May 27, 2009 – Butkovitz’ 10 Action Steps Target Unpaid Taxes


Audit Date: May 27, 2009
Controller: Alan Butkovitz

Executive Summary


P R E S S R E L E A S E

For Immediate Release:
May 27, 2009

Contact: Harvey M. Rice
(215) 686-6696

Butkovitz’ 10 Action Steps Target Unpaid Taxes
Controller’s Tax Discovery Plan Can Increase Revenue & Improve Tax Compliance

Click here to read the report

PHILADELPHIA – City Controller Alan Butkovitz today released the “Tax Discovery Program” report that explores 10 action steps for the City to increase tax revenue collections and reduce thousands of tax delinquents.

The report examines the Department of Revenue’s current practices and analyzes new techniques to improve tax discovery methods and tax compliance procedures. Revenue was only conducting limited tax discovery initiatives and recovery initiatives.

“We must be vigilant at all times and utilize smarter and better practices to make our city government more efficient, effective, better managed – and more financially responsible,” said Butkovitz. “Adopting tax discovery practices will help identify taxpayers who are not filing annual tax returns and not paying their fair and appropriate share of taxes.”

The 10 “Action Steps” for effective tax discovery can be broken down into three categories: planning, execution and evaluation. The planning phase would include identifying the tax gap to determine how much in each tax category is owed. This phase also includes the creation of a centralized database to permit all City agencies to tap into one information portal.

“In many of our audits, we find that one department doesn’t know what information another department has and both are supposed to be working together,” said Butkovitz. “It’s a recurring instance where the right hand doesn’t know what’s in the left hand.”

Best practices for execution of tax discovery include using data mining technology to identify tax evaders such as those conducting business without a license. The report includes the results of an investigation that found 112 of 193 home repair businesses that advertised in one local newspaper did not have a registered business privilege license.

Other practical steps under the execution initiative would include:

  • Utilization of a “Tax Clearance” system that would prohibit any applicants for a city license or permit who owe the city more than $100.
  • Implementation of a Fraud Hotline.
  • Public Awareness and Education Program to encourage voluntary compliance with city tax laws.
  • Periodic Tax Amnesty Programs that would encourage businesses to sign up as well as pay up.
  • Conduct Street Level Inspections and unannounced business sweeps for unlicensed business operations.
  • On-going Checks for Non-Filing Businesses.

The final action step would include evaluating and documenting the results of the tax discovery initiative to determine its effectiveness in identifying non-tax filers as well as the revenue that would be generated from these additional taxpaying business entities. The evaluation will help determine the success or failure of the City’s tax discovery efforts.

“If the Department of Revenue implements at least some of the practices outlined in our report, we believe it will lead to a substantial increase in the revenue collected by the City,” said Butkovitz.

“It should not take a financial crisis – either minor – or of the magnitude we currently face – to start being financially responsible.”

Click here to read the report