Tax evasion is cheating US out of $1tn a year, IRS chief claims

Joe Biden proposes beefing up corporate enforcement as a more aggressive attitude to collecting tax gains traction

Chuck Rettig, the commissioner of the US Internal Revenue Service said 'it would not be outlandish to believe' that the country could be losing a trillion dollars a year to tax cheats. 

Tax evasion in the US may total $1 trillion a year, a figure that is multiples higher than previous estimates from the federal government.

Internal Revenue Service (IRS) commissioner Chuck Rettig said previous tallies of the tax gap didn’t include some tax-evasion techniques that weren’t on their radar at the time.

New estimates include the use of cryptocurrency, he said. Offshore tax evasion, illegal income that goes undetected by the IRS, and underreporting from pass-through businesses also contribute to a larger than previously known tax gap, Mr Rettig said.

More aggressive tax enforcement

“I think it would not be outlandish to believe that the actual tax gap could approach and possibly exceed $1 trillion per year,” he said.

The ballooning difference between the tax dollars owed and what is actually collected by the IRS has become a point of focus on Capitol Hill, where a rising number of politicians are coming to see more aggressive tax enforcement as a way to boost government revenue.

US president Joe Biden has proposed to strengthen corporate tax enforcement as part of his proposal to pay for his $2.25 trillion, infrastructure-led spending plan. He also plans to outline proposals on individual taxes in the coming weeks.

Mr Biden’s budget proposal last week also called for an additional $900m for expanded audits.

• Bloomberg