Wednesday, October 07, 2009

Inventives Matter: Tax Cheats Edition

From Yahoo News (HT: Jason Oberle):
Dangle some cash and a lot of people are happy to turn in their employers for cheating on their taxes.

Since Congress beefed up whistleblower rewards in late 2006, tips about suspected tax cheats owing at least $2 million have jumped more than tenfold, the Internal Revenue Service said in a report Thursday.

In 2008, the agency received tips on 1,246 suspected tax dodgers, each owing more than $2 million. That's up from 116 big-money tips in 2007.


The 2006 law targets high-income tax dodgers, guaranteeing rewards for qualified whistleblowers if the company in question owes a least $2 million in unpaid taxes, interest and penalties. Tips about individuals also qualify if the taxpayer has an income of at least $200,000.

The most interesting part is the last excerpted paragaph, in my view. We don't care about cheating in the abstract, just cheating from firms with more than $2 million in unpaid taxes and individuals with at least $200K in annual income. True, on a case-by-case basis it might not be worth pursing smaller dues. However, these are the groups who will be most inclined to fight the accusations. Furthermore, smaller taxpayers in the aggregate still probably account for a good chunk of change, and excluding them from eligibility does not do much for deterrence of evasion.

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