RELEASE OF STATISTICS

In connection with this, we considered the release of statistics to the public, and I want to take the blame for going slow in this area. We now have under consideration at the Department of Justice, with their committee having overall responsibility for freedom of information, the extent to which as statistics are properly protectable under the Freedom of Information Act, the extent to which they should be released and the extent to which they should be held confidential. I can't commit this committee as to a time when they will make their decision, but I can say that we will abide by it and this problem should be resolved, I hope, in the near future.

Now, some have expressed dismay because we don't continue publication of statistics that we consider not only unnecessary but inadvisable. I am sorry about their dismay but I don't think that we should manage the Internal Revenue Service in an effort to produce statistics for those who may want them for one reason or another. I think we should manage the Internal Revenue Service to try to do the job assigned to use and to try to fulfill all of our responsibilities under the Freedom of Information Act as well as those under the Internal Revenue Code.

Senator KENNEDY. Well, when will the Justice Department finish with its study, do you have any idea?

Mr. ALEXANDER. I don't know, perhaps Mr. Whitaker has a better idea.

Mr. FLANAGAN. I have no idea when we will finish. We have to update our submissions. They are now waiting for them.

Senator KENNEDY. Update on your what?

Mr. FLANAGAN. Updating the submission we gave them. We hope to get the submission to them in the very near future. How long it will take after that I don't know.

Mr. WILLSEY. We have set an internal time limit that the material will all be submitted to the Justice Department by August 5. We would hope that we would have a meeting immediately thereafter with the Freedom of Information Act Committee at the Justice Department. We intend to abide by their decision whichever way it cuts as to what portion of the statistics should be released and which portion of that are appropriately safeguarded under the Freedom of Information Act.

Senator KENNEDY. Obviously the importance of the collection of the statistics has broad implications, I would expect, to how the Internal Revenue Service is going to devote its resources or energies, and how well it is doing its job.

BALANCE BETWEEN CONFIDENTIALITY AND PUBLIC RELEASE

Mr. ALEXANDER. How well it is doing its job, how effectively it is doing its job, how comprehensively it is doing its job. Some statistics are important and certainly the public has a right to know Certainly the public has a right not to be misled. It is again a malf strik ing a balance between that which should be held confiden which should be released. We are engaged in this projec

hope and expect this will be completed very soon. We will keep this committee advised.

Senator KENNEDY. Well, I hope we can get that at the earliest possible time. I think it is certainly in the public interest that that type of information is available to it.

I realize OMB is concerned with undue publications of materials, but there is a question, I think, about the coincidence between the 'disclosure of IRS reports and statistics, and the discontinuance of other of their publications. I am referring to the audit story, the register of IRS study Quarterly Review of technical project or technical guidance level, and I think the important point is that if these were duplicates, the public should know what documents they duplicate. I think this applies to the audit story which generated a substantial amount of information and public interest when publicly released.

I am just wondering what reaction you have to that observation.

IRS NOT MANAGED BY STATISTICS

Mr. ALEXANDER. In point of time, Mr. Chairman, there is indeed a coincidence. In point of fact, the coincidence disappears.

In point of fact, I am completely aware of the responsibility of the Internal Revenue Service to administer the law fairly, to construe the law fairly and reasonably irrespective of the effect of that administration and that construction on the revenues as a whole and the obligations of these particular taxpayers. We have a special duty to be fair and to be reasonable and to be equitable and that duty is inconsistent with management of Internal Revenue by statistics. I don't propose to manage it by statistics. One of the ways to prevent management by statistics and at the same time comply with the OMB directive and comply with our obligation to be as lean an agency as we can, is to curtail paper pushing and curtail numbers for the sake of numbers and curtail numbers which can be misconstrued by our own people as implying some sort of goal-if you didn't pick up your $400 this morning you are not doing your job-that sort of thing which is absolutely improper for the Internal Revenue Service.

