Law Commons^™

Qualified Intermediary Or Bust?, Susan C. Morse

Susan Cleary Morse

In reaction to news about wealthy U.S. individuals hiding assets in non-U.S. bank accounts, the Obama administration has proposed statutes that would make non-qualified intermediary (NQI) status more unattractive for non-U.S. banks. The proposals appear to push non-U.S. banks into qualified intermediary (QI) agreements with the IRS, and under accompanying proposals QIs would undertake expanded responsibilities to automatically provide information about U.S. clients to the IRS. But models other than the QI system could also serve the enforcement goal of international automatic information exchange. Fortunately, the proposals also would permit Treasury and the IRS to craft administrative exceptions to adverse …

Using Salience And Influence To Narrow The Tax Gap, Susan Morse

Susan Cleary Morse

Most self-employed and small business taxpayers cheat on their taxes. In fact, in the aggregate, they fail to pay about half the tax they owe to the government, and this unpaid tax amounts to about $150 billion annually. This amount is about half the "tax gap," or the amount of tax due that the federal government does not collect.

This paper argues that more salient government communications and greater attention to principles of influence would improve existing and proposed policies to encourage self-employed and small business taxpayers to pay their taxes. Reversing the widespread tax evasion among self-employed and small …

Cash Businesses And Tax Evasion, Susan Cleary Morse, Stewart Karlinsky, Joseph Bankman

Susan Cleary Morse

This paper offers interview data on the tax compliance behavior of small cash businesses. We find that such businesses systematically underpay income, employment and sales taxes through income underreporting. The results show that participation in a parallel cash economy facilitates tax evasion and that cash business owners seek out sympathetic tax preparers. We also find that norms and opportunity, but not equity or tax complexity, strongly influence such decisions to underreport income. The behavior patterns indicated by our data suggest specific policy tactics in the effort to close the tax gap.