certainly serves as a good case-study for an agency that exercises significant, and important, discretion, in its service capacity.  As a result, hopefully further study of such exercises of IRS discretion can help inform work about the discretion, and power, that agencies exhibit in the context of helping regulated parties comply with the law. 


Posted by Leigh Osofsky on July 8, 2015 at 09:17 AM in Tax | Permalink


Well, maybe another criteria for comparison could be to what extent, in different countries, tax administrations have the capacity to get their ideas enacted by Parliament (and for what ideas they have the ability to do so), or, conversely, they are merely called upon to enforce laws passed by Parliament. Maybe one could distinguish between "bottom up" tax enforcement mechanisms (when tax administrations have the ability to have their ideas accepted by Parliament) and "top down" tax enforcement mechanisms (when they are merely required to apply the enforcement mechanisms decided by law passed by Parliaments), and, on the bases of distinction, some research project may explore whether the tax administrations service role, the performance of tax administrations and the relations between tax administrations and taxpayers are better off in (more) "bottom up" jurisdictions or in (more) "top down" jurisdictions.

Posted by: luca cerioni | Jul 25, 2015 1:52:02 PM

I agree that the service/enforcement dual role is commonly articulated by tax agencies around the world. Recently have examined the approaches of Australian and US tax administrators in context of tax anti-abuse law. There are many similarities -- e.g. sorting cases for audit and litigation and developing strategy. There are also differences, including those stemming by the capacity of Australian tax administrators to get their ideas enacted by their Parliament.

Posted by: Susie Morse | Jul 20, 2015 6:05:36 PM

Dear Prof. Osofsky,

as an academic working in tax law area (I'm a lecturer in tax law, at the University of Edinburgh), I would like firstly to thank you very much for having posted your ideas - through this blog - to the worldwide audience of tax law scholars. This gives the occasion for comments and exchange of views from a comparative perspective too.

Well, if we consider that the dual role of enforcement agency and service agency is played by a number of tax authorities in other countries too (e.g., in the UK, in the "Taxpayer Charter" it is stated that the HMRC aims at offering the best possible service), maybe a question can be raised from a comparative perspective. In my view, the question is: can tax authorities of different countries learn anything from each others' experience, when acting in the role of service agencies too and when, in so doing, exercise their discretion? I.e., can the outcomes of the experience of a tax authority in one country be useful to the tax authority in another country? personally, I believe that the approaches toward taxpayers used by tax authorities in different countries, are affected by the higher or lower degree of trust and confidence existing between tax authorities and taxpayers in different jurisdictions, but international comparison could probably offer some elements for reflection.

Posted by: luca cerioni | Jul 19, 2015 2:37:24 AM

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