quorum call:

quorum call: the presiding officer: the majority leader. mr. reid: i ask consent the call of the quorum be terminated. the presiding officer: without objection. mr. reid: mr. president? the presiding officer: the majority leader is recognized. mr. reid: first of all, thank you very much for your patience, but we often need patience so i appreciate yours. i ask consent that the previous order with respect to s. 1789 and the akaka amendment number 2034, that the reference to the modification to the akaka amendment 2034 be stricken. the presiding officer: without objection. mr. reid: there is a bill at the desk due for its first reading. the presiding officer: the clerk will report. the clerk: s. 2327, a bill to prohibit direct foreign assistance to the government of egypt until the president makes

certain certifications related to treatment of nongovernmental organization workers and for other purposes. mr. reid: i now ask for its second reading and in order to place the bill on the calendar under the provisions of rule 14, i object to my own request. the presiding officer: objection is heard. the bill will be read for the second time on the next legislative day. mr. reid: mr. president, at 5:30 on monday, there will be a roll call vote on the confirmation of the wimes nomination. this evening we reached agreement to complete action on the postal reform bill. on monday this will be time from 12:00 to 2:00, from 4:00 to 5:00 and following the vote at 5:30 p.m. for senators to debate their amendments to the bill. mr. president, i ask that the senate adjourn under the previous order. the presiding officer: the senate adjourns until monday, senate adjourns until monday,

>> when i was embedded in eastern afghanistan, the soldiers target telling me the

u.s. government was wasting tens of billions of dollars i'm totally mismanaged development imagistic contracts. >> i was in one meeting where the brigade commander incredibly good guys named colonel nick coward, not long after president obama took office and the state department is out there saying okay camargo and issue a whole bunch of development money. counterinsurgency. but going to do this. when their hearts and minds combination pill. colonel howard said don't send any more money. some the contract officers that can receive the stuff. i need people. i don't need my money.

>> at a house hearing, irs officials talk about the problem of uncollected taxes in the amount of $300 billion. they blame the tax gap on the lack of enforcement resources and underreporting of income by taxpayers. they also testified about the problem of identity theft. the house service hearing is an hour and 45 minutes. >> today's hearing of the subcommittee government organization efficiency and financial management will come to order. i certainly thank everyone for being here today, both witnesses

and guessing ranking member, mr. countermeasure. our hearing today focuses on two key issues at the internal revenue service. or start hearing will address the tax gap between what people in federal taxes and let the irs ultimately collects. second we will review the increasing problem of identity theft related tax law. federal taxes make up about 96% of the government's total revenues each year. because of this, it is very the irs is able to effectively collect taxes and enforce federal policy. the majority of americans pay taxes voluntarily and on time. every year there is a gap between a not federal taxes owed and the amount of irs collects. earlier this year the irs released his most recent analysis on the tax gap, using data from the 2006 here. the data shows $450 billion cap between taxes owed and taxes voluntarily pay. iris recovered 55 billion on

this amount making the net tax gap $385 billion. according to the national taxpayer advocate must pay approximately $3400 more for the government to raise sustainment revenue it would've collected if everyone paid their taxes in full. as many causes attacks have come, including intentional underreporting file taxes are not errors on those taxes that are failing. because of this, we need a multifaceted approach to achieving effective and appropriate response and to close the tax gap. using third-party information to verify tax insurance could increase compliance and it is recommended increasing penalties for people who purposely do not apply to federal tax, especially graciously, more so repeatedly failing to comply. simplifying federal tax code could also help make it easier

to file taxes and reduce the opportunity to commit willful tax evasion. we will hear more from witnesses today about solutions and how we can close the tax gap and better serve all of our taxpayers. this will address identity theft related tax fraud. identity theft affects thousands as we learn more hundreds of thousands of taxpayers each year and that's a significant impact on the state dems. identity thieves often steal personal information for taxpayers including names, social security numbers and addresses. but this information please contact fraudulent tax returns with the irs received the refund federal to the legitimate taxpayer. victims may not know they've had great indian tax returns stolen until they go to they codify out there on return in the iris notifies them someone asperity filed on their behalf. fraudulently filed on their behalf.

it can often take months for iris to resolve these cases and issue refunds to legitimate taxpayers, the victims of crime. identity theft related tax for a is a serious and rapidly growing problem that has been the focus of two prior hearing people significant work assigned to address this problem i commend the iris furthers efforts and they must do to protect taxpayers from criminals to steal identities and refund and do harm, not just to the individual but, but also to america and the hard-earned tax dollars of lawful citizens. just this week authorities reported a man working for a health care nonprofit stole the identities of more than 50 brain injury patients to steal censoring the american people through fraudulent returns. the american people deserve a government that protects the taxes they pay in fairly and equitably enforces the law. many solutions to ensure that honest taxpayers are not unduly burden because others do not pay

their share. we must also birch reduced payment that. today we are joined by four experts with extensive knowledge about the problem exists within federal tax system. i look forward to testimony of eyewitnesses and to continuing to work with each of them and all partners, including within the subcommittee to better prevent tax fraud and feeling sinister tax code. with that, i yield to the previous chairman of the full committee ranking member of the subcommittee and previous chairman of the subcommittee, my good friend and colleague from new york, mr. towns for the opening statement. >> thank you, mr. chairman. and we thank the witnesses as well. this is a very timely hearing. this is the third hearing in a series held at this committee to examine how it handles the growing problem of identity theft and tax fraud.

as of march 3, 2012, the irs saturday identified voter 445,000 tax returns with 2.7 billion claims as part of a refund. fortunately irs screening presented 97% of those claims from being paid. today the irs is doing a better job of protecting the taxpayer and the treasury from criminals than ever before and we salute you for that. for more that is required of us to stay ahead of the criminals than to hope that dems, one of the first priorities we must address is the quality of the system, given to taxpayers victimized by employment or tax refund fraud. it does not paint a pretty picture of how the irs will be able to handle this problem going forward.

it is seen as of taxpayers will have shorted business hours and longer hold times on the phone with irs agent. budget cuts are the primary reason, but i hope we can find ultimate solutions to these issues. today we will also focus on the $450 billion tax gap. this tax cut equals nearly 20% of our forecasted deficit for this physical year. we simply cannot afford to look the other way and just not do anything. part of the tax gap is a result of tax be to simply refuse to comply with the law, which increases burden on the rest of us. but enforcing due to taxpayer confusion and unintentional a rare as well. i am sure that we can all agree

that the tax code is extremely complex. this complexity makes it hard for taxpayers who honestly want to pay their taxes to figure out what they actually owed. and as a result, they can accidentally overpay or underpaid. we must do more to understand the sources of the tax gap and compliance burden so we can make progress in recovery new creative solutions. we cannot close the tax gap by enforcing against the average american who is doing their best to comply with the tax laws. we all have to share the burden and do more and let us work to reform our tax code in a way that will help us to collect more of the taxes owed, but not pay. and let us continue our work to

make the tax code more fair and simple, in order to do that we must work together. i think our witnesses today, inspect or general miller, mr. white, olson for your appearance here today. i think all of you for being here. and i look forward to your testimony with great anticipation. we need to make certain that the people i protect it and the application responsibilities to do it and they can work together and we can do a lot better than what they're doing. this is not a committee that is to blame you and blame us. this is a committee to come at the solution. thank you so much, mr. chairman. ..

ms. nina olson national taxpayer advocate and the honorable russell george inspector general for tax administration and james white director of strategic issues at the united states government accountability office and the thank each of you for being here. we have had a chance to review your testimony and appreciate your submitted that ahead of time. it allows me to go through it. i'm famous for my blue marker and making notes for things i

want to get to in the time we will have but we appreciate having had in vance -- advance. try to stay in in the five-minute window and hear opening statements before running to the floor for votes in coming back for question so commissioner miller if you would like to begin. i apologize. if i could ask all for it would be to stand pursuant to our committee to swear you in. you can stand and raise your right hand. do you solemnly swear dash solemnly swear or from the testimony you're about to give the committee will be the truth, the whole truth and nothing but the truth? thank you you may be seated and reflect before when when this is a firm deal then we will begin. you are recognized. >> ranking member towns, my name is steve miller. to find it deputy commissioner of internal revenue service. i appreciate it britain to testify in the tax gap today and also to update the subcommittee on identity work.

the tax gap is the difference between the amount of tax owed by taxpayers for a given year and the amount that is paid voluntarily and on time. the amount includes the complete spectrum of behavior from confusion to fraud. the tax gap analysis itself is best seen as a directional tool to provide insight into areas where noncompliance exist and the means by which we can impact compliance. is better explained my written testimony, our work shows the compliance most prevalent where there is withholding and/or third-party reporting. the irs received an updated tax gap study covering the tax year 2006 which show the nation's compliance rate that year was a little over 83%. this is essentially unchanged for the last review covering tax year 2001. the report also showed that the net tax gap in dollars for 2006 was $385 million. the tax gap is comprised of the three components, underreporting, non-filing and -- of which underreporting

is by far the largest. as indicated the largest parts of the underreporting category or where there is little withholding for third-party reporting. in our view, any discussion on how to reduce the tax gap must consider three guiding principles. first, both unintentional taxpayer error and intentional taxpayer ebay should and must be addressed. thus, both enforcement and service are necessary. second, different sources of noncompliance requires different approaches. and third, a major attempt to address the tax gap by legislation, regulation which increases enforcement must be considered within the context that fully recognizes taxpayer burdens and taxpayer rights. in keeping with these principles are strategy involves not only increasing enforcement activities but also educating taxpayers about their tax obligations, improving customer service in order to make it easier for individuals and businesses to get the help they

need to keep their filing requirements, reducing opportunities for tax evasion, expanding compliance research and improving information technology. with respect to enforcement iris is making significant headway in increasing tax compliance. over the last decade tax collections have gone up significantly and audit rates have risen but some of these gains are deteriorating as a budget atrophies. thus we would ask for your support for the 2013 budget. we believe the best way to impact the tax gap is to a combination of responsible discussions on legislative change and responsible investment in the irs. turning now to identity that. november i testified before the subcommittee and describe their ongoing work. my written testimony today i provided an update on irs actions. what you will see is that we have implemented many initiatives we outlined in november. has before our approach is two-pronged. first we need to stop false refunds before they get out.

