SOLICITATION NOTICE
R -- EXPERIMENTAL ECONOMIC RESEARCH -- ESTIMATING THE INDIRECT EFFECT OF AUDITS: AN EXPERIMENTAL APPROACH
- Notice Date
- 7/11/2003
- Notice Type
- Solicitation Notice
- Contracting Office
- Department of the Treasury, Internal Revenue Service (IRS), National Office Procurement (A:P), 6009 Oxon Hill Road, Suite 500, Oxon Hill, MD, 20745
- ZIP Code
- 20745
- Solicitation Number
- TIRNO-03-R-00027
- Response Due
- 8/18/2003
- Point of Contact
- Helen Carmona, Contract Specialist, Phone 202-283-1514, Fax 202-283-1514, - Helen Carmona, Contract Specialist, Phone 202-283-1514, Fax 202-283-1514,
- E-Mail Address
-
helen.d.carmona@irs.gov, helen.d.carmona@irs.gov
- Description
- The Internal Revenue Service (IRS) requires the services of a contractor to provide an analysis of audits on taxpayer compliance in the Statement of Work entitled, ‘Estimating the Indirect Effect of Audits: An Experimental Approach’. The Request for Proposals (RFP), TIRNO-03-R-00027 will be issued on or about JULY 14, 2003. Proposals are due not later than 3:00 PM on Friday, August 15, 2003, at the address shown above. Interested parties may obtain a copy of the Request for Proposals (RFP) from the IRS Procurement website: http://www.procurement.irs.treas.gov/ No telephone requests will be honored. The North American Industry Classification System (NAICS) code is 561440 and the corresponding small business size standard is $6,000,000.This is a commercial item acquisition conducted in accordance with the format in Subparts 12 and 13, as supplemented with additional information included in this Notice and the subsequent RFP. It is anticipated that a single fixed rate contract will be awarded from this solicitation. PERIOD OF PERFORMANCE will be for 8 months from the date of contract award with 4 30-day option period, not to exceed 12 months (base and all option periods). PRICE: The Contractor shall furnish all work products and services; management, facilities; research participants; supervision and personnel (except as may be expressly set forth in this contract as furnished by the Government) necessary to perform and provide the requirements of the Statement of Work. The proposed price shall be inclusive of all direct and indirect costs (salaries; fringe benefits; overhead and general and administrative expenses), survey expenses; honorarium, travel and profit and be applicable for the contract period of performance, (base period and any exercised option periods). STATEMENT OF WORK BACKGROUND: The U.S. Internal Revenue Service (IRS) believes taxpayer audits are a necessary tool for maintaining the integrity and fairness of the Federal income tax. However, a recent Treasury Department study has expressed concern about a decline in audit rates and its potential impact on voluntary compliance. TIGTA (2002) reports that the number of income tax return examinations fell 51 percent, from 1.6 million to 779,000 returns examined, between Fiscal Year (FY) 1997 to 2001, while the number of income tax returns filed grew 8 percent, from 128 million to 138 million returns. Thus, overall income tax examination coverage fell 56 percent for this period, from 1.27 percent of all income tax returns filed to 0.56 percent, while the associated recommended assessments declined 29 percent, from $24.9 billion to $17.7 billion (TIGTA, 2002). In addition to these direct impacts on Federal tax revenues, several studies have reported a deterrent effect of taxpayer audits. In an econometric study for the years 1977-1986, Dubin, Graetz and Wilde (1990) found that for every dollar of revenue produced because of taxpayer audits, an additional six dollars of revenue were generated from the indirect or “ripple” effects. However, the results of other studies have been mixed. Tauchen, Witte and Beron (1989), using random taxpayer audit data from the 1969 Taxpayer Compliance Measurement Program (TCMP), find that raising the audit rate had an impact only on high-income wage and salary workers. For this group of taxpayers, they estimate an indirect effect of audits to be almost three times the direct revenue effect. Blumental, Christian and Slemrod (1998) describe a controlled field study carried out with the Minnesota Department of Revenue. In their experiment, a stratified sample was selected based on three levels of 1993 income: low-income with adjusted gross income (AGI) less than $10,000, middle-income with AGI between $10,000 and $100,000, and high-income with AGI over $100,000. The sample was split into a treatment group and a control group. The Minnesota Department of Revenue informed the treatment group by mail that both their state and Federal income tax returns would be “closely examined.” In contrast to Tauchen, Witte and Beron (1989), the resulting differences in reported income and tax liability between the treatment group and the control group show that the heightened threat of examination increases reporting compliance among low and middle-income taxpayers, but among high-income taxpayers compliance actually decreased. The authors interpret their findings as an indication of a more aggressive negotiating position on the part of high-income taxpayers in anticipation of an audit. Finally, an internal IRS study (Plumley, 1996) found that taxpayer examinations have a strongly significant impact on reporting compliance. Using an econometric approach and state-level data for the period 1982-1991, the study finds that for every $1.00 in tax adjustments on an examination opened in 1991, $11.60 of additional tax was voluntarily reported on individual income tax returns as a deterrent effect. The report estimates that if “face-to-face” examination rates had been held constant at the 1982 level of 1.62 percent (instead of declining to 0.65 percent in 1991), an additional $257 billion of tax would have been voluntarily reported due to the indirect effect. Clearly, this finding supports the theoretical conclusion that increasing audit rates would improve voluntary compliance. How audits deter taxpayers from evading is not well understood. According to Plumley (1996), “It is generally believed, for example, that many taxpayers would perceive increased auditing by IRS as an increase in their chances of being audited, and that they would improve their voluntary compliance as a result.” From this description, it is clear that audit-based deterrence depends on taxpayer awareness of the level and year-to-year change in examination rates as a necessary, though not a sufficient, condition. Therefore, a valid test for the existence of indirect effects must ensure taxpayers are aware of the likelihood of audit. This is unlikely to be the case using data from random taxpayer audits. A greater degree of control is possible in field studies but such data also may contain a broad array of exogenous influences, such as changes in tax law or economic conditions that may cause taxpayers to change their behavior during the period of study. The purpose of this study is to use an experimental approach to measure the indirect effects of taxpayer examinations using the standard expected utility model of tax evasion. A high-level experimental design for estimating the indirect effects of audits is proposed. The proposed experiment builds on previous work by improving parallelism with taxpayers’ decision framework. NOTE: THIS NOTICE WAS NOT POSTED TO FEDBIZOPPS.GOV ON THE DATE INDICATED IN THE NOTICE ITSELF (11-JUL-2003). IT ACTUALLY APPEARED OR REAPPEARED ON THE FEDBIZOPPS SYSTEM ON 08-DEC-2003. PLEASE CONTACT fbo.support@gsa.gov REGARDING THIS ISSUE.
- Web Link
-
Link to FedBizOpps document.
(http://www.eps.gov/spg/TREAS/IRS/NOPAP/TIRNO-03-R-00027/listing.html)
- Record
- SN00483427-F 20031210/031208212916 (fbodaily.com)
- Source
-
FedBizOpps.gov Link to This Notice
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