Outsourcing is the act of assigning certain functions of a company to another external company or agency in bid to enhance quality of services, minimize costs and bring in flexibilities to the operations. However, outsourcing has some limitations. The IRS decided to outsource their collections during the administration of President George Bush in order to effectively collect the revenues. This paper evaluates the consideration to outsource tax collections and the challenges facing the management of the IRS.
Due to various pitfalls in outsourcing, I would not recommend the implementation of the plan. Outsourcing would mean allowing the private agencies to collect revenues from the taxpayers rather than the IRS. This creates an additional operational cost on the part of the government in terms of paying the outsourced agencies. These extra costs can be avoided or made cheaper. It would be relatively cheaper to employ a sufficient number of trained agents to the IRS to carry out collection of tax debts instead of outsourcing (Frei & Edmondson, 2002).
Outsourcing Complicates the Management of Revenue Collection
IRS may not be competent enough to monitor and supervise the activities of the private agencies. This may in turn lead to the violation of the taxpayers’ rights (Guenther, 2006). Loss of control over the situation may cause greater economic losses especially when dealing with unscrupulous private agencies. There may be over taxation on the ground especially if the remuneration to the agencies is pegged on the amount they have collected- commission based. Some of the agencies may also not consider the economic hardships of the taxpayers in their collections.
The recommendation to outsource the revenue is contrary to the government authority to tax collections as provided under the constitution. Collection of taxes should be a government function which should not be left in the hands of any private agencies under any circumstances (Guenther, 2006). If the collection was to be entrusted to the private agencies, there may be a loss of touch between the government and the citizens. Continuous use of this method may even pose a challenge to reverse the trend in the future hence complete loss of government control of revenue collection. Since the main aim of the use of such private agencies in outsourcing is to increase revenue collection, it would be better to use them as supplementary tools in the collection process. This would limit their probability of dominance and unwanted increase of costs.
Challenges Facing the Management of the IRS
Compliance to tax laws is one of the challenges to the IRS management. According to Frei & Edmondson (2002), voluntary compliance accounted for 85 percent of the total revenues. This implies that there are tax defaulters. The IRS management is faced with the challenge of tracking the non-compliers to ensure proper payments of taxes. Besides, the management of IRS also has the challenge of providing security to its employees in the process of revenue collection. This is based on the observations of Frei & Edmondson (2002) that no one likes the tax man and they are often resented.
Lack of adequate competent employees is yet another challenge. This necessitates recruitment of employees and replacement of the existing employees. The management is faced with a higher demand for the competent employees who can competently handle its revenue collection functions. In doing this, some of the existing employees with proper expertise in the sector are forced to earlier retirements especially those who never wanted change (Frei & Edmondson, 2002). Further, IRS is yet to modernize the facilities such as the telephone services and electronic filing so as to better customer services (Frei & Edmondson, 2002).