Evening star., 1925-08-25
BY DAVID LAWRENCE.

1t is cheaper for the Government to
settle out of court literally scores of
disputed tax cases. Litigation costs
money, but the interest that accumu-
lates while the funds paid in by the
taxpayer are held in reserve is even
more costly.
This is what the Treasury has dis
covered after examining the require
mentS of the last revenue law, which
is that s per cent interest shall be
paid 10 any taxpayer on all sums re-
funded to him. 1t used to work hard
ship to the taxpayer to be obliged TO
pay his taxes on disputed items and
then find when a court ordered the
Government to refund to him that the
same amount of money invested dur
ing the intervening period would have
paid large sum in interest.
Now ii works to the disadvantage
of the Government. For while the
Treasury will pursue TO the utmost
a case In which it is confident of vic
tory, the risk in other cases is that ul-
timately the courts may decide in ia
vor of the taxpayer and the Govern
ment pays interest at per cent,
which amounts to a penalty for hav-
Ing pushed doubtful case.
Object of Law.
Possibly those who framed the law
had in mind that the per cent inter
est charge would act as a deterrent
against litigation of cases involving
such hair-splitting points that a deci-
sion either way might be unjust. But
the lawmakers counted on an ideal
state of affairs inside and outside Of
the Treasury. For instance, there are
hundreds of individuals passing on tax
cases and there usually is room for
plenty of difference of opinion. Ordi-
narily an impartial unrestrained judg-
ment would be entered, but an unlock
ed-for influence has asserted itself and
upset all calculations. 1t is the work
of congressional investigating com.
mittees.
So penetrating has been the effect of
congressional inquisition that II has
developed sort of intimidation.
Rather than settle a doubtful case on
its merits, tax experts, fearful of the
heavy hand of Congress, have learned
to pass the buck to the courts. This
means that the tax experts err on the
side OF payment of the ta& and then
the Government has to defend its case
In court, and in many instances the
taxpayers, victorious in forcing such
large amounts refunded. have col
lected even more money in interest.
Under the circumstances, Secre-
tary Mellon has ordered n change in
tactics. Settlements shall be made
whenever possible out of court on
points in which there Is considera BILE
doubt whether the Government has
assessed the right amount in taxes.
And. he has insisted that this shall be
done without delay, for the accumu-
lating interest charge means a big
expense to the Treasury if its assess
ment is wrong. The Secretary has
found 1t necessary to stimulate his
personnel SO that they will go ahead
ana settle cases in dispute rather
than sit back In fear 70 congression-
al reprimand.
Refund Calculation Impossible.
There is another phase of refunds
that has caused some concern. 1t is
the fmpossibility of calculating the
sums that will be needed by the Treas
ury each year to pay the refunds. In
making up budget it is desirable to
have the expenses of the Government
so carefully determined that CORE.
spending sums may be sought through
scientific tax rates. With the new
Board of Tax Review it is believed
there Will be less uncertainty and the
Government will know precisely how
much money approximately may have
to be returned to the taxpayers. Most
OF the large refunds have been made
on tax payments of three and four
years ago, when the Governments ex-
perience cannot be said to have been
as good as it Is today. The whole
problem of protested payments is ham
died more efficiently now and the Gov.
eminent Is more Sure-footed about its
decisions.
This is not saying there isn't room
for great improvement, because, after
all, 1t is largely a question of trained
personnel, but 1t is fact that the
authorities believe the present system
of careful consideration of disputed
points will save the Government money
in litigation and more money in re-
moving some of the largest expense
involved In refunds.
(Copyright. 1926)