second we need to help those who have been victimized. we are in fact something much more refund fraud generally and identity theft specifically. we have put various new identity theft screening filters in place to improve our ability to spot false returns and for a refund is issued. the numbers in my testimony and i'm obviously more than willing to discuss any questions that you have in a particular area. in our work with victims with train 35,000 of our employees to recognize identity theft and expanded a program for identity protection personnel, personal identification numbers for ip test. for the 2012 filing fees we issued over 250,000 i.d. theft victims which will allow unfettered piling for 2012 for those individuals. we continue to increase staffing to assist identity theft victims and we are revising and streamlining our process to determine who the real taxpayer

is when duplicate filings occur. again i will say that we are not done that we have made real progress in the area. mr. chairman this concludes my oral testimony and i'd be more than happy to answer any questions. >> thank you commissioner miller. missiles and. >> chairman platts, ranking member towns and members of the subcommittee thank you from biting me to testify today about the subject of the tax gap and tax related identity theft. both of these issues present challenges to the tax of. regarding the tax gap, the irs recently released an updated tax gap estimate of 385 net tax gap estimates of $385 billion in 2006 and the size of this estimate has understandably attracted considerable attention. there are many causes of noncompliance including difficulty understanding and complying with the law caught in a minute -- inability to pay and deliberate understatement of tax. i believe the complexity of the

tax code is responsible for considerable portions of noncompliance and i have repeatedly recommended in my report to congress that you all simplify the code. while you are working on that, and i am ever the optimist in that regard, that there are other steps that can be taken. first, the irish should be given the resources to substantially improve its taxpayer services. the percentage known as the level of service has been declining in recent years. for for the year to date about one out of every three calls seeking to reach an irs representative hasn't gotten through. when taxpayers have managed to get through, taxpayers are played in an average of about 14 minutes on hold. the irs is also behind and timely processing taxpayer correspondence with the percentage of letters classified as over age and nearly half of all correspondence by the end of fiscal year 2011. there is no doubt in my mind that some taxpayers give up in

frustration or anger when they find nobody is home and simply don't file or pay. the state of affairs may cause the tax gap to increase by converting formerly compliant taxpayers into noncompliant ones simply because the irs does not timely pick up the phone or look at its mail. second by the irs will never be the government's most popular agency, i believe it's funding level should be substantially increased. over all the irs is an extraordinary investment. on the budget of $12.1 billion, collected $2.4 trillion in tax revenue last year bringing in $200 for every dollar invested. yet the congressional budget rules generally require that the idea rest of the funded like all other spending programs with no direct credit given for the funding to iris brings in. that makes little sense. in my view simplifying the tax code including taxpayer service and giving the irs sufficient

funds to expand its enforcement programs in the proper way would go a long way toward maximizing the tax compliance. regarding tax related identity theft, the irs has made significant progress in the areas in recent years including adopting many of my office's recommendations. notwithstanding these efforts, it's clear that combating identity theft continues to pose significant challenges for the irs. three points deserve particular emphasis. first, the irish to continue to work with the social security administration to restrict public access to the master file. second, i'm aware that through state and local law enforcement agencies that would like access to return information to combat identity theft. i have significant concerns about privacy protections. as i describe in my written statement the irs is developing a procedure that would enable taxpayers to consent to the

release of their returns in appropriate circumstances. in my view giving taxpayers a strike -- lastly i know that even with the irs being urged to do much more to condemn -- combat identity theft tax players are clamoring for the irs to process returns and issue refunds more quickly for gold while there is still room to make improvements in both areas the goals are fundamentally at odds. if our overriding goal is to process tax returns and deliver tax refunds and sickly as possible for the vast majority of persons who file legitimate tax returns it's inevitable that some identity thief will get away with refund fraud and some honest taxpayer will be harmed. on the other hand, if we decide to place a greater value on identity theft in the treasury against fraudulent refund claims, the irs will need more time to review returns and the roughly 110 million taxpayers who receive refunds will have to wait longer to get them, perhaps

considerably longer. alternatively, the irs will require a considerably larger staff to enable it to review questionable returns more quickly. there is no way around these trade-offs. i appreciate the opportunity to testify today in would be happy to answer your questions. >> thank you missiles and. inspector general george. >> thank you chairman platts, ranking member towns. thank you for the opportunity to testify in the tax gap and the efforts by the internal revenue service to enforce compliance with the tax code. my comments will also address their identity theft and tax fraud. in january 2012 the irs released a dated estimates of the tax gap for tax year 2006 which indicated the nations 83% voluntary compliance rate was essentially unchanged from prior estimates. the irs estimated that the gross tax gap increased from

$345 billion, to $455 billion as was indicated by mr. miller. my written statement includes a table that shows the comparison between the prior and current tax gap estimates. has also stated earlier the irs reports the gross tax gap is comprised of three primary components, again $376 billion and and under reporting of tax liabilities, $28 billion due to non-filing of tax returns and $46 billion under payment of tax liabilities. the irs reported the growth of the tax gap last year from 2001 to 2006 was concentrated in under reporting and under payment forms of noncompliance which jointly account for more than nine out of 10 tax gap dollars. the irs also reported that the tax gap is caused by both unintentional taxpayer errors or the tax law complexity, confusion or carelessness and

willful tax evasion, or cheating. the irs needs to overcome its institutional impediments to more effectively address the tax gap. these impediments referred to the established policies, practices, technologies or interest requirements that had unintended cause or are no longer optimal given today's society. we intend to believe the current institutional -- faces can point the way to improved opportunities. namely address and complete compliance research, reassessments efficient compliance strategies, determine help us to fix incomplete documents matching programs and find a way to handle the insufficient enforcement resources. every year more than 1/2 of all taxpayers pay someone else to prepare their federal tax returns. third-party reporting and transparency is crucial to high compliance among individual taxpayers.

faces reporting associated with the buying and selling of securities was an area that needed third-party reporting based on previous studies that showed low levels of compliance. the new merchant card reporting requirements were established in 2011. they provide third-party reporting on business receipts for the first time. making it much easier for the irs to identify businesses that are either under reporting receipts or not reporting at all. globalization of the u.s. economy has been a major trend for many years. the scope and a box of the of the international financial system creates significant enforcement challenges for the irs. the irs continues to be challenged by lack of information reporting on many cross-border transactions. the misclassification of millions of employees as independent contractors is a nationwide problem that continues to grow and contribute to the 72 billion-dollar under reporting employment tax gap.

they identified more than 74,000 taxpayers who may have avoided paying approximately $26 million in social security and medicare taxes in 2008. we have continued to assess the irs's efforts to identify identity that. stealing identities at an alarming rate remitting tax returns with false incomes and withholding documents. for processing your 2011 the iris reported it had detected 940,000 tax returns involving identity theft and prevented the issuance of fraudulent tax reforms totaling 6.5 alien dollars. the amount of fraudulent tax refunds the irs intends to prevent. the iris does not know how many identity thieves are filing these tax returns and how much revenue is being lost resulting from the issuance of fraudulent tax refunds. we have found the issuance of fraudulent tax reforms they

stunned -- and presented by the irs an upcoming report will provide further data. access to third-party income and withholding information at the time tax returns are processed is the single most important tool the irs could have to identify and prevent tax fraud. thank you for the opportunity to share my views. stay thank you inspector general george. mr. white. >> chairman platts, ranking member towns and members of the subcommittee i am pleased to be here to discuss the tax gap i.e. faith-based fraud and how to reduce them. the gross tax summarized on pages four and five of my statement, as you have heard, as was recently estimated by the irs to be $450 billion for tax year 2006. this is the amount the taxpayer should have paid but did not pay on time.

no this is the amount unpaid for just one year. of this, the irs estimates, as you heard, that it will ultimately collect $65 billion from enforcement actions and payments by taxpayers waiting in that gap of $385 billion. one piece of context is that the tax gap has persisted at about the same level as the percent of total tax liability for decades. this despite a myriad of congressional and irs efforts to reduce it. keeper thinking about how to reduce the tax gap is understanding its nature. the tax gap has spread across various types of taxes, taxpayers and taxpayer behaviors. most of the tax gaps for the individual income tax, but corporate income tax and employment tax are also significant in tribute or's. much of the tax gap is due to misreporting of business income even for the individual income tax. on business income also contributes. even for a certain category of

taxpayer there is a variety of misreporting behavior. for example in a recent report be found for sole proprietors miss recorded both their receipts and their expenses and some of each is unintentional while some is intentional. at one level as you have heard the tax gap is easy to understand. income subject to withholding and/or information reporting by to irs by third party such as employers are banks have low misreporting. only about 1% of wage income of withholding his misreported. on the other hand, 56% of rent, royalty and sole proprietor income with little or no information reporting is misreported. there are opportunities to reduce the tax gap, but because of the variety of noncompliance multiple approaches will be needed. no single approach is likely to fully and cost-effectively address the cat -- tax gap. opportunities include more third-party information reporting, third-party reports

to irs by the taxpayer's income allowing the irs to easily verify the computer matching without the taxpayer's return is accurate. as they are denoted compliance is high when income is reported by third-party such as employers are banks. the challenge with increasing third-party reporting is identifying new third parties. they must have knowledge of taxpayer's income or expenses and have tolerable reporting costs. also the irs must be able to enforce the reporting requirements. for example a small number of reporting entities like tanks would be an advantage. the problem is that most third parties that meet these requirements are already required to report. another opportunity is improving service taxpayers. services declined. for example wait time to get through to an irs telephone has been around 60 minutes this year. the model of human assistance responding to taxpayers may not be as sustainable given its high

costs. different strategies for answering taxpayer questions such as on the irs web site or through paid tax preparer sore tax preparation software will be needed. another opportunity is additional resources. with type budget the irs's the risk is that enforcement and with that voluntary compliance will go down. if taxpayers lose faith in the fairness of the system they could become less willing to comply themselves. another opportunity is increasing pre-refund compliance checks, doing more computerized checks before refunds are issued can reduce improper payment and might also limit refund fraud based on i.d. theft. leveraging external resource. such resources include paid preparers, tax fraud -- software companies and whistleblowers. it made recommendations to help irs leverage all three to reduce the tax gap. modernized information.

such systems can route phonecalls to help taxpayers get the answers they need and support irs's enforcement staff with timely access to data. simplifying the tax code which involves simplification to make it easier for taxpayers who want to comply to do so successfully and make it harder for those potentially trying to evade their tax obligations to hide from the irs. in closing i want to highlight the value of research on on the knee turn causes of the tax gap. such research is costly but without a congress and irs will be left struggling to reduce the tax gap without a fact-based understanding of its causes. mr. chairman, this concludes my statement and i'd be happy to answer any questions. >> thank you mr. white and i i thank all for a few. perfect timing. the clock is at zero on the floor so i'm going to run over and mr. townsend mr. connerly and i will return very quickly, as soon as those are concluded

and then we will get into questions. we appreciate your testimony so this hearing stand in recess until the call of the chair. [inaudible conversations] [inaudible conversations] [inaudible conversations] >> the hearing will come to order. i appreciate everyone patience while we concluded floor votes and we will go into questions.

