IRS may contact taxpayers about any  differences. New Zealand Does Integrated Evaluations of Tax Expenditures and Discretionary Spending Programs to Analyze Their Effects and Improve Program Delivery

New Zealand, like the United States, addresses various national objectives  through a combination of tax expenditures and discretionary spending  programs. Rather than doing separate evaluations, New Zealand completes integrated  evaluations of tax expenditures and discretionary spending programs to  analyze their combined effects. The research found that the WFF  program aided the transition from relying on government benefits to  employment, as intended. Electronic tax administration is part of a governmentwide policy to use  electronic services to lower the cost of government and encourage growth  in the private sector. Overall, the growth  of electronic services, according to Finnish officials, has helped to reduce  Tax Administration staff by over 11 percent from 2003 to 2009 while  improving taxpayer service. This cultural attitude  helps promote compliance. IRS Considers Foreign Tax Practices That Might Merit Adoption

IRS officials learn about foreign tax practices by participating in  international organizations of tax administrators. Second, the IRS participates with the Organisation  for Economic Co-operation and Development (OECD) Forum on Tax  Administration (FTA), which is chaired by the IRS Commissioner during  2011. Appendix I: Scope and Methodology

For our objective to describe how other countries have approached tax  administration issues that are similar to those in the U.S. tax system, we  selected six foreign tax administrators. We based our selection of these  practices on several factors, including whether the tax administrators had  advanced economies and tax systems and the foreign tax administrator’s  approach differed, at least in part, from how the United States approaches  similar issues. To describe whether and how the Internal Revenue Service (IRS)  identifies and integrates tax administration practices used in other  countries, we interviewed IRS officials and reviewed related documents. We also followed up with IRS officials based on any information we found  independently about practices that relate to issues in the U.S. tax system  and our comparison of U.S. and other administrator’s practices. The  descriptive information on the practices of foreign administrators  presented in this report may provide useful insights for Congress and  others on alternatives to current U.S. tax policies and practices. What Is New Zealand’s Working For Families Tax Credits Program? The IRD and MSD portions of the WFF tax  credit program are intended to work together to assist low- to middle- income families and promote employment. Why Did Finland Increase Its Use of Electronic Tax Administration? The UK and United States both have individual income tax returns and use  information reporting and tax withholding to help ensure the correct tax is  reported and paid. In 2009, IRS formed the Global High  Wealth Industry (GHWI) program to take a holistic approach to high- wealth individuals. IRS consulted with the ATO to discuss ATO’s approach  to the high-wealth population as well as its operational best practices.
Why GAO Did This Study

The Internal Revenue Service (IRS) and foreign tax administrators face similar issues regardless of the particular provisions of their laws. These issues include, for example, helping taxpayers prepare and file returns, and assuring tax compliance. Understanding how other tax administrators have used certain practices to address common issues can provide insights to help inform deliberations about tax reform and about possible administrative changes in the U.S. existing system to improve compliance, better serve taxpayers, reduce burdens, and increase efficiencies. GAO was asked to describe (1) how foreign tax administrators have approached issues that are similar to those in the U.S. tax system and (2) whether and how the IRS identifies and adopts tax administration practices used elsewhere. To do this, GAO reviewed documents and interviewed six foreign tax administrators. In some cases, GAO also interviewed tax experts, tax practitioners, taxpayers, and trade-group representatives who were selected based on their expertise or involvement in developing or using the foreign systems. GAO also examined documents and met with IRS officials.

What GAO Found

Foreign and U.S. tax administrators use many of the same practices such as information reporting, tax withholding, providing Web-based services, and finding new approaches for tax compliance. These practices, although common to each system, have important differences. Although differences in laws, culture, or other factors likely would affect the transferability of foreign tax practices to the United States, these practices may provide useful insights for policymakers and the IRS. For example, New Zealand integrates evaluations of its tax and discretionary spending programs. The evaluation of its Working For Families tax benefits and discretionary spending, which together financially assist low- and middle-income families to promote employment, found that its programs aided the transition to employment but that it still had an underserved population; these findings likely would not have emerged from separate evaluations. GAO previously has reported that the United States lacks clarity on evaluating tax expenditures and related discretionary spending programs and does not generally undertake integrated evaluations. In Finland, electronic tax administration is part of a government policy to use electronic services to lower the cost of government and encourage private-sector growth. Overall, according to Finnish officials, electronic services have helped to reduce Tax Administration staff by over 11 percent from 2003 to 2009 while improving taxpayer service. IRS officials learn about these practices based on interactions with other tax administrators and participation in international organizations, such as the Organisation for Economic Co-operation and Development. In turn, the IRS may adopt new practices based on the needs of the U.S. tax system. For example, in 2009, the IRS formed the Global High Wealth Industry program. The IRS consulted with Australia about its approach and operational practices.

What GAO Recommends

GAO makes no recommendations in this report.