Now, my concern about numbers, about numbers being little gods unto themselves, has manifested itself in the elimination of much in the way of these numbers, and if there are those who in their study of the Internal Revenue Service, whatever the reasons for the study, are concerned about this, I think that their concerns are far outbalanced by the concerns of the taxpayers as a whole who want us to be effective but want us to be fair.

Mr. WILLSEY. With respect to one of the specific items you mentioned, the audit story, part of the basic statistical data from which the audit story materials were drawn is now part of the package that is pending at the Justice Department. Pending resolution of this issue with the Freedom of Information Act Committee we will make decisions one way or the other on the release of those statistics.

LONG'S CALCULATIONS BASED ON UNRELATED DATA

Senator KENNEDY. You are aware of some of the testimony that the Longs have made about an IRS taxpayer compliance measurement

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program that indicated that had all returns filed been audited the previous years almost half, they said, 48 percent, would have failed IRS standards.

Mr. ALEXANDER. We are aware of that testimony and Miss Alpern

can comment on it.

Miss ALPERN. Mr. Chairman, as a general proposition, I find erroneous the Long's interpretation of the statistics that they received. Generally, what they have done is to take raw data that appeared in one table that was a part of, and only a part of, a sample design for the taxpayer compliance measurement program, used total population for that audit class from an entirely different year, and from an entirely different source, multiplied these two sets of figures and came up with certain deductions. The conclusions they arrived at are not the results that we find in our own surveys.

Senator KENNEDY. What would your figures be, can you tell us?
Mr. ALEXANDER. Far less.

Miss ALPERN. I don't know. Far less.
Senator KENNEDY. In the 40 percent?
Miss ALPERN. No.

Senator KENNEDY. Thirty percent?

Mr. ALEXANDER. It would be far less.

Miss ALPERN. Not more than 10 percent in dollar terms, I would estimate.

Senator KENNEDY. What does that translate into dollars?

Miss ALPERN. I really don't know.

Mr. WILLSEY. That is another erroneous assumption the Longs have made.

Senator KENNEDY. Erroneous assumption?

Mr. WILLSEY. The translation that the number of returns that are in error can be translated into dollars of errors on those returns. That kind of translation is just meaningless.

Miss ALPERN. I can't even relate to their figures because as I indicated they are using different tables from different years. One of the tables that they used, for example, was for fiscal year 1973. They multiplied that by the total population of an audit class, say corporations of over $100,000, for fiscal year 1972, because that was the only data they had. These are nonrelatable. The resulting figure was erroneous and, incidentally, that is how in their testimony the Longs came up with an equally erroneous figure of a $23 billion gap from one of the surveys.

Mr. ALEXANDER. The figure doesn't translate.

TCMP DATA

Senator KENNEDY. Of course, you have that information prepared in a document which is for official use only. We have received that document in confidence, and will obviously respect that, but the answers to many of the allegations and charges have actually been prepared and are included, as I understand, in those summary results. But the thing I am wondering, given the kind of public confusion about this particular interest, is why that information shouldn't be available to the public.

Mr. ALEXANDER. Mr. Chairman, this is under consideration now with the Department of Justice.

Mr. WILLSEY. That is part of our package.

Mr. ALEXANDER. First, we need to find out to what extent are materials like the one that you mentioned are protected, are not protected under the act. Then we need to reach the second determination of our two-prong requirement, which is even though the material is protectable, to what extent in the sound administration of tax laws should it be released. So the initial problem is the one that is now under consideration, the one that we will advise this committee about when this consideration has been completed. We hope that will be soon.

BASIS OF AUDIT SELECTIONS

Senator KENNEDY. Well, I have just had a chance to review this briefly and it doesn't appear that there is any particular road map towards tax evasion in this manual. I hope that your recommendations to the Treasury will be followed. Let me just mention one further area and then we will move on: the Longs said that there were IRS agents, to audit all individuals reporting between $10,000 and $50,000 incomes, chiefly from wages and salaries, the percentage of returns that would be approved as filed varied from 77 percent reported by IRS agents assigned to the Providence, W. Va., district, to only 20 percent reported by agents assigned to the Buffalo, N. Y., area.