i will yield myself five minutes to begin. certainly the numbers are pretty staggering when you think of the tax gap of almost $400 billion even after adding some recovery of taxes and properly paid when we talk about taxpayer identity theft, fraud and the fact that we have hundreds of thousands of americans being victimized and billions of dollars at risk. so, the issues that we are trying to address today are real issues and are about real money and people and about trying to protect the american people as well. is either they are not paying $3400 of someone else's tax bill or not being victimized by criminals. starting with the area of tax gap and commissioner him miller i guess we can say it's a structural question or framework. is the data we are looking at

dash we are in 2012 swiping prior to that it was 2001, five years back before we had similar data. one, is there a plan that this year they will update it again and five years or six years to update the data about the tax gap and what is the difficulty in having it more current because having 6-year-old data certainly isn't helpful but it would be helpful if it was one year older to grow data. >> i think that's right mr. chairman. the process has been to do examinations, so for example if we were to do 2011, those returns are now coming in. it would be a while before we would do ours specifically to the sample and using 1040 as an example, we are doing 14,000 research audits per year to try

to update this and we are -- it's a continuing path we are on. it will be a few years before you complete those audits, before we are able to roll up the information with respect to this. 2006 was a long time ago but i'm not sure how much better we will be able to get. i think we will have an easier time going forward than we had in 2001. we did a better job in 2006 with better data, better estimating models and we will get more current but i don't think we are ever going to be dash we will never be dash the 2011 gap as i said is 2012. >> i see don't expect that year 2012 when you look and say 2011 that is what the tax gap was. it was 6-year-old data that we were using a specially with technology and i guess what

concerns me a little bit is that we are still doing audits and completing and compiling the audits from 2006. 07, 08, four years back, five years back. that is one of the issues that the inspector general raises, the ability to use the data we have and whether it deals with identity theft or whether deals with the tax gap. i understand that it costs money but if we do it well and act on what we learn it will save money in the long run by helping us to close attacks gap in this case. and so that is a concern that jumps out that we are relying on 6-year-old data in the need to make that more current so we can be more effective in how respond to what that data tells us. >> mr. chairman if i may add? i do think the irs is doing a rolling research so they are going to be doing three years

rolled up at a time so even though you may be a bit behind, 2006 is done, you would do 2007, 2008 in 2000 and i'd rolled together and move one year on and to the point about how long it really does take, if you have even 2006, some people are filing on october 15 and you may want those people in a random sample because they may be some complex returns so you are waiting for those to go through processing. taxpayers have rights so even those 14,000 audits that we have, they may want to go to appeals before they go to tax court. if they got a tax for it may take a year and a half before they are out of tax court and we have to wait until we are final on the whole issue. we don't know what is going to be in that 14,000 example, whether there will be tax court ones are not so it's not an easy thing but i do think the irs is

with the rolling sample, it really will work. we will have years of lag. it will give us good data going forward. >> and i certainly appreciate some of these cases will be very complex especially that goes -- those that go to tax court but again we don't need the data from all 14,000 to be able to assess what is working or not. if we lost 4000 we had 10,000 to look at, but it's 3-year-old data instead of six euros data that certainly would be more beneficial. on specter george? >> i was just going to add sir, that there are certain aspects of the tax gap with the irs had to adequately address too. for example the international tax gap. that is the hundreds of billions of dollars again per year that is due to the american taxpayer, the treasury and it isn't being paid on time if at all. it is an enormous task and it was printed out in these

additional resources but it's something that you have addressed. >> commissioner do you want to comment on that because i know that that is an area where we have the most limited information regarding it and what efforts dash i am not an appropriator although i want to look at how we try to make the case and the taxpayer advocate are well-documented on return in investment and we invest in taxpayer services and what a dramatic return of investment that is compared to enforcement and how we can try to help promote what your needs are. when we hear hundreds of billions of dollars that we are not getting in that one category, how can we do better? >> on the international tax gap i'm not familiar with the inspector general's numbers to be honest with you. so i'm not going to speak directly to that. on international i can say two things. you're not looking at a single

number. you are looking at different components. you are looking at what is cross-border activity in large corporations and that is one set of documentation they would look at and we do look at that and that is our window into the world. the other world is offshore accounts, which as you may be aware of we we have we have done a margarent -- remarkably good job on. we have had three or 4000 people come in with over $4.4 billion of declared money coming into the treasury. do we know that the total number, do we know the full pie in neither case? probably not that we are on our way in doing good things in both areas. >> i don't want to suggest that we are not moving in the right direction. i think to the american people that are paying their taxes, doing their best whether it's

5000 or 3000 or 10,000, and then when they see the numbers, if it was even tens of billions, but hundreds of billions, that we need to do a better job and just out of fairness to those who are compliant with the law and paying their fair share. one other question before yielding to the ranking member. one of the issues ms. olson you talked about is in the current system, we use electronic system of collection especially for reporting income taxes and employment taxes and we have a mandatory 94% requirement for irs using electronic collection. can you expound dash the way i understood your suggestion and recommendation is if we apply that same approach to estimated tax payments it would help the

taxpayer be more compliant but ultimately generate more collection if we took that approach? >> we were very successful one the irs with gave a little nudge to achieve this goal in employment taxes and getting electronic payments. we save the whole government money by not processing checks but it also makes it easier for the taxpayer after they get used to it. we should apply that to estimated taxes. i think that in some areas it's very hard for taxpayers to save up money to pay estimated taxes quarterly so if they can pay a monthly like they pay other bills and they pay lots of bills through their banks, bank accounts, just setting a payments. we don't have a good interface and so i think if we could get some kind of a nudge from congress to set the goal for irs has responded well to that in developing strategy and then we would get the different parts of treasury together to make it a

good user interface for the taxpayer. >> is it the same argument, making it clear that voluntary reporting agreements would achieve in essence that same goal? that came from the trade association that met with me that said for example they do have an employee receptionist so they are art in the payroll tax system and the people who cut hair really are printing booths from them but they get in trouble and then they move on because they don't pay their estimated taxes. the hair salon says if we could enter into an agreement where these are not our employees because they are working but we will withhold a percentage and keep them in compliance, we will have these people stay with us and we won't have so much upheaval and when we worked with counsel they said we don't have the legal authority to enter into those agreements the way that particular code section is written. >> is the irs general counsel

dash did they need additional statutory authority? >> they need additional statutory authority so this really was a taxpayer friendly proposal. >> something that we are glad to make -- look at as a committee to try to see if we can't allow that because i think it is a win-win for the person who has the independent contractors working in their facility. they don't get the turnover of the independent contractors. >> and it's not mandatory. it's totally voluntary. >> ultimately dash i yield to the ranking member mr. towns for the purpose of questions. >> thank you very much mr. chairman. let me begin with you general george. your testimony indicates that the irs has institutional impediments that prevent them from effectively addressing the tax gap and of course

specifically even when the irs examines the tax insurance that these improvements offer no change made to the return and this increases the burden on compliance. could you just elaborate on this a little bit more? >> certainly mr. towns. the bottom line is the irs has in complete compliance research and specifically the irs does not know all the sources of noncompliance, so the irs's resources cannot be targeted appropriately. the research which is needed is on the relationship between the taxpayers burden and the compliance and on the impact on customer service on voluntary compliance. these are various studies that may have engaged in the past but we don't believe they have done so adequately. additional research is also needed to measure how

establishing benchmarks and other measures to assess the effectiveness of some of the efforts the irs has engaged in the past whether something is working or isn't working. so for example we know for a fact that when they reach out to a taxpayer by letter, the initial contact normally results in a relatively high response from the taxpayer. that is, the taxpayer will either acknowledge that he or she owes the tax and pay it, and yet if the irs delays reaching out to the taxpayer and i don't have exact numbers yet, the number of weeks or the number of days, we know the response rates declined and so in a recent report, we encourage the irs to increase the frequency in which they communicate with taxpayers and the irs to my understanding has declined to do so.

again citing resources. but that is just one example. incomplete compliance strategies. there are systems that identify returns for examination that needed improvement to identify potentially noncompliant returns. the collection activity that extends for years has a lower rate of collection for delinquent liabilities. the irs has something called q which is a database in which tax returns for people who owe taxes which aren't handled by irs revenue officer's or any other method within the irs literally are put in lines and that line contains millions of tax returns. keep in mind there is a statute of limitations on whether someone has to comply with their tax obligations settled millions

of dollars of our potentially being lost because the irs has simply not addressed these returns. they have someone assigned to them to look at them but one of the most disconcerting aspects of all of this is the irs has an incomplete document matching program so the irs does not have reliable third-party data for taxpayers for all taxpayer sectors and for all types of tax returns and most notably income earned by the self-employed. i carry this card with me and i cited every opportunity i can because information comes from the irs is very compelling. as you heard earlier today there is a high correlation between tax compliance and third-party reporting. the irs estimates individuals whose wages are subject to withholding report 99% of their wages for tax purposes.

self-employed individuals cooperate nonfarm businesses are estimated to report only 68% of their income for tax purposes. the most taking number is self-employed individuals who operate distances on a cash basis are estimated to report only 19% of their income so there is no question that it's the irs and again it would have to have a vote from congress and so we are able to mandate third-party reporting, the level of compliance would go up astronomically i would argue. >> mr. chairman i need a minute to give mr. miller an opportunity to respond to some of that. >> thank you mr. towns. >> mr. quite. >> thank you. bears a whole batch that was wrapped into general george's

comments. a few things are good like to clarify. won a national research program comes up with the tax gap is also used on an annual basis to improve our filter so it has a benefit to us to do these things and prove our selection process because we have a living process that filters back in the results so that we can target better our noncompliance. there is no doubt that we can improve and we are improving on an individual basis. the things i will mention, the q and the collection area exists, no question about that. cases go to the q when they are lower priority than other cases. other cases can be a higher priority because we think they are better caller cases are two because we don't have the resources to reach them at this point. we are doing a better job of selecting cases for collection, not first-in, first out and i want to make that very clear. it's based on the attributes we give a case.

