WMC: Reform system to level the playing field

In one of the highest taxed states in America, it is critical that our tax collectors and the Wisconsin Department of Revenue (WDOR) provide fairness, justice and impartiality for business and individual taxpayers.

Unfortunately, that seems to be the exception rather than the rule as increasingly aggressive tax collection tactics have turned predatory in recent years. This creates a hostile environment for business.

Advertisement

The situation of a hostile agency and an unfair playing field for taxpayers is a decades-old problem. But recently, Wisconsin Manufacturers and Commerce released a report titled "Tax Collection in Wisconsin: Providing Fairness for Taxpayers," which for the first time identified specific problems, and, more importantly, recommended specific tax procedure reforms to address those concerns.

The report was developed with business survey data and information from focus groups and other trade associations and tax professionals. It found problems in three main areas: poor and inconsistent WDOR guidance, aggressive tax audit practices, and the need for taxpayer appeal reforms.

WMC intends to work with the Legislature and Gov. Jim Doyle to enact the reforms needed to improve the tax collections in Wisconsin.

Understanding the tax code is a difficult task; taxpayers, therefore, need good guidance from WDOR to make certain they fully comply with the law. Unfortunately, WDOR often gives inconsistent advice, fails to provide guidance on certain hot button issues, and gives tax "advice" in audits which it refuses to promulgate as a rule or publish for all taxpayers.

WDOR also frequently disregards its own guidance and gives advice contrary to established law. Examples of the latter include WDOR's imposition of sales tax on temporary service agencies and customized computer software. If companies cannot rely on consistent, sound advice from the agency, and must file tax returns shooting at a "moving target," how are they to know if they are complying with the law?

Audit procedures generate the greatest degree of frustration from taxpayers, with coercive tactics causing grave concerns among business taxpayers. In particular, WDOR provides often inconsistent treatment from one audit to another. Oftentimes different companies get different treatment for the same tax questions.

In addition, auditors often change positions from one audit to another for the same company. Another particularly sinister tactic is how WDOR coerces taxpayers to agree to extend the statute of limitations on audits and/or waive their appeal and refund rights. This coercion happens under either an implicit or explicit threat of a larger than justifiable assessment.

Finally, Wisconsin needs to improve its system of appealing the actions and rulings of the WDOR. Taxpayers need a more level playing field for times when they want to challenge a decision by the department. While the Wisconsin Tax Appeals Commission (TAC) is generally viewed as impartial and fair, it is often too difficult for taxpayers to get a case to the TAC as WDOR officials obfuscate and delay.

Further, WDOR will often "non-acquiesce" to commission decisions, meaning those decisions have no precedential value. It is time to eliminate costly delays in this process, clarify that TAC decisions are "good law" and make the TAC more like a real tax court.

Taxes are the dominant political issue in this state and understandably so given Wisconsin has the fifth-highest taxes in the nation. Overly aggressive and unfair collection practices only add insult to injury for overburdened taxpayers.

WDOR is raising business taxes even higher, however, through aggressive audits and new interpretations of the tax code. This must stop, as uncertainty leads to an unhealthy tax climate and hurts our ability to persuade companies to grow their businesses here.

The reforms included in the WMC report will significantly level the playing field for taxpayers. Perhaps more significantly, it will send a message to the business community that state government wants to keep jobs in our state.