Mr. McCORMACK. Would this reorganization plan eliminate that hiatus there between what would be a large return for the collector's office and the small return for the agent in charge's office?

Mr. DUNLAP. I think that the details that I will explain Monday, Mr. McCormack, will cover that in great detail, but the answer is that it makes it a steady flow.

Mr. McCORMACK. Exactly.

Mr. DUNLAP. By agent grades, rather than by office jurisdiction. Mr. McCORMACK. That would be a powerful point in favor of the reorganization plan of this kind?

Mr. DUNLAP. In my opinion, one of the most powerful.

Mr. McCORMACK. One of the things that I have always been interested about, and I have no hesitancy in having my income tax return being made public, has the Department any views as to the publicity of all the income tax returns?

We hear about Members of Congress saying, "Sure, I have no objection." But why confine it to a group? Why should there not be publicity and the public know every income tax return, corporation and individual?

Secretary SNYDER. The only difficulty in that, I think, Mr. Congressman, would be the question of whether it would be a deterrent to the taxpayer of the free disclosure in the return of his income in this voluntary system of ours. People might be more hesitant in submitting their returns if they thought it was going to be published in the paper.

That is the only reason I can see against that. That would, of course, be a matter for Congress to decide. Of course, when we get into corporations or business operations, why, that would be a matter of the revelation of business secrets that they might feel extremely hesitant about being made public.

Mr. McCORMACK. In other words, if they possess a patent or some peculiar method of producing a product?

Secretary SNYDER. Or their ability to operate efficiently.

Mr. McCORMACK. I am just exploring. My mind is open.

Secretary SNYDER. On the face, it appears to be such a simple matter that we all ought to be willing to have our affairs known, but when we get right down to the individual it is not that simple by any means. And when we realize the tremendous volume of our taxcollection system, that is, the Federal tax-collection system, and that it is on a voluntary basis where the man, freely of his own accord, fills out the return, we have to give him some consideration in that procedure.

Mr. McCORMACK. I wanted to get your views for the record on the question on a matter that many people discuss.

Secretary SNYDER. Yes, sir.

Mr. McCORMACK. And my mind is completely open. I have no fixed views on it. I see the potency of your observation, particularly about business being protected in its own business activity as against a competitor, and so forth.

Secretary SNYDER. And it works in the opposite direction, too. There are a lot of people with pride who would dislike to have publicized that they were not getting as much money as their neighbor. It works both ways there.

Mr. McCORMACK. As a matter of fact, in connection with a number of income tax returns, the great, vast majority of people give an honest return, is that correct?

Secretary SNYDER. There is no question about that. It is illustrated in the very fact that our projection for 1953 of anticipated revenues to be collected against the appropriation that we requested for 1953 shows that we will collect those revenues at a cost of fortyfour-one hundredths of 1 percent. That is a tremendous indication of how that voluntary system actually is working and of the fine operation that is being done by the Bureau.

That is the lowest cost, except for 4 years, since 1862. The 4 years that had a lower cost of collection were 1918, the peak of World War I, 1944, 1945, and 1946. Those are the only 4 years that have had a lower cost of collection per dollar.

And so it is evident that we have got a very fine system of voluntary disclosure and payment, plus a good organization handling it. Mr. McCORMACK. In your prepared statement you said:

We have also announced the abandonment of the former voluntary disclosure policy.

What was the former voluntary disclosure policy?

Secretary SNYDER. It was a rather complicated one as it turned out to be.

In the early days when it was first adopted it was adopted for the purpose of encouraging

Mr. McCORMACK. When was it first adopted?

Secretary SNYDER. 1919 was the first year it was adopted.
Mr. McCORMACK. Explain what it was.

Secretary SNYDER. The policy was that if at any time a taxpayer who had not voluntarily disclosed his taxes in which evasion was involved came forward of his own accord and exposed his failure, prior to the initiation of an investigation, the criminal charge would not be pushed.

Mr. McCORMACK. In other words, where there was full cooperation, of course?

Secretary SNYDER. That is correct.

Mr. McCORMACK. And honesty of disclosure?