>> let me ask you very quickly. has anybody ever estimated or looked at the fact that you indicate you have dash tax identity theft. what would happen if you had 55 or 45? i mean with the resources increase? i am not sure that not having more staff is an economical way to go. >> mr. towns, i would agree with you. i think that nina has said and others at the table has said we believe the irs is a good investment and that we are in essence the people who bring in $2.4 trillion in the upper 90 percentile of every dollar that comes into the government on an annual basis. so i think as we pull people in, and we have pulled many people

to work on identity theft, as we had to end and as we should, that does impact other programs. >> sir, if i might comment on some of the earlier points from the inspector general. the irs does have a project right now that is looking into the impact of service on compliance. my office is working very closely with the office of research and the wage and investment division and we are doing a lot of surveys of taxpayers. it will be eight very interesting what we find out. this is a constantly developing area. i have been very critical of the irs's collection strategies and their use of automation and their failure to just pick up the phone and talk to taxpayers because they think you can really get resolution. but notice dream where we send out notices to taxpayers early in the system are in the process. it's very effective at what that leaves us with are those taxpayers who aren't going to willingly come forward and they

made -- need maybe a little nudging and it's how you do the nudging. the main thing i want to talk about is the comment about her incomplete document matching. we have been given significant tools but you'll just repeal the provision that would have given the irs more information about the purchases that businesses made, but the upshot and we really criticize it because it imposed so much burden on the businesses who are going to have to do the recording. i think that is a trade-off and in the self-employed area, the way the information reporting on the self-employed is to get the householder to report on the person who is cutting their grass every week and you were not going to get that done. that is just not something we can impose on those taxpayers. so that is where we had to do vigorous audits and look at areas of risk and think of some

alternative strategy. i'm not convinced that information reporting is the end-all be-all for this tough area that we have got. >> mr. white before you respond, getting back to the third-party reporting, do you think that the irs has taken full advantage of third-party reporting and anything else you have to add i would appreciate it. >> let me start with a quick example that highlights the importance of research and i want to follow up on mr. miller's.there. the recently enacted basis reporting requirements for financial transactions, financial security, that policy proposal was based in significant part on research that was done using the compliance date of the irs has developed to estimate the tax gap so that is an example of how you can use that data to make changes, to reduce the tax gap. it's estimated that the first seven years of that ace is

reporting proposal brings in $7 billion. that is a reduction in the tax gap. in terms of information reporting, third party information reporting, one of the advantages there that i think it's been discussed somewhat is that the irs can match that information to tax returns rather than having to do an audit. audits are labor-intensive, very costly for the irs. more partly they are very burdensome on the taxpayer so this is alternative to audits for enforcement processes. the difficulty is in identifying new information reporting sources. there are some that we have raised in recent courts, some additional source. one is payment for services. >> if i can ask you if you don't mind, mr. connolly has to run for a floor statement. if we can kind of go back and

let him get in and then we will come back to those examples of additional sources. is that okay? i yield to the gentleman. >> i thank my colleague. mr. chairman i would ask unanimous consent that my opening statement be entered into the record in full. >> without objection. >> i would further suggest the national treasury employees union dash also be entered into at the full record. i thank the chair. i think you said a 450 billion-dollar tax gap? that is this year? >> that is 2006. >> 2006 and is growing? >> i believe it's a lowball figure and it's an ongoing review. it doesn't include aspects like the international tax gap. >> you think there could be some relationship between the growing gap and the fact that we have a 20% reduction in 1995?

>> there is no question that if the irs had additional resources they would be able to collect additional tax fees. >> i point out to my colleagues, just for the sake of argument, $450 billion in money owed to the government that we are not collecting, that is what the tax gap is. times 10 is $4.5 trillion. here we are sweating egg -- it would be 1.2 trillion. this would be a big dent in the debt if we put the resources, the irs to collect the money that is owed. now over and above that, this subcommittee led to my colleagues, mr. platts and mr. towns has done a lot of work on the issue of improper -- and mr. miller i think you are covering that in your testimony.

what is the estimate of annual improper payments, the things that maybe refunds to send to people that did not qualify because the amount was wrong or whatever it may be but what is the estimated improv prepayment for the irs? >> just speeches to give two examples. >> is there a global figure? the ford and 50 billion is a tax gap of what comparable figure for dash i can tell you definitively under the additional tax credit it is estimated at $4.2 billion a year or although the irs under an interpretation from the treasury is whether or not that is an improper payment. we don't believe that the law authorizes a payment of the additional child tax credit to people who are not u.s. citizens and don't have dash. >> we are trying to deal with local numbers here and i would

be useful to have a number. the total amount estimated is $125 billion a year. >> income tax credit is estimated at their teen billion dollars a year but no. >> our tax gap number say that tax credits and part of the ender reporting gap are about 28 williams of that 450 r. 6% of the gross tax gap so that includes a number of refundable tax credits. >> mr. mellor? >> the only thing i would caution is the difference between the improper payment which is what should've gone out which includes all sorts of different dash. >> i am making that distinction. >> i don't have that number but we can come back. again, the goal is making is zero and understanding that is an impossible task.

what would be required, what would be required to close that 450 million-dollar gap and to better get a handle on the improper payments because we are making incredible and in my opinion sometimes egregious policy decisions that will do real damage to the united states of america. we are cutting back these estimates that are very important if we stay competitive and here is a source of revenue we are owed that this body is not willing to make the investments in the irs that we need to make. what is very clear from your testimony is for every dollar we invest in the irs, especially in terms of compliance, we have a big return. and it puzzles one why congress wouldn't seize on that opportunity is one measure to

put a real dent in the tax without having to create you know gnashing of teeth. let me ask a question of both of you. if i pay mr. chairman. if you talked about offshore tax havens. is that correct? >> yes. >> that is something every ordinary american taxpayer has, right? >> i hope not actually. >> well what percentage of tax filers have offshore accounts? >> so we know, i don't have the percentage with me but we know the ones who are declaring them, the rules that call for a checkbox on the 1040. we will find out when the 2011 earnings come in. >> and that is a legal loophole in the law that someone can use as an exemption to? >> it is it permissible act.

obviously, we have made inroads on offshore and we also have the fact of the rules that were require banks to report to the united states, those who have foreign bank accounts. >> i can't think of anybody who has those types of accounts. oh, yes. according to one study, the percentage of income paid in taxes for the top one tenth of 1% of taxpayers, and the top bracket, has declined from 70 to 40% and if you look at the middle income quintile, it has increased from 15.9 to 20%. that suggests a rather dramatic regression in taxes paid in the de facto tax code we are living with. would you comment? >> i really wouldn't be able to comment on whether those

accurate -- numbers are accurate. >> would you not agree that the top one tenth of 1%, which used to pay 70% of the percentage of income paid in taxes, is now 40%? that is certainly not progress. that is called regression. >> so that is outside of what the deputy and the general revenue service would be speaking about, sir. >> ms. olson? >> sir i don't have those numbers but i would be glad to look into them and get back to. >> would you agree those numbers are accurate that would suggest that the de facto income tax in this country is becoming more aggressive, not more progressive? if the top one tenth of one person is paying half of what it used to pay? the middle quintile is paying more. >> cert, the reason why it's difficult to answer that question is that i have just been looking at historical data

and it's not clear to me that the highest income tax payers are paying less than name might have done historically so that is why am saying i need to look at what you're asking me and look at the charge that i've got to be able to answer for the record. >> i have to say to ms. olson, the numbers available to me are quite clear. they are not ambiguous. they have declined significantly in terms of the total percentage of income tax collected by the irs. mr. chairman nye thank you and they thank you mr. towns. >> i tango the gentleman and i would associate myself with the gentleman's comments about the need for astute do a better job of making that investment with the revenue officers to get a return on that investment for the american taxpayers and similar to how the three of us went together on funding levels for the government accountability office and abdicating to the appropriations

committee members and staff, if i remember there was $86 for every dollar spent by gao. i would be glad to work with you on something similar that makes the case and advocates the numbers really presented pretty well but the return on investment is. with that, we go back to mr. towns and astor white if if you wanted to conclude we will reference examples of additional data collection i would be helpful. >> the attentional information reporting to things we have recommended and recent reports and one is payments for services to corporations. this is not payments for goods. this would be purchases of services from perhaps from contractors, outside contractors who may be incorporating. if you are inc., that does not have to be reported to the irs and if you are not incorporated does have to be reported to irs

so one suggestion for additional information reporting is to extend that to contractors who are inc.. payments for services by services of real estate is another area where we have recommended increased reporting of their other -- one example is on reporting on mortgages. currently the 1098 forms that report mortgage information did not include the address of the mortgage property and that creates problems for the irs and sorting out suspicious returns from correct returns. it's not easy to tell even how many properties of somebody else so they're both sorts of opportunities. one other point i would mention is there has been quite a bit of discussion about return on investment. this is something we have highlighted with the irs the importance of doing, more estimates of return on

investment both for proposed initiatives which the surface is now doing and then after-the-fact, trying to calculate, trying to measure the actual return from investment on compliance initiatives so that the service learns what has been effective, what has been more effective than they thought it would be, what has been less affected than they thought it would need? that raises and the possibility of redirector resources to get the biggest bang for the buck. >> mr. george? >> just to touch on what mr. white discussed, throughout the session we have talked about the need for the irs to receive additional information, third-party information and how that would enhance revenue collection but what is just as important as once the irs receives this information what it does with it and that and that is a problem that we have reported on before whether it's a 1099 or what have you.

the irs will receive this information from an employer and yet, then will receive a tax return, or returns seeking a refund and won't match the two in time to make sure that the information is accurate. so if someone wants to commit tax fraud you know, they're able to claim more in the refund than they are entitled to because the irs didn't know on a timely basis the information. that is a major problem. the resource is derived in terms of their having computer systems are revenue offices to address how they handle them internally but it is a significant problem. >> mr. miller. >> mr. towns so i agree with general george that it is a significant problem and stems from a number of reasons, the key of which is timing. we don't have the 1099 or the

w-2 often when the return comes in for a refund. we do what we can, but we don't have the information to match. we have recently started talking to the community about being more real-time, which has in mind exactly what general george is talking about. the most information we can have at the time of that refund the better off we will all be. we should have the w-2 and we should have a 1099 with respect to that person so that we can validate one, that it is the person that should be getting the refund and two, that the amount is correct. >> how soon can we get that? >> so we received many 1099's are due march 30 and we already are 70 million into the refund stream by that time.

>> so what changes -- this is why we have you appearing. to see in terms of what we can correct. that is the purpose, so what needs to be done? >> this is something that my office has proposed several years ago and we did a study and look at many different countries around the world. many countries, and i alluded to this in my testimony a little bit, they don't start -- they don't issue refunds until they have -- the filing season is closed and they have received all the returns and they have had a chance, including information returns and they have had a chance to run everything against and do matching and then they issue a refund. the united states, people are showing up the first week of january to file their returns to get a refund and it would mean a major shock to the system. ..

