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Desperate times call for taxing measures
Nov 30, 2008 (Boston Herald - McClatchy-Tribune Information Services via COMTEX) --
The state is unleashing a fierce array of cyber tools and data-mining devices to chase down tax cheats who owe almost $2 billion to Massachusetts at a time when revenues are shrinking and the budget deficit has hit $1.4 billion.
The state's computerized system for corraling tax evaders is snagging the scofflaws at four times the rate of its old-fashioned, manual audits, last used in 2004, according to the Department of Revenue.
"I understand that these are difficult times for people, but part of my push is fairness," said Department of Revenue Commissioner Navjeet K. Bal. "If you're paying your taxes in full, but the guy living next to you isn't doing it, that's not fair to you as a taxpayer."
In an interview with the Herald, Bal said the harsh economic meltdown could render $200 million to $300 million in annual tax revenues uncollectible, but said that the DOR will not relent on its efforts to collect what's due to the state.
Nor would she rule out the possibility that the figure -- typical for financial slumps -- could rise given the unprecedented nature of the 2008 upheaval.
State tax revenue projections are pegged at $20.3 billion this year, Bal said, prompting Gov. Deval Patrick to slash spending by more than $1billion last month. The state says $1.79 billion in back taxes is listed as "collectible," while $1.1 billion more will never be recouped.
"You can't hide from what's going on with the economy. Businesses are having a hard time. Retail businesses are having a very hard time," said Bal, an attorney and the DOR chief since February.
At the center of the state's collection efforts is DiscoveryTax, a data warehousing system launched in June 2002 that has led to 542,749 audits, or 79 percent of all audits initiated in the last four years. Before launching the system, the state did 33,000 audits annually. In the fiscal year ending June 30, DOR did 148,707 audits.
The $6 million system mines between 60 and 70 electronic databases, including the Internal Revenue Service, wage reporting systems, driver's license and vehicle registrations, and homeownership records, to identify individuals and corporations who did not file tax returns or under-reported their income.
"We started putting this technology into place about six years ago when the state was coming out of its last recession. It's important to have this technology in place in good times and bad times, because there's always a tax gap," Bal said.
From fiscal 2004 to fiscal 2008, the DOR identified $4.7 billion due to the state in unpaid taxes. It collected $1.7 billion during that period, DOR figures show.
Another $1.1 billion was determined uncollectible, meaning that the money could not be recouped because a corporation went out of a business, a bankruptcy case forgave the debt or taxpayers proved that they did not owe as much as the state estimated. The state is trying to recover $1.79 billion in revenues that are either in dispute, litigation or worked into payment plans that taxpayers agree to pay back over a period of time.
"I anticipate that we will be entering into more payment agreements with taxpayers who maybe in the past would have said, 'I can pay you full,' but now we have to enter into a payment agreement. But we won't be backing off on that," Bal said.
Anecdotally, Bal said the DOR is hearing more concerns about the economy from taxpayers calling the customer service line. She singled out businesses who collect meals and sales tax from consumers, but don't pay those revenues to the state as a "pet peeve."
"It's disturbing because you as a consumer, you're paying that," Bal said. "I understand businesses are in difficult times, but that's truly not meant to go to their businesses, but to the commonwealth."
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