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Government Contracts
Private Enterprises
that Collect Public Taxes.
The Internal Revenue Service
has reportedly been studying the feasibility of outsourcing debt collection
services for delinquent taxpayers since 2001. The topic raises important
issues of privatization, as well as the importance and viability of the debt
collection industry in the United States.
Currently as of October 2002, it is
estimated that there is $240 billion in uncollected U.S. federal taxes, equaling
one third of the current annual federal appropriations budget. Some
believe that privatizing tax collection could yield $50 billion over 10 years.
Senator Max Baucus (D, Montana), Chairman of the Senate Finance Committee,
warned in mid-October 2002 that private debt collection would have to be
measured against the privacy rights and other statutory and administrative
rights now being afforded to taxpayers. But others, including Sen.
Charles Grassley (R., Iowa) and Rep. Rob Portman (R., Ohio) argue that private
debt collection could overcome the unfairness of tax cheating to the honest
taxpayers who pay their fair share.
One report indicates that, under a 1996 law, the federal
government's other branches, including the Education Department, have used
private collectors to collect non-tax liabilities, such as defaulted student
loans. The Education Department reportedly "helps" the private
debt collectors by agreeing to indemnify them up to a certain amount for
violations of federal debt-collection statutes.
Private debt collection
agencies, eyeing a potential bonanza of 20% collection fees for these huge sums,
have expressed their willingness to accept tough restrictions on their
operations, including compliance with applicable debt collection legislation,
applicable privacy legislation and other rules governing the government-taxpayer
relationship. Currently, the IRS is required to fire its employees
who harass taxpayers.
The Wall Street Journal reported that certain
governments indemnify their private debt collectors from a limited amount of
violations of the laws governing harassment of debtors. This type of
indemnification deserves closer scrutiny.
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