>> they voluntarily ask taxpayers to wait during the filing season. because they had a pretty filed return, so customers could download that information and >> they're getting about 40% of the taxpayers who are waiting and using information that the agency is getting voluntarily. they are getting to the point where they might be able to say, ok, we are changing deadlines. we are seeing people moved to later in the filing season. and that is the approach that we recommend. if you could voluntarily make it as a desirable thing, taxpayers will wait because they want a certainty. negotiate with your partner, which the irs is beginning to do. rather than bringing a huge shock to the system, we're

taxpayers are waiting for their refunds early. >> just to add a little bit to that, a few other considerations. in addition to the burden on the third-party changing the filing date for the information returns, it does need to be just enough time needs to be allowed to make those returns accurate. if they are not accurate and they have errors, it is less useful for the irs. it means that they are finding false positives. at that point, they contact taxpayers about a mismatch. when there may not be a true mismatch. one other point about the value of everything matching early on, is that it would come, to some extent, be a long-term solution, or at least a partial solution to beat that problem. the irs would be able to do more verification before issuing

refunds. that way they could detect illegitimate claims. >> you mentioned this, mr. chairman. you mention the statute of limitations. there is no statistician statute on fraud. >> that is correct. but which comes first? it is in the queue, if it's there for five years, i believe that is the statute of limitations for -- for someone having to pay their tax obligations. if the arras hasn't gotten to it, it is out of the queue. that is my understanding. you can correct me if i'm wrong, commissioner. if they haven't met by then, how do they know what it is worth? >> much of the tax gap is not in that queue. there are significant parts of

the tax gap that we do not detect in terms of particular taxpayers got over that amount. one of the issues here is that a significant portion of the tax gap is in very small amounts, spread over millions of taxpayers. there are a lot of small businesses that have reporting problems that are both unintentional and intentional. they are small. it raises the question of whether it is work function worth going after them. you would have to audit those unpaid taxes in many cases. another question is how intrusive you want the tax system to be. to find those small amount spread over millions of taxpayers. >> if i could, one question to general george. there is a 10 year statute for us to collect the money. i think i would agree that the

older and colder, the less likely we would collect any other debt. but we do have offsets that occur constantly, and we have other means and tools that do make use of that data and those accounts are collected on. >> something mr. white said. there are things other than direct enforcement that are very valuable tools. commissioner miller mentioned the offsets. a large collection of collection occurs because they also get a refund in a future year. that is just the computer and seeing the refund and grabbing at. it goes into the public treasury. another thing that the irs is during this year is behavior modification, if you will. we recommend that several years ago on the sole proprietorship return their you break out the lines for reporting income, where you say here is income from 1099 that is reported on

1090 nines line and here is other income. i just know the former return prepared, my clients come in and show me their 1090 nines income. clearly, i'm not going to audit your books, but clearly you earn more money than us. and they say oh, yes, $100 or something. welcome if you've force taxpayers to have to articulate, they will look at how they will be audited if they don't report money on this other line, the non-1090 nines income. even if people were now reporting $100 and the gold $2000, that is that his behavior modification -- we have used it in the past, the drives people to compliant behavior because they think we are looking at them. that is a very important tool. that is really the policy behind

information reporting. you don't just need it to third parties. you do it through what they have to report on their return. >> thank you ms. chairman for your generosity. gentleman is more than welcome. i want to turn the discussion towards specifically identity theft and the issue that the ranking member and i have focused our time on with our staff and both sides -- the stub unsent subcommittee staff. i want to commend the irs for increased focus on this issue. it is certainly a necessity as we see the numbers going up each year of those who want to defraud those related to tax refunds. i know one of the issues is the taxpayer protection that has been established as someone who has a victim of identity theft, or believes they have, to have a designated union is an important

step. one of the things that jumped out to me after the advocate's testimony, something that is just unacceptable, it is at the level of service. understand, that in general, the goal was 60% or more. and yet, when the taxpayer protection unit in mid-march their service level was under 12%. even in this past week, the heaviest time was only at 35%. i look at that as saying, we are going to create a special unit for those who have been victimized. emphasize victimized by criminals. because of identity theft, we set up a special unit for them to call. and we are not even helping two thirds when we have a high level of assistance dedicated.

even those who do get through to get assistance, according to the advocate's testimony, the average wait on hold was one hour and x. minutes. that is not how we should be treating victims. it goes to our previous discussions here we need to recognize this as a crime, and there is a victim of the crime. we set up a special unit, it's a good thing, but if the unit can deliver to help the victims, that is not a good thing. dropping to 60% is a level of concern. but helping those who even were able to get help but had to wait over an hour on hold, does anyone in this room enjoy being on hold for over an hour? i don't think so. i'm amazed that anyone stayed on hold for over an hour, quite

frankly. that is just not acceptable. that is not how you treat the victim of a crime. i want to recognize that you're trying to do the right thing here, but we are far from where we need to be. >> chairman, just to make a clarification. the unit but that number went to is different from the unit were taxpayers who think that they have been identity theft victims call the irs out of the blue. the unit that those statistics go to our unit where the irs is sent letters and said we think there's a question about your return, and we're not going to hold it. so i just want to make that clear. >> absolutely. if i didn't make it clear, whether there is a belief that there is identity theft here, and so we set up a special unit to respond, and then we put them on hold for an hour, if they get through -- and as the numbers show, the majority do not.

>> i agree, mr. chairman. i was unaware of that 35%. i thought we had resolved that. i thought we had added more staffing. maybe we have not added enough. >> not only do they not have adequate staffing and extended wait times, if someone calls back to find out what the status is of their case, they are assigned to someone who may not have seen the case before. they are not handed to the same person who has the institutional knowledge of their case. in addition, in times such as recently, people who are normally assigned to those types of cases are reassigned to answering regular tax concerns from other taxpayers who dialed the 800 number to walk into taxpayer assistance centers. so there is a way to the irs can certainly run the system a lot better than it is to. >> general george, you raise an

important point. in whether we have looked at us in the past were not. especially when you set up a special unit to respond specifically. it certainly at a fraction of the numbers. i would equate it to my office or. [inaudible] office. we open about 4000 new constituent cases a year. that is individuals. now, if someone calls in and the person they are working with is not in, a member of the staff can pull of the case to see if anything has been updated since the last talk to the staff. there is a dedicated staff person that they are working right. that does make a huge difference. that way they don't have to start over. i don't know if that is anything that the irs has looked a doing so that when you call in, you know, once you make that contact, then you have a case

manager that you should be dealing with so you're you are not starting over and re-educating every time you call. is that something considered? >> it is considered. i don't know if it will work or not. to be honest. generally, and i think that the taxpayer advocate and i may disagree, we don't have the resources to say this is your person. what we ought to be doing is a ensure whoever does get on the phone with you has all the information in front of them. that is what we tried to do. >> does not go through the case files electronically? >> that is our attempt. our attempt is to have -- and remember, we are talking about a microcosm of the way we are doing business on the phone generally, where we can't -- our systems do not permit a single person. we don't believe it's the most efficient way and we can't assign a single person to another person. in a perfect world, yes, we

would have one individual who is assigned to each account. we have not been able to get there in terms of resources or systems to date. >> all i know is that not just in identity theft, but in correspondence and some of the most significant and frequent complaints, taxpayers save they talk to for different people, they've had to explain their situations over and over. i have looked at the notes, and you cannot read or build a story from the notes. you don't know what the person before you did. to mr. white's point, this is where you go into the return on investment. to do the analysis to say, by saving pennies, you know, by having anyone who is answering the phone -- whoever is the next available, are you really saving money downstream where you get the wrong result in the -- and the taxpayer cost back. then you have two people working

the case and the irs, you go to tax court where you have the lawyers and paralegals and the tax court personnel involved. can we really do a good return on investment with that? no, you're not saving money. >> when you add what's been shared here today, we know that our best chance of eliminating the tax gap is the voluntary compliance. a person who is calling and it's trying to figure out whether -- i always use the example of the victim calling in because they have been defrauded or victimized. but for anyone calling in, the fact that they are calling is a good thing. they are trying to resolve the case. we want to give them the assistance they need and the data shows that. it shows that -- and that goes to the issue of taxpayer services. the return on investment versus forces. i think it is a penny saved. it doesn't seem to be a well

thought out plan. in an issue where i want to acknowledge a positive step, if i understand this correctly -- this is something we raised in the first hearing on identity theft last june. that is someone files a return fraudulently. legitimate taxpayer finds out that someone already filed and got a 4000-dollar refund. and it will take a while for us to work through it. even when that happens, and we are working on shortening the timeframe for the victim to be made whole, in the past, the victim couldn't get any information about the fraudulent contact, even though it was cemented in their name, their social security number. as i understand, the general counsel has issued an opinion that says the legitimate taxpayer has a right to the information of the fraudulent material that was cemented.

and then they can authorize that they want that information and they want to be able to share with law enforcement. i will use the example of a couple of citizens who testified last year. i guarantee you that if they had been given the information a year ago, they would've gone to new york, gone to the nypd and said listen, here is where the checkpoint. let's go get the photos from the bank that show who came in. who collected the money. if they had that information. at that point, they were being told no. is it correct that it has been changed that they have a right to the information? >> it is correct. we have the opinion of counsel that we can share that information. it will require what we are doing as we speak. we are rolling out a pilot with local law enforcement. the real issue is that we cannot share the information with local law enforcement. >> at the but the taxpayer can authorize it to be shared?

