Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-01-12
REVENUE METHODS
SCORED IN REPORT
SUBMITTED SENATE
Charges Improper Allow
ances of s21O,655,36O in
Tax-Free Deductions.

Improper Treasury allowances Of
SZlo,655, 1850 in tax-free deductions
from income for amortization of war
facilities of manufacturers and min
ers was charged in report submitted
to the Senate today by the special
committee which investigated the In
ternal Revenue Bureau
The report also was presented to the
finance committee today with a view
10 having corrective provisions incor-
porated in the pending revenue bill
The report makes many criticisms
of the method of administering the
income tax by the Bureau of Internal
Revenue and declares:
Compromises Attacked.
1T has been the consistent policy of
the commissioner of internal revenue
to exceed the authority delegated to
compromise taxes. The commission
er, in compromising taxes, has fol-
lowed the policy of giving the unse-
cured creditors and stockholders of
insolvent corporations precedent over
the Governments claim for taxes.
"As administered by the commits
Sioner of internal revenue, the fraud
penalty fixed by Congress is never en-
forced but is treated as a maximum
penalty.
Tax refunds amounting to S459,-
090,S25 were made by the Bureau Of
Internal Revenue from July l 1921, to
April 30, 1925. An analysis shows
that the TWO principal grounds for
these allowances are increased al
lowances for invested capital and tax
ing by special assessment.
raI
the war profits and excess profits
taxes. The special assessment provi-
sion for the law provided for the de-
termination of the tax by comparison
with the tax paid by representative
concerns in the same industry, in
cases where invested capital could not
be determined or where the taxpayers
suffered special hardship by abnor-
mal1ty in income or invested capital.
Failure to Observe Provisions.
THE principal administrative diff
culties incident to invested capital
and special assessment are due to the
failure to observe the plain provisions
of the law.
THE practically unlimited discre-
tionary power vested In the commits
sioner of internal revenue is actually
exercised by the division heads. These
division heads are governed by no ade.
quate rules or instructions, and un-
less taxpayer is dissatisfied with the
determination Of his tax, or unless
refund exceeding $4,000 is involved,
there Is no review of the work done
under division heads.
1T is the policy of the income tax
unit to discourage complaints and
protests by subordinates. This policy
leaves the division heads supreme and
their superiors in ignorance of how
the law is really administered.
Promulgating PRINCIPLES.
Many of the principles, methods
and formulas applied in the determi-
nation of tax have never been reduced
to writing and only 151a per cent
of the formal written rulings, ap-
plicable to income taxes, have been
published.
This failure to promulgate and
publish the principles and practices to
be followed has had the following
results:
u. Information for hte guida nee
of employees of the income tax unit is
so incomplete that gross discrimina-
ton results from the failure to ap-
ply uniform principles to similar
cases,
~. Taxpayers in many instances
have failed to claim allowances
granted others similarly situated
3. To secure the benefits of un-
published precedent, taxpayers are
forced to employ former employees of
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