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2009 Assessment

United States: Integrity Indicators Scorecard

United States: Integrity Scorecard Report > Sub-Category: Taxes and Customs
Indicators		Score
61	In law, is there a national tax collection agency?	100
62	Is the tax collection agency effective?	88
63	In practice, are tax laws enforced uniformly and without discrimination?	75
64	In law, is there a national customs and excise agency?	100
65	Is the customs and excise agency effective?	100
66	In practice, are customs and excise laws enforced uniformly and without discrimination?	75

Indicator and sub-Indicator Details

In law, is there a national tax collection agency?

61: In law, is there a national tax collection agency?

Score:

YES

Comments: The Internal Revenue Service is a bureau of the Department of the Treasury and bills itself as "one of the world's most efficient tax administrators. In 2004, the IRS collected more than US$2 trillion in revenue and processed more than US$224 million in tax returns."

References: The Internal Revenue Service [ LINK ]

Is the tax collection agency effective?

62a: In practice, the tax collection agency has a professional, full-time staff.

Score:

100

Comments: As noted in the Government Accountability Office report, the IRS is a large, complex organization that employees an extensive staff located in regional centers across the nations. From a GAO assessment of the IRS FY 2008 and 2009:

"In its role as the nation's tax collector, IRS has a demanding responsibility in collecting taxes, processing tax returns, and enforcing the nation's tax laws. IRS is a large and complex organization, posing unique operational and financial management challenges for its management. IRS employs over 100,000 people in its Washington, D.C., headquarters and over 700 offices in all states and territories and some U.S. embassies and consulates. In fiscal years 2009 and 2008, IRS collected about US$2.3 trillion and US$2.7 trillion, respectively, in tax payments, processed hundreds of millions of tax and information returns, and paid about US$438 billion and US$426 billion, respectively, in refunds to taxpayers."

References: "FINANCIAL AUDIT: IRS's Fiscal Years 2009 and 2008 Financial Statements" Government Accountability Office, November 2009 [ LINK ]

62b: In practice, the tax agency receives regular funding.

Score:

100

Comments: The IRS does receive regular, annual funding, although whether this is enough to carry out its mandate is debatable.

The Government Accountability Office completed an audit of the IRS's FY2008 and 2009 financial statements. After its review, GAO made 136 recommendations to the IRS for improvement. On conclusion related to funding noted: "IRS has not fully integrated the use of cost- and revenue-based performance information into its routine management and decision-making processes or in its externally reported performance metrics."

In addition, the IRS oversight board has recommended that the agency receive additional funding in order to reorganize its structure and streamline its processes.

References: "FINANCIAL AUDIT: IRS's Fiscal Years 2009 and 2008 Financial Statements" Government Accountability Office, November 2009 [ LINK ]

Press Release: IRS Oversight Board Calls for More Information Technology Funding in IRS FY2010 Budget [ LINK ]

In practice, are tax laws enforced uniformly and without discrimination?

63: In practice, are tax laws enforced uniformly and without discrimination?

Score:

100

Comments: From the Center for Public Integrity's Broken Government report: "Tax avoidance is an old trick, but under the Bush administration, weak enforcement and a spate of new tax credits and loopholes have led to an extended tax holiday for big business. Though the basic corporate tax rate is 35 percent, according to the left-leaning Citizens for Tax Justice, the average tax rate paid among the 275 largest U.S. corporations is closer to 17 percent -- lower than that of most individual citizens"

The Financial Secrecy Index, published by the Tax Justice Network, evaluates the levels of opacity and secrecy in a given jurisdiction's tax law. In its study of Delaware in 2009, the index reported: "some US Internal Revenue rules in combination with the US Qualified Intermediary program constitute an effective mechanism by which foreigners can invest in the US tax-free and without the US having information about the identity of the foreign investors."

This loophole is currently being brought to the attention of the US Congress. From a summary of the proposed Foreign Tax Compliance Act of 2009:

"Based on proposals included in President Obama's 2010 Budget, on legislation proposed by Senator Carl Levin and Representative Lloyd Doggett, and a draft released by Senator Max Baucus, the Foreign Account Tax Compliance Act would force foreign financial institutions, foreign trusts, and foreign corporations to provide information about their U.S. accountholders, grantors, and owners, respectively"

U.S. PIRG advocates that improvements must be made to fiscal policy to stop special-interest giveaways, increase budget transparency and accountability, eliminate waste, ensure that subsidies or tax breaks serve the public, and make taxes fairer.

References: Broken Government, a Center for Public Integrity Investigation, January 2009 [ LINK ]

The Financial Secrecy Index 2009 [ LINK ](Delaware).xml

Foreign Account Tax Compliance Act of 2009 [ LINK ]

US Public Interest Research Group website [ LINK ]

In law, is there a national customs and excise agency?

64: In law, is there a national customs and excise agency?