>> yes, the taxpayer can authorize through a waiver for it to be shared. we are rolling that out. >> that's great to hear. using cases from tampa, florida, the legitimate taxpayer says i want to work with police. that is an important step. i understand we are talking about the average of $3500 or $4000 as a fraudulent return. from a privatization of resources the cost, at the national level, trying to go after them. but the local guys come and that's what they do everyday. that is what my local police are helping citizens with everyday. the types of crimes and the fraudulent crimes. i think that is a very positive step. while i am very displeased with the level of service, i do want to recognize that that is a very important step in the right direction. maybe to other issues here before we wrap up.

i appreciate all the witnesses and their patients. the information that is listed for those who want to commit arson and conduct, i know that the irs, i believe some of the position is to restrict access to that. is that correct that you would like to restrict who can access that information? >> i think we are working with the administration and the social security administration with legislation that would do that. >> that is an ongoing effort. but it is not ready yet to say this is what our approaches within the administration? >> i think your question would be very well answered. i think they are actively engaged in talking to people as we speak. >> it is something that we want to look at. we want to have them do that. the fact that that information is too freely shared, it

sometimes is for legitimate services share, but it's too big of a target for those who are committing identity theft the other final issue is more of a broad issue. that is the balance, and any of you would like to comment, this goes to the issue of the timing of matching documentation with returns i know it is a balance between a quick refund, which those who are entitled to refunds once you have it as quick as they can. i also say that most taxpayers don't have to wait for a refund if they wanted to adjust their filings and get the money in their paycheck. so they could get instantaneous response every paycheck, rather than one lump sum. human nature, you talked about human nature and behavioral

management. i will admit that i am one that would rather get a thousand dollars back then have to write a check for $1000. it is a mental psyche of how you look at it. but it is a choice. it is a choice that every taxpayer has too tried to ensure that they don't have to get a refund. they can actually go money and come out ahead and write a lump sum check. how do we balance that refund against the risk? and that were not able to match. and today, with electronic filings, is it more the norm -- more and more the norm is also individuals having a computer, but also a printer that is a scanner. that is the norm with printers

today. printers can scan, fax, and print. if you want to file electronically and maybe it is not all refunds and there is a pilot to look at, you have to spend your w-2s. rather than wait or matchup from the third party, you stand in your w-2 and you can electronically submitted. what's the percentage, is at 65% or higher that use paid ? >> it's about 60%. >> i guarantee that your ability to scan a document if you are a paper writer, it is a given. is that something we should consider? >> if i could start out. a couple of things. two separate points altogether. for savings, i think it is true for you and i. it is less true as you go down

the income scale where you have that tax credit. it might be one third of one thing the people float in and out of. [talking over each other] >> i think that is a very good point. the second point is i think we should look at everything we possibly can. we need to get better at our screening we need to apply it to a refunds as we have them come in. his first inning, i think at this point, to be honest with you, we still get a lot of paper fraud. and they have dummied up w-2s. i'm not sure that that in and of itself, it might be a piece of a larger strategy. i'm not sure that in and of itself it would be a game changer for it unchecked us. >> i agree. i agree that the id thieves are

making up the w-2s. so getting one from the taxpayer doesn't guarantee that it is legitimate. what you need to do is get the information returned to the party and that is where technology may help. a lot of the deadlines that mr. miller mentioned thoroughly earlier, purdue dates, or set many years ago, and with more modern technology, it might be possible for third parties are least certain kinds of returns to submit them much earlier. earlier in the filing season so they could be matched. there are some other things that need to be in place to make it work as well. the irs is modernizing its information system. august the come you need systems in place that can handle massive amounts of data. the irs gives gets billions of returns each year. you are talking about a lot of information you have to match quickly so that you are not making taxpayers wait for

refunds. >> mr. chairman, i would note those software packages. first of all, they do allow for people to download their w-2s electronically. it does exist, but you're right, it's $65 to purchase that package, and some people don't want to make that expense. we've got -- >> we thought a lot about this. suddenly, the irs giving you money through direct deposit and electronic filing within 10 days look like and it and honestly long time. i think we have to really think hard about messaging and communicating with taxpayers to talk to them about what's the reality of the filing season, and they actually do want to do these refund screens. the first year it may be hard because you are depending on

this money like you have always but if you can adjust your behavior, then you can depend on it in the future at the same time every year the lower income really use this for paying their heating bills, you know, studies show that they use it for the buying school clothes and refrigerators and stuff like that. i think we have to work with a larger community to get people used to it, but i think the irs has to step up to the plate and really change expectations and behavior. >> two final questions related. the first is with the information provided with the push on certified taxpayers moving forward with -- when there is a professional taxpayer, do they have to certify and sign the document

the prepared document -- do they have to certify in some way that they have seen the w-2 or the supporting documentation? is there an affirmation that have to make? >> i don't think the section on chin signature means -- i come back to that. what exactly are they signing when they sign the return? well, the due diligence that they are required to do is at a broader level than that, but i can come back to it more specifically. >> that's good. finally, looking again at the type of fraud, buster last year we talked about the issue of debit cards and what percentage of identity theft fraud is paid out on debit cards versus a deposit into a bank account. the ability for a criminal to go

in and access money in a bank account there is much more of a trail if we are going to pursue the criminal conduct. it is a different trail if it's a debit card. >> i will have to come back to you without as well. we have seen an increase in the use of debit cards. you are quite right. >> i would -- i think that goes to the broader issue and assessment of the information that we have. if we are identifying -- say that there are 400,000 actual cases of identity theft that were identified and stopped. what percentage of those were asking for refunds on debit cards? should we be issuing debit cards? >> i think we need to know that. >> i think the debit card is an account -- [talking over each other]

>> the financial management services of the treasury that is making the payment, it sees an account number, i don't believe it sees whether it's a debit card or bank account. that would be something that is known by the software providers. those are discussions that are ongoing. i agree. >> when you hear the testimony and information from tampa, where they go when and a former drug dealer -- they go in and they have 50 debit cards with $4000 and each of them are fraudulent returns, that seems like some evidence that the criminals -- organized criminals are doing this, and they're using that method more so than any other method. again, if it is a data analysis, that's what i'm asking. >> i will make one other point. there is no doubt that we are seeing the same stories as you are. where there are rows of debit cards. i want to make it clear. if we stopped the refund, the

criminal would not have a debit card. there will be nothing loaded on it. when he or she goes to load, there will be nothing there, because it will be stopped by us or by the debit card company, because it is declaring fraud as well. those -- i'm sure some of them have money -- but it shouldn't be assumed that they all have money. >> a final comment, and then we need to wrap up. we need to wrap the issue of identity theft. i want to reemphasize about the victims -- legitimate taxpayers, who are victimized by fraudulent criminals. there was a fallen hero of the nation who gave his life for our country. when his parents learned that not only do they lose their son, but they were victimized by identity theft related to the

taxpayer refund. that just epitomizes the type of victimization that is occurring. we need to do right by that family and by every individual family out there that lives as legitimate, law abiding citizens. if and when they are victimized, that we prioritize them and, i know we can do a lot better in that regard. i want to think each of you for your testimony and your patience. especially with the floor votes. we are trying to work through this issue and see how we can help. whether it is the issue of adequate funding for the resources and making that return on investment, that we invest and the taxpayers come out ahead. whether it is legislative authority that we don't have that we need to provide. on all aspects, we want to work with each and every one of you and your offices.

do you have a final comment? >> i just want to clarify one thing. mr. miller was correct in terms of the tenures to collect. there is no statute of limitations on fraud -- on willful fraud. but there is a three-year statute of limitations on the irs's ability to examine broader on tax returns. this is something that needs to be clarified here. >> do you want to make a closing remark? >> actually, i want to thank the witnesses for being here and to say that if there is something that we need to do on this site, you know, feel free to let us know. i just think there are areas that need to be dealt with. and i think that working together we can deal with this. i think you very much,

mr. chairman, for this hearing. >> again, we will have the record open for seven days for some of that extra extraneous materials and responses to questions. we appreciate the witnesses testimony. this hearing stands adjourned. the next on c-span two, christine lagarde and transport. then memos of congress talk about a small business tax cut

bill.

>> the heads of this organization began this event. christine lagarde and robert zoellick talk about this transition process. this is one hour and 15 minutes. >> good morning everyone, and welcome to this press conference. on behalf of the imf, for the spring meeting of their 2012, it

is my pleasure to introduce the managing director of the imf, christine lagarde. to her right is the first deputy managing director of the funds. mr. david lipton. david's going to have to leave us a little bit early this morning to participate in an important event that is taking place. don't be surprised if you see him suddenly have to leave us. we are on the record. i would ask you to identify yourself by name, and affiliation. we will try to take as many questions as possible. i think you know that we have some translations in a number of languages for you. in french, spanish, arabic, and you have all of those. with that, let me turn to the managing director for a few opening remarks. >> think you very much, jerry.

very nice to see all of you back, and very nice to welcome you to the 2012 spring meeting. david and i are really pleased to see many familiar and friendly faces. first of all, let me make a tribute to somebody who is going to be the last man in his capacity. that is the president of the world bank with whom the founders had a very good cooperation. i would also like to congratulate all the contenders who will be found to be president of the world bank. a special congratulations to yung kim. together with david, i look forward to working with him as

we work with bob. it has been six months since we all saw each other, and in the six months, we have had a new member. this member is her hundred and 88 member, which is very exciting. as you can imagine. before you go into questions, i would like to make a few points. first of all, i would like to touch on how the imf sees the world economy. for those of you who have not attended the press conferences, it will obviously be very summarized. then i would like to touch on what policies received are and what challenges there are. finally, i will end up with what we at the imf expect from these meetings in terms of outcome.

now, looking at the world economic situation, it is obviously very diverse. i would use a weather analogy, because we are all fond of weather reports. we are seeing light recovery, blowing in a spring wind. but we are also seeing some very dark clouds on the horizon. which is another way to tell you that there is a difficult recovery. in a fragile situation would still high risks. about the dark clouds on the horizon. clearly, first of all, hi, sustainable unemployment. this exists in many corners of the world, not just in our economy. second, slow projected growth.

third, potential deleveraging. fourth, renewed financial major stress in the euro area. fifth, potential oil price hikes. so you have lots of clouds out there. in a situation where, as i said, recovery is blowing in the spring wind. now, what can be done about it? what should be done is actually collective action. in my recent speech at the brookings institution, called for the washington moment, as there had been a london moment in due course. this is needed because all members have to address their respective issues. if you turn to europe and the euro zone, first and foremost, because it is in fact the

epicenter of potential risks, weak knowledge that in the last six months, negative action has been taken. more discipline, stronger sanctions. significant involvement of european institutions, in particular, the european central bank. to top it off, chancellor angela merkel. the significant improvement of the european firewall. many of you would like to argue that we are missing here and there, but if you argue it come altogether, it is a significant package in determining defense and currency. this 800 billion euros overall commitment, some already

committed and 500 fresh, with accelerated capital -- it is a clear improvement. but if we had a message to you, and to europe in particular, it would be to keep up. keep up means implement. implement the reforms that have taken place nationally and at the regional love and content level. keep up the integration of the zone. and build on the efforts. the job is not the only place where action needs to be taken. if we look at the emerging markets. they, too, have to address some of the issues, and they, too, have to be attentive to a volatile market situation. that means clearly, for some of these markets, refocusing on

their domestic growth and not only based on investments, but also drawing on consumptions, which means significant in-depth reforms at home. and it means for other emerging markets, being very attentive to the capital flows. managing them properly with macroeconomic measures. and adjusting currency as appropriate. or accepting the evolution of currency. what does it mean for other corners of the world? the air of spring countries where we will be paying a lot of attention in this meeting and with these countries. it means more resources more attention, better market access being given to them by their

partners in the region and across the globe, and clearly at the imf we continue to play a capitalist as well as a role for those countries. low income countries as well have to make sure that they understand what is going to happen and what has been signaled in terms of lower aid resources. lower limit senses, which is going to put them in a more precarious position, when they have used a lot of the fiscal reserves. as far as we are concerned, the imf needs to participate in that effort as well by building additional firepower to contribute to these global firewalls that we have been advocating very strongly in the last two months. that is the reason why that's part of the outcome of this meeting, we expect our firepower

to be significantly increased. i know this is the topic of the day. and is she going to get their? is the imf going to reach the threshold? i would like to call your attention to another fund that you don't like much about. that is the prgt. poverty reduction and growth trust. witches are pooled resources from which we draw concessional funds from lower income countries. that, too, needs to be thought of. the numbers are not as big. and the needs are not as a luminous, but it is equally important that we have the adequate resources to help the low income countries if they need it. the second outcome that we expect, we expect out of this meeting from our own perspective