Secretary SNYDER. That is correct. That worked very well up until we began to get these expanded tax rates and larger volume. Since that time it has become very complicated and it has caused us undue amount of delay in court decisions, in cases that were taken to trial, in trying to determine the exact line where voluntary disclosure could be accepted as a fact.

Even though the intelligence people, the enforcement people were breathing down his back, if he beat them into the office and disclosed, the question then became whether or not he had complied with the policy. That became quite a controversial matter in the courts. And it caused great confusion in our handling of cases and it brought about the attempted abuse of that policy to the extent that after a study of many cases, why, we determined to abandon that policy. Mr. McCORMACK. In other words, the policy was all right in 1919 and during the succeeding years?

Secretary SNYDER. We had no difficulty with it, comparatively, up until then.

Mr. McCORMACK. In view now of the tax structure we have and the large number of returns and the abuses that have crept inSecretary SNYDER. That is correct.

Mr. McCORMACK. I want to congratulate you on that and also on the health of the taxpayer-I think that should be judicially determined.

Secretary SNYDER. That is correct. It is not a matter of our humanitarian feelings about this, but that is a matter that can be more accurately determined during the course of the trial of the case, where the judge and prosecutor are on the ground. And that seems to me like a prosecution and judiciary process decision.

Mr. McCORMACK. For the purpose of the record, and I would like it myself, and probably my other colleagues might be interested, when a fraud matter is called to your attention, or you detect it-you have spot examinations, I assume, all of the time, do you not?

Secretary SNYDER. That is correct. We have adopted a new audit procedure on a rotating basis, and in the absence of a lead or anything of that sort, why we rotate the number that are spot-checked each year. That gives a broader coverage and is of great value in the stimulation of the filing of correct returns.

Mr. McCORMACK. When a fraud case is called to your attention, or in examining the returns you run across one that you think indicates a fraud and a justification for examination and investigation, will you give us an idea of how long a period of time it takes to make that investigation to get the facts, approximately?

Secretary SNYDER, Could I ask the Commissioner to give that detailed process that he would be in a better position to give?

Mr. DUNLAP. The average, sir, and averages do not mean too much would run about 6 to 9 months. But may I call your attention to the fact that in the case Mr. Hoffman mentioned, when talking to Mr. Hoffman, those things took 3 to 4 years. Others might take 30 days.

The actual field investigation will run somewhere around 6 months on the fraud angle.

Mr. McCORMACK. When you get a real case, where there is a deliberate attempt, a willful attempt to evade the payment of any tax, it takes a long while to get the evidence in order to support any indictment that might be returned to prove, as the Constitution requires a defendant guilty beyond a reasonable doubt.

Mr. DUNLAP. That is right, sir.

Mr. McCORMACK. So that when you get into the deliberate fraud cases, it takes a long while to go in and dig out their bank returns and any place where they might have money hidden-it takes much longer than 6 to 9 months, does it not?

Mr. DUNLAP. Yes, sir. As I say, we have any number of cases in process now.

Mr. McCORMACK. The Commissioner wanted to say something further?

Mr. DUNLAP. We have any number of cases in process that we have been working on anywhere from 1 to 3 years. We hope to shorten that time under this plan.

Secretary SNYDER. There are hundreds of them that through some disclosure of reporting, and so forth, are open and shut cases that can be closed quickly. There are both kinds.

Mr. McCORMACK. And some of those cases are of legitimate businessmen who through a long period of time might have made one slip or one mistake or they may have, some of them, fallen within the twilight zone, and then there is a matter of proper discussion and consideration in connection with the taxpayer, is that right?

Mr. DUNLAP. Correct, sir.

Mr. McCORMACK. The opportunity of appearing before the proper officials of the Bureau, is that correct?

Mr. DUNLAP. Yes, sir.

The CHAIRMAN. I would like to say that each member, certainly, will have his opportunity to question every witness. Mr. Hoffman yielded, but he has three more questions that he would like to ask. Mr. HOFFMAN. Yes; very short.

Let me put it this way: Will you tell me whether or not H. R. 5174 and H. R. 3313, one introduced in 1949 and the other in 1950, would have accomplished what this reorganization plan would do, and also brought about a similar result throughout the Treasury Department. And I assume that you do not know now and are not familiar with the bills.

Secretary SNYDER. We will examine them and reply to that.
Mr. HOFFMAN. And then tell us?

Secretary SNYDER. I will be pleased to.

Mr. HOFFMAN. I give you a copy of a letter written to Senator Tobey with several exhibits, dated March 9, 1951. I have had one exhibit enlarged. If you will take that with you, and then give the report back to the committee in executive session, your idea as to the correctness or inaccuracy of that statement in those specific cases and the relationship between the men shown on the chart, as indicated on the chart?

Secretary SNYDER. Yes, sir.

Mr. HOFFMAN. And you are familiar, are you not, with this final report of the Special Crime Commission of California?

Secretary SNYDER. Yes.

Mr. HOFFMAN. And if you have any answer to that report which you have not heretofore made or do not make to other questions which we may ask you, the part on pages beginning on page 36 and over to and including 56, we would like to have that, too. Thank you. You have this in the library.

Secretary SNYDER. We have that. We have it.

Mr. HOFFMAN. The number is Library No. S13351.
Secretary SNYDER. I think we have copies of that.
Mr. HOFFMAN. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Holifield.

Mr. HOLIFIELD. Mr. Snyder, when did you become Secretary of the Treasury?

Secretary SNYDER. In June 1946.

Mr. HOLIFIELD. How long had your Department had the reorganization of the Treasury Department or the Bureau of Internal Revenue under consideration?

Secretary SNYDER. We began those studies and changes in 1947. Mr. HOLIFIELD. This, then, is no expedient drafting of a plan in a hurry or after a few weeks' consideration?

Secretary SNYDER. Mr. Congressman, by the time the Commissioner gets through presenting the plan and showing you the detail of it, you

will know that it could not have been any other than the result of a very careful, prolonged study.

Mr. HOLIFIELD. Your statement shows there has been continuous administrative improvement in your Department since you became Secretary of the Treasury, following both the recommendations of special investigation commissions appointed to study the function of the Bureau and certain recommendations of committees of Congress. Secretary SNYDER. That is correct, sir. We can give you a chronological history of those if you would like to have them, with the results.

Mr. HOLIFIELD. It is true that the Appropriations Committee of the Eightieth Congress recommended that the positions under that of Commissioner be placed under civil service?

Secretary SNYDER. That is correct. I think all of these studies have included that.

Mr. HOLIFIELD. That was during the Eightieth Congress, and the members of that Congress had a chance to put the employees of the Bureau under civil service, too; did they not?

Secretary SNYDER. That is correct.

Mr. HOLIFIELD. Is it not true that the collectors of internal revenue have been political appointees for over 100 years?

Secretary SNYDER. That is correct.

Mr. HOLIFIELD. By both Republican and Democratic administrations?

Secretary SNYDER. That is correct.

Mr. HOFFMAN. Not all of that time, not for the last 20 years.

Mr. HOLIFIELD. We must not forget, though, that during the last 100 years we have had Hardings and Coolidges and

Mr. HOFFMAN. And Teapot.

Mr. HOLIFIELD (continuing). And Hoovers, and a few others who had the same opportunity to put these political appointees under civil service that the Democratic administration has had.

Is it not true that under the Democratic administration we have made great strides forward in putting political appointees, such as postmasters and other servants of the Government, under civil service? Secretary SNYDER. I think that is true; yes, sir. I can address myself more particularly

Mr. HOFFMAN. I do not see how that has any bearing on the bill unless he tells me which direction they went.

Mr. HOLIFIELD. We realize that there is no absolute guaranty that people under civil service will be honest. We realize that. The very fact of putting them under civil service does not insure absolute honesty; does it?

Secretary SNYDER. No, sir; that was not the point we were making. It does permit us, under this reorganization plan, to so streamline the flow of authority and responsibility that it will tend to eliminate the temptations and opportunities for deviation.

Mr. HOLIFIELD. That is right. And experience has shown that people who make Government a career and who are given career protection, such as they are given under civil service, are more zealous of their positions than the people who may be appointed just for a few years and removed because of political changes in administration. Secretary SNYDER. I think that is definitely true, sir. The very reaction of the fine group of people composing the Treasury Depart

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