Score:

YES

Comments:

References: The U.S. Customs and Border Protection (CBP) agency [ LINK ]

Is the customs and excise agency effective?

65a: In practice, the customs and excise agency has a professional, full-time staff.

Score:

100

Comments: At the end of FY2008, the customs and boarder protection agency recorded a staff of 17,000. The CBP website also notes: "The Border Patrol continues to operate an aggressive recruiting program to bring new Border Patrol agents into the government. Read more about Careers with the Border Patrol."

Included on their website is information about careers in customs and border control as well as a link to the USAjobs portal for job application.

References: U.S. Customs and Boarder Patrol website [ LINK ]

65b: In practice, the customs and excise agency receives regular funding.

Score:

100

Comments: In a Customs and Border Protection press release, the agency requested additional funding for FY2009. From the release: "CBP's FY 2009 budget reflects US$9.49 billion in appropriated resources and US$1.45 billion in funding acquired through user fees, for a total of US$10.94 billion."

The GAO report provides the following summary of a legislative act to provide increased funding from the Department of Homeland Security to the US Custom and Boarder Protection Agency:

"Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, and subsequent agency comments.1 This mandate required the Department of Homeland Security (DHS) to prepare an expenditure plan that satisfied 12 specified conditions, and for the plan to be submitted to and approved by the House and Senate Appropriations Committees before the agency could obligate US$400 million of the approximately US$775 million appropriated for U.S. Customs and Border Protection (CBP) fencing, infrastructure, and technology."

References: Budget Request for CBP Totals Just Under US$11 Billion U.S. Customs and Border Protection [ LINK ]

"Briefing on U.S. Customs and Border Protection's Secure Border Initiative Fiscal Year 2009" Government Accountability Office, April 2009 Expenditure PlanPrepared[ LINK ]

In practice, are customs and excise laws enforced uniformly and without discrimination?

66: In practice, are customs and excise laws enforced uniformly and without discrimination?

Score:

100

Comments: Generally, regulations on import taxes and inspection are applied fairly in the United States. However, incidents have arisen where US Customs and Border officials have exercised leniency and unfair discretion in the application of these laws. For example, in November 2009, a customs official and his wife were sentenced to prison for accepting a bribe to allow for certain vehicles to pass through U.S. customs inspection stations at the US-Mexican border without a proper review. See the FBI press release for more details: [ LINK ]

In another recent case in February 2009, an official at the Export-Import Bank of the United States was indicted in a federal court for accepting a bribe from a Nigerian businessman.The Export-Import Bank of the United States' mission is to get more small and mid-sized American businesses involved in international trade in a way that turns an actual profit back to the businesses. The Bank employee accepted money from a Nigerian businessman who was interested in importing goods and services from a Kentucky business through the financial assistance of the Export-Import Bank. See the Justice Department press release for more details: [ LINK ]

Drug smuggling and money laundering have been serious issues on the U.S.- Mexican border with a correspondingly sharp increase in the drug-related deaths in Mexico and along the border in 2008 and 2009. The Wall St. Journal reports that the drug cartel continued to hold great prominence and control in the region despite a 40 year US- Mexican joint "war on drugs." This reality is prompting some Mexican and US officials to consider new options. One such solution is to legalize marijuana to dampen the economic influence of the drug cartels near the US-Mexican border.

In a similarly focused report, he New York Times states that the increased anti-money laundering regulations enacted by the United States have not curbed the illegal flow of money across the US-Mexican border. It has simply forced smugglers to employ less sophisticated methods: "Customs officials have discovered a host of ingenious hiding places, from US$3 million secreted in the floor of a Mexican passenger bus to US$1.6 million stuffed in duffel bags and balanced atop the heads of people wading across the Rio Grande to Mexico. At border crossings and airports alone, American customs officers seized US$57.9 million in the fiscal year ending September 30, up 74 percent from the previous year. And once the money lands in Mexico, it is easily swept into a largely unregulated underground cash economy or laundered through seemingly legitimate businesses."

References: "Customs Official and His Wife Sentenced to Prison for Conspiracy to Commit Bribery and Conspiracy to Import a Controlled Substance" Federal Bureau of Investigation Phoenix Division, Nov. 24, 2009 [ LINK ]

"Former Employee of the Export-Import Bank of the United States Charged with Corruption and Tax Violations" US Department of Justice Press Release, Feb. 24, 2009 [ LINK ]

FY2009 Report. The Export-Import Bank of the United States [ LINK ]

David Luhnow "Solutions to Mexico's Drug Crisis" The Wall St. Journal, Dec. 26, 2009 [ LINK ]

JAMES C. McKINLEY Jr. and MARC LACEY "War Without Borders: Along U.S.-Mexico Border, a Torrent of Illicit Cash" The New York Times, Dec. 26, 2009 [ LINK ]