, and for the benefit of our members, better surveillance. better imf surveillance, if you will. the unilateral aspect of it, at the interconnectedness that has been identified in the crisis, they need to really hope this on this sack, what happens when a country decides on a policy that they are going to push those initiatives and we are going to ask membership to validate that approach. improved lateral surveillance, but significantly beef up the surveillance. the third outcome we expect, david and i and the other deputy managing directors, in all the meetings we are going to have, and in session on saturday morning, we are going to ask membership to finish the job in

terms of resources and governments. there are changes that need to take place but better reflect terms of economic rules, and we are not there yet. we still have 60% ago on the quota resources and nearly half the job is still undone on the government's reform. we will be pushing that as well. we will not complete the job this time, because her targets and deadlines is at the next annual reading, which will take place in tokyo. i think our final expectation out of this meet3 i think our final expectation out of this meeting is to make sure that all ministers and governors who are coming to the meeting, go home went more energy and a clear understanding

that everyone has a task. everybody has work to do so that in a more corporative fashion, we dress the challenges and push away those dark clouds that i was referring to earlier. you have my introduction, you will probably not pay much attention to it, and you will be essentially focused on your questions. and now it is time for your questions. >> thank you very much. name and affiliation, please could we will work our way across the room. i am going to go with the lady here. >> japan public tv. [inaudible name]. since the global economy is in a stable phase and we have continuously called upon the country to seize the moment, you

see the country is responding to your call. how do you think it needs to get achieved to call this a success, and if i may ask, what are some of the steps and discussion that are leading to that tokyo meeting? >> i very much hope that the entire membership will respond and seize the moment. but i can say that if there is one country that has seized the moment, it is japan. japan was -- the euro members committed early on in december, eight contribution to increase resources of the imf. japan was the first country to come up with a pledge of additional resources for the fund. it is in line with the tradition of japan to actually participate

in unilateral efforts. i can only say that we are gratified to have members of that commitment and engagement for the unilateral approach. i have to say that it is also true in technical assistance, by the way. the fund provides advice, or economic advice, and more pointed advice -- the fund provides a lot of technical assistance in many corners of the world. particularly in low income countries. particularly in arab spring countries at the moment. japan is a great financer of this endeavor. i hope that this seizing the moment that was advocated in a recent speech will also be understood by other members. we have other commitments. the nordic countries came in fourth. singapore came in and came

along. we have others too. i don't want to participate an announcement, it is for them to announce, not me. it is for them to announce. what we expect from our annual meeting in tokyo, first of all, it is in and of itself good to pay tribute to the japanese people who have been so brave and working under construction after the horrible disaster that hit the coast of japan. if only for that, as it's reviewed for japan. to bring out all of you, i hope, and many members, visitors, academics, that thousands of people who populate our meetings. they're in japan, reporting back from japan, spending money in japan. all of that is good. i would hope that we can deliver our efforts to support the arab spring countries. a better and stronger commitment

and actual demonstration that collective action has been taken between now and the annual meeting. we will continue to support actively all these initiatives. >> down in the front here. >> [inaudible name] from china. you have a fine taste for what you are wearing. [laughter] three you are wearing a. [inaudible] what message are you delivering to china and other countries? >> how can we help to seize the washington moment when there are washington moment when there are dark clouds on the global economy. what is your suggestion for countries and members to help increase the resources?

>> my beautiful peacock tether other chinese jacket is at the cleaner at the moment. i could not wear today. but if is a message, including the designer fashion industry across the globe, it demonstrates that this global partnership that we have here with 188 new members, it can display unity and diversity and can respect the individual views and individual policy framework that are adopted by countries. one thing i've learned since i've been here is the principle of interconnectedness that i have not seen as strongly as i

have. it is also the fact that we cannot propose one size fits all solutions. everything that we do, whether it is policy advice in terms of fiscal consolidation, whether it is gross initiatives where there is labor market reform, that has to be country specific. now, you asked me about the. [inaudible] equally, this countries approach applies to them. they have different issues. they have different currency issues, for instance. they have different capital issues to reckon with. they have different gross inclusiveness projects to work with. but certainly, what they have in common is their dedication to

unilateralism. i hope this will be demonstrated by the various members, including each of the ones that you're thinking of. loudly and clearly, i hope for the end of the spring meeting. >> let's go over here from the "washington post." >> hello,. [inaudible] i hope your knee is feeling better. >> well looked after by the george washington university hospital. >> good local care. >> a question on europe. the recommendation of the european firewall mechanism being expanded so they can intervene directly into the financial sector. i am wondering if you are attempting now to take the next step, given the tensions converging around spain. is it time for the spanish government or europe as a whole to consider a more quick, dramatic, direct intervention in the banks there to clear a way

the dead weight of the real estate sector? and tried to get that banking sector back on its feet in a clear way? >> well, thank you for inquiring about my health. but i will make it through the meeting. no question. first of all, i would like to observe that the spanish authorities are taking the matter very seriously. and i have announced actual measures and policies in relation to their banking sector, which is good and very welcome. second, including in its present forms, and under its current status, both efs app and esm can actually help with the euro zone. it has to be channeled due to the way it is instructive. it can be done.

what we are advocating and what we have been advocating for a wild and will continue to advocate is possibly this could be done without the channeling through the. [inaudible] we would see that as a move towards stronger and better integration, stronger and better europe. it could be accompanied and should -- accompanied with more global european supervision with appropriate european backstop. with appropriate european resolutions systems. the same as bailing in. both at home and in the host country where quite a few of those banks have sub securities and functions. >> let me take the lead here at the front. yes. >> thank you very much.

>> i think you're right needs to be switched on. >> hello. my name is [inaudible name] hong kong tv. [inaudible question] my question is on china. first, last week we welcome china's move to allow more flexibility. my question is do you think this is a baby step? is it and not? and what do you hope to see come up next? thank you. >> i did welcome the move by the chinese authorities to widen the defense in the situation relative to the dollar. we think that it is a good move.

it is a very good step in the right direction. .. ..

[inaudible] [inaudible] >> much better. >> congressmen morris rogers you had a connect to the meeting went has never taken back or legislation to rescind the $100 billion donation in this country made to the imf in 2009 and in fact it now has 100 cosponsors in the u.s. house of representatives. at a time when you are calling for people for nations in member states to make donations, are you turned it all about this attitude of holding back donations from the imf's largest shareholder? >> first of all, the imf -- can

you hear me? okay. the imf does not receive donations, okay? we receive loans from members of the imf have become our creditors and would only try on those loans if need be. i wish we could, but no we don't. and at the time back in 2009, all members committed to -- welcome and many members committed to increase the participation in the lending pot of the imf. and in the united states of america, which is my leading member in terms of put it simply sits in governance and all the rest of it did participate like many others.

either the form of what we call the new arrangement to borrow, which have to be rolled into for those vendors that have actually participated in two purported reforms that was noted, agreed and approved including that united states of america back in 2010. that was the 2010 before and that we have to complete before the annual meeting of 2012. and every form intends to increase the overall quota and shift a little bit of quota, about 6% of it to the underrepresented countries essentially. i mean, it's a little bit more complicated than not, but that's the simplest way i can describe. i had to be obviously completed depending on the various parliamentary rules and principles applicable in many countries. and in the united states of america has to be ratified by the u.s. congress as i understand. and i certainly hope that it can happen. in due course.

now i don't think that, you know, the excellence time productive meeting that i've had with cassie mcmorris tortures, who understands the issues very well is sufficient to withdraw a proposed bill. but we need to constantly demonstrated two things. number one, the efficiency of the imf come the fact that we don't give money, we don't get grants. because loans. we are paid back. the lunch generates interest for the creditors. it is money that is well-managed no country has ever lost money on the imf. and the second thing that i hope is clear is that the leading economic power in the world clearly has to have the leadership role and i think it's

in the tradition of the united states very much so. and i think that's one way to demonstrate it. but it's not the only way if i may say. and the united states of america is also providing tremendous support. secretary geithner yesterday referred to this offline, for instance, it's a technical but very efficient way to support another part of the world that is facing difficulties. >> lady all the way in the back with your hand up. >> two ladies in the back. thank you. [inaudible] you are talking about the supporting conference on a loans , so what's your wishing for is just breaking for the election of political opportunists to decrease knowing

that you have to know that egyptian government is just calling people that imf is not to plan its promises to support each act with the loan you promised. >> i will learn and you're a competent female journalist to actually report what i will tell you. egypt is a very important country for many points of view. and it is one of what we regard as the fine countries that we call the air of spring countries and the imf stands ready with pallet each other's countries than any other member for that matter, but each of those fine countries that so requires any hope. and we're going to do so in accordance with our rules because the answer i gave to the gentleman before you applies here, too. we have rules.

and the reason why the imf is a reliable and respect the institution is that we go by the rules. and for us to extend the loan, it requires number one, that we have negotiated with the country and with the authorities in the country and economic programs that it's going to actually hold that country and pull itself out of the difficulties that a fan. often balance of payment difficulty, which might arise antiship. sooner. the second condition is that there is broad political support in the country so that our loan and are programmed to lay negotiated with the authorities actually stand and is endorsed

by the authorities. we're working on it. and now, we've been to egypt once, twice. the team was there for an extended period lately and we are here. there's a $3.2 billion loan that is being discussed at the moment. it won't be sufficient and everybody knows that. so it's going to require other donors, other participants will succumb to the table to help each other. but it's always the case will play the capitalist rule that will always play in the catalyst will have to do with reinitiate the process. renegotiated becomes the country's program. it is endorsed by the local authorities and attest to the fact of the country to recover from a difficult situation. i want to help each other.

