Evening star., 1920-03-05
MANY L0OPH0LES
FOR j. s. TO CHECK
INCOME RETURNS
Evaders of Taxes Will Some
Day Be Surprised by
Prosecution.
BY DAVID LAWRENCE.

| oiSie sam "Ouiu never nave time TO
check up on individual returns will
be just as surprised when they are
indicted and punished as the persons
VINO never dreamed that certain kinds
or graft entirely unrelated to income
| taxes would be exposed to public
| view
There are. ior instance, plenty of
| laws on the statute books to stamp
out political corruption. Yet the gov
ernment may never have had the evil
dence. Suppose a firm has been ac-
| 1customed to paying a few thousand
dollars to somebody as political pull
] IN federal. state, county or city. That
| Item might be uncovered. as an in
Vestisation is made of what consti-
! tutes proper salary allowances. The
evidence could be turned over to an
| other branch of the government or 10
/ state authorities for prosecution
| special experts are working with
| United States attorneys in the prose-
cutlon of cases in which tax returns
nave been falsifed. Already there
| nave been indictments and iaiI SEN
tences. The government is not pub
lishing all its information, but in one
rather populouS section of the country
II IS estimated that at least s100 O00.-
900 IN taxes haven't been paid that
| should have been paid.
| Slowly but surely government in
Xestlgators are getting data. The
treasury Departments agents have
| the authority to subpoena all persons
who have records Of dividends paid
for instance, the government can. If
IL chooses, ask for a mans check
BOOK. and can get from his bank the
amount of his deposits AS a general
rule that isn't done unless fraud is
| suspected and evidence is being gath
ered Tor a possible prosecution.
Recovered $4,000 900.
1T took fifty agents of the govern
ment recently nearly three months in
.le .eiu TO audlt big account and
something like $4,000. 0OO was recoy-
cred when the job was over.
nonresident aliens can't escape any
more than can aliens who try to leave
the United States without paving
tnelr taxes A special machinery has
TEL Tten aeVised to act in emergencies.
!here are certain ports of the United
states Where agents of the utmost
resourcefulness are stationed. They
know how to get court orders in a
JlHy to stop an individual from going
across the International line or get
tlng MS passports for an ocean
voyage II income taxes have not been
PAID Not long ago, group of
foreigners left the country without
paying thei1 taxes. They complained
that they didn't understand the laws
ana gave every evidence of not want
the matter up for them either. So the
government merely began attaching
the property they left behind and
would have sold it if the individuals
IN question hadn't voluntarily given
themselves up and paid the taxes duo
dollars VI
information about every conceiv-
aoie activity from natural resources
10 farming, to shipping. to manufac-
turlng-eVery phase Of human en-
deavor-is recorded by the rovern.
men through income tax returns AZ
cess 10 other government records is
available. but nobody else in the gov
ernment. no other department or bu-
reau. can get hold of income tax re-
turns. These are carefully guarded
from prying eyes Yet mass of stas
tistical information of incalcula Bile
value will be ready within the next
Two or three years. Mass figures will
De given out some day showing the
average cost to run a bakery, a candy
snop, shoe factory, a steel mill, and
the profits made in each group and the
costs of production in each classifica-
ton.
Detects False Returns,
In fact that is one of the wavs the
government detects false returns
All the bakers are grouped, all the
butchers. all the doctors, all the law,
yers. all the farmers in certain sec
tons OF the country, all the growers
cost Of production and deducting the
expenses which he thinks he should
be allowed to subtract from the total
Of his income.
Now, Of course. it is improbable that
all the bakers. for example. acted in
conspiracy to put down exactly how
much their costs of production were
in any year. Competitors do not en-
gage In conSpiracieS. So on the face
OF 1T, the government has general
collection Of statistics on each trade,
profession or business. And then
when somebody comes along and
wants to claim that he paid an en-
ploye or manager $4,000 year when
nobody in the whole business, whole
sale or retail. included any such re-
turn. the government Investigator
takes the matter in hand. To be sure
some odd cases have arisen.
And some big concerns have been
on the carpet here about excessive"
salaries. And the government has in
many cases decided that the allow
age and the employer did not prove
that his employe possessed the ex-
traordinary qualifications or per-
formed extraordinary duties which
entitled the latter to be considered
an exception to the rule. The re-
tuI 10 VI lIlc ScIcIdl dNeI age VI VIC 6
trade or business competitors is the
best check the government has on
efforts to charge off to salaries sums
that logically should be subject to
the higher percentages of taxation or
excess profits taxes. Many man
would prefer to pay an individual tax
on 100000 rather than an excess
profits tax on the same sum, as a
business profit, for in the second case
he might have to give nearly half of
it to the government.
Contracts Made Long Ago.
Indeed some people are lucky.
Years ago, long before the income
tax laws were ever thought Of GER
tain men entered into contracts, re-
corded in their books each year and
on the minutes Of their corporations,
paying themselves big salaries or
even specified sums of the net profits
of the business. Those sums are not
taxable as excess profits. The con-
tracts cannot be invalidated by the
government. But these cases are not
numerous.
Speaking of data on corporations,
however, the government experts can
tell at a glance what constitutes ex-
cessive cost of production. The bur-
den of proof rests on the taxpayer.
He may be able to explain why the
salaries he pays or the expenses he
incurs are out of all proportion to
| the other men in the same business,
| but his return is the kind likely to
| excite curiosity and start the ma
| chinery q investigation.