Now, whether those statistics are 77 or whatever, the disparity is, of course, the extraordinary statement. Do you find that again these statistics are inaccurate?

Second, do disparities of this dimension exist and what is the significance of such disparities?

STATISTICS ACCURATE DEDUCTION ERRONEOUS

Mr. ALEXANDER. As to the first question, I will ask Miss Alpern if she has any comments and I would like to discuss the second and third. Miss ALPERN. Their compilation in the example you cited, Mr. Chairman, is accurate statistically. Their deduction is erroneous, for this reason: what they are assuming is that there is a uniform base of cases selected. For example, they assume that every case, let us say, in West Virginia, is like every case selected elsewhere-in Ohio, let us say. This is not so. The audit selection of returns that comes out of the computer is based upon nationwide surveys, which do not reflect differing conditions from district to district. Therefore, there should be different audit results because the nationwide sample which determines computer selection of returns for audit does not reflect differences not based upon taxpayer characteristics or local conditions that exist. So the disparities should be there.

Mr. ALEXANDER. I think you have covered all three points because I would just like to add that if indeed this particular statistic were uniform throughout the country then Internal Revenue would not be doing its job correctly because pretty clearly we would be, insisting upon a norm, upon a uniform test that would mean those below would have to be raised above. How would you do it? You would do it by misapplying the law. Of course, there are differences in economic condi

tions and in taxpayer conditions in this country. There will continue to be differences, and it is up to us to manage our resources effectively but not manage them so as to try to create a uniformity which can only be created by mismanagement.

Senator KENNEDY. Well, why shouldn't the public know whether people in the business community pay more in terms of their taxes, than people in another aspect of our economy, the workers. Rural communities pay more than urban areas. Just in terms of public information about statistics, why shouldn't we know that, lawyers pay more, certain professions pay more, doctors, whatever the case may be. Why shouldn't that be available?

Mr. ALEXANDER. This is part of the overall problem that we are pursuing, Mr. Chairman, and we are concerned about the beginning of the process as well as the end of the process. Perhaps we are overly concerned about it and perhaps our concerns about the beginning of the process will be eliminated by a finding by the Department of Justice Committee that statistics which involve the beginning of the process are indeed not protectable. That indeed will be the end of it if there is such a finding. But maybe as an agency we are mindful of the resources we have as compared with the job we have. We have increased our resources and we have increased our audit coverage and we made 300,000 more audits last year than we did the year before. But as Mr. Whitaker pointed out, we can't audit everyone. We think that in balancing our responsibilities to disclose and our responsibilities to administer the laws, the beginning of the process is important and the matters that you referred to go to the allocation of resources at the beginning of the process.

Now, this concern like our other concerns is subject to reconsideration and you can be sure that we will give it further thought. This is the second prong of the two-pronged problem that I mentioned in connection with the statistics.

First is whether they are protectable at all and second, even if protectable should they be protected?

Senator KENNEDY. I agree with you. I don't understand how they are protected myself.

TAXPAYER CLASS DATA

Mr. ALEXANDER. Now, the question, by the way, specifically as to taxes by classes of taxpayers along the lines you described, by occupation, we publish a great deal of data to this very effect in the statisticsof-income series and we will be glad to supply that for the record to show you what we give to the public.

[The material referred to follows:]

STATISTICS OF INCOME SERIES

Statistics of Income-Business Income Tax Returns.-Provides annual statistics derived from proprietorship and partnership tax returns on the selfemployment income and expenses of farmers, businessmen, doctors, lawyers, and other professionals.

Statistics of Income-Corporation Income Tax Returns.-Annual estimates classified by industry and size of assets, liabilities, receipts, deductions, profits, income tax liability, tax credits, and distributions to stockholders, and computaton of the corporate tax base.