>> coming back. johnson then back on the yellow shirt. >> good morning, dolphin headship from television jamaica and jamaica. in regard to pledges that have been made, is it enough to deal with other demands for particular and jamaica, having a program from watson purposes was rescinded, how difficult would it be to negotiate again for a new deal that the government is seeking for the imf. it will require a more stringent going forward? >> it would have to be enough. an increase within then general recourse is around the quality of reduction and growth

stressed. in both cases it has to be enough. in the case of jamaica, it was a matter that was restricted to the arizona in the imf is raising one's for the arizona. we support all members and we know that they are crisis bystanders that might need help. we know that for a fact. there is a program in place. that is what you mean by it was rescinded. i have had a meeting with the jamaican authorities, good and productive meetings. the dialogue has been reinitiated and i will leave it to the team into the jamaica authorities to define the economic program that began help put in place. >> coming back around for a few more questions.

this lady in the tank right here. yes, you. >> next time camille have to say this man with the blue. >> thank you. i am from egypt. i want to ask you another question about egypt. it has taken a status to help your comment that he did take the state three-tiered spring country and they have problems in this country. especially in egypt and imf or the government ended contains

the government in egypt? thank you. >> i might disappoint you, but i'm not going to details of the program that is undercurrent discussions with the authorities. with imf programs it takes two to tango. we already identified the means. we are reaching out to the appropriate authorities in the country and we want political endorsement. before here, solid part is on the ground not too sure about this program, not too sure about borrowing. it's a bit of an issue, but we never lead the negotiation table, never. we will keep at it and we are focused on helping another arab

country says we are to help other members. it's not a question of focusing on one part of the world and not the rest of the world. we will address it with equal force and energy. >> i'm going to make this the last question, gentlemen and the red tie. >> well done. >> seven months ago, during and the meetings last september i had the honor to ask about the performance of greece and many men say beyond most implement increments. i am wondering if now after the seven months he filled greece is implementing. and i ask you that because a few days at the brookings institute your admiration for the former ecb mr. papademos who is the prime minister of the last six months. sue is the country implementing? is the image of the country in

the right track? thank you. >> you know, we spent in the last x-men an inordinate amount of time on greek issues, on the greek new program and discussions with the greek authorities and a lot has happened in greece since we last met any last asked me the question. many things, change of government and the change of approach by many of the partners on the ground and clearly a new prime minister who is taking his staff very seriously. and a lot is happening in terms of implementation because all the preconditions that we had identified together with the other members were implemented. the laws were passed. but i was sick to my previous response to you. implements, implements,

implement. pay tribute to the great people who share and bear the burden and make a sacrifice that we know us. and i would call and those who are not sharing that were, but i'm not hearing it to actually do so. there is one area or better work needs to be done. it's in the revenue correction and the tax collection affairs, were more work needs to be done. [inaudible] >> a lot will happen by then. thank you very, very much. i will see some of you -- [inaudible] >> thank you will have a number of opportunities in the coming days for further interactions. so thanks everyone and welcome again. [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] ♪

[inaudible conversations] >> well, good morning. good morning, everyone. thank you for joining us for our world right press conference for the 2012 passing a spirit joining me this morning as the president of the world bank group, rather transcendent who have an opening statement and then take some of your questions. if i could please ask everyone ask a question to identify themselves in your organization once again ensured he then asked, but for cadaveric device is switched to taipei. so president zoellick. >> thank you coming-of-age. >> thinks all of you for coming. this merit is my last remaining as president of the world they

grew. the guy to begin with few words of thanks to the ministers who have supported us and worked with guys to our executive board who've labored hard to work my team to modernize this important multilateral institution. to the team that's been proud to lead and to the world bring groove staff in washington on the world if they're motivated, committed, want to make a difference. they're a tremendous asset and we been able to draw the best now for 170 countries. this has been a pretty busy five years, so i suppose my tenure at the world bank group has had three phases. a turnaround from a time of some travel, quickly moving into faster and more flexible large-scale support for client countries across the suit, feel an financial crisis. about a quarter trillion dollars. in the start of the

modernization of the world a group for future. that ongoing modernization effort will be a large part of my presentation with the development committee later this week and my discussions with their governors. with the first large recapitalization in over 20 years and over to record-breaking totaling and $90, i'm please to turn over what resource bank with a aaa rating. yet we always seem to think about it how to mobilize resources for the growing interest in ifc in the development, for the poorest and for the changing needs of our middle in compliance, which are still home to those with recorders of those living under $2 a day. i modernization agenda is driven by focus on clients, listening to priorities as opposed to an old top-down approach and modernization involves a rigorous focus on results,

openness and accountability. so our initiatives for open information, open data, open access to knowledge may turn out to be the most important legacy of the past five years. these steps are key to democratizing development. and the steps laid the foundation for expanding social accountability, fighting corruption and building better governance. master propose the world bank and others should recognize investment and civil society and good governance are as vital as investments in roads, factories and clinics. so i'll be pleased to announce later today the formation of a new global partnership for social accountability that will provide support to civil society organizations in their work and social accountability. much of what you'll hear over the next few days will deal with the ongoing shop waves of the financial crisis. issues of macro economic

stability, fiscal and monetary policies. that is certainly important. but it's not enough. countries both developing and developed need to focus on the structural reforms that will be the drivers of future growth. otherwise the world will keep stumbling along. the world bank group will be emphasizing the structural growth agenda. structural reforms, changing growth models fit with their recent beach or report such as the china 2030 report and the colin firth report that looked at europe. you'll also encounter structure of growth in priorities per infrastructure, especially private public partnerships, social safety net to protect human capital in a volatile and uncertain world. gender or so countries can gain growth opportunities for empowered all of their people and financial inclusion, including at these meetings the first of its kind report on measurement to access financial

services that will show that three quarters of the 2.5 young people living on less than $2 a day are shut out of access to man. developing countries have provided two thirds of global growth of the past five years. these are no longer charity cases. they are vital to the world economy. but of course they face huge challenges, too. so what is the world bank group thing to keep focusing the world economic leaders on growth, not just ability, i'm human safety nets, not just financial safety nets and i'm monetizing multilateralism so that'll 188 of our shareholders can work together for their common interests. finally, had an opportunity to talk to jim kim after his selection as my successor. we'll have a chance to meet shortly after the spring meetings on the transition

process. i think he'll do a great job and i wish him and all others associated with the world encrypt every success. pleased to take your questions. >> yes, see deep. >> see deep dirty with "the wall street journal." something you could address the european crisis from two angles. one copy printed out european countries about out of time time with liquidity measures. curious what you think about how they use that time and what they need to do next and more broadly with emerging market countries, how are they faring with the shockwaves from europe and is there anything in particular they should do now given potential for another round with spain? >> well, on the first one, i think the euro zone in particular and the european union will be walking a very fine line. first is a noted with the anxieties late last year, i think the ecb's extraordinary reaction where appropriate, but

i think some misled themselves because they only got time for that time has to be used. i think as the imf has pointed out on the one hand, the future of the arizona depends on actions of individual countries, particularly steps they take for fiscal consolidation and as i've emphasized the steps they need to take for structural reforms in future growth. it's very difficult to take those steps in another growth environment. so it has to be balanced with steps that might be able to support demand and longer-term changes of growth. so this week a trade can make some suggestions on the supply-side ways in which the single market could also further deepen integration to support growth. now again as the fund has pointed out, the banking system also remains under significant stress. and that the one hand, you need

to thanks to build their cap will. on the other hand, what we have seen is that the banks build their equity ratios by shrinking as they have by and large been doing, that will put a credit stress on contraction undermines the basis. so i think the debate, understandably, reflects the fact of trying to balance issues. but i think we are now in the face or after the ecb track to financial resources to a number of the banks to be able to buy government debt, but as you and various newspapers, i think around as i saw today one-story, there didn't appoint a minute. so for their actions are going to be called for an appointment keep emphasizing, wherever it is around the world is not just to focus on the austerity of macro economic stability measures, but do it in the context of growth

in part because we have to face political economy issues. so as i've emphasized, the real countries that are critical because of size at this point are italy and spain. governments take strong actions. it would certainly help if they got some support from some of the types of things i and others have talked about so as to help with growth in politics of reform. as for your second question, the deleveraging process in european financial institutions has certainly begun. i tend to agree with the imf report and others that said there's to go. we have seen the differential effects around the world. i just came from east and south asia. you definitely had a pullback in some of the project lead the sale of some of the assets in east asia. a number of patient things have stepped in so it hasn't really had a significant contractionary

effect. started late last year i can work with my friends at the ebrd and the ec to try to react the vienna agenda because i have been most concerned about the southeastern european balkan countries that are working with the banks. we're seeing the contraction. so far it has been orderly, but it is a good example of getting ahead of the curve. i was talking about this late last year and people didn't get see the numbers and as he saw quarter got me started seeing this contraction. i was actually pleased through the ibrd were able to expand our commitment by about $4 billion. i see another 2 billion solar totals about $27 billion. i think that is the example of types of things you need to do frankly in the months ahead to get ahead of some problems.

north africa has clearly been affected by this and this is again the political implications because for a number of north african countries, europe is a very important export market so it is important. i was at the tunisian finance minister yesterday. i'll meet them again as they undertake difficult reforms they need to get support from us and others along the way. in an area that pascal lamy at the tip eto after watching particularly close, a lot of european banks are big traders, particularly french banks. so you see some shrinkage of that. in the areas, but i'm most concerned about -- by the way this is where the new capital rules from basel three will have to be watched closely. the committee took some steps to alleviate some of the changes they put into overly stringent in my view, but now are trying to gather some data with the wto and others to make a stronger

case for easing some of the structures they have because what i'm worried about is a place like sub-saharan africa, where you suspect the exporters of major commodities to the u.s. in the europe of the trade finance. if you're a small country, small bank on a small client this inter-african trade comeau should be the future of growth, those are likely to get squeezed. so again what i try to do in these meetings with my chi 20 colleagues because we see of these marketplaces to anticipate those issues and those are some of the ones that i'm focusing on. in the last of course, which is implicit in your question is that we are not out of this mess yet. so if you have a more seismic event because of failures of management, that is going to have everybody hard. still a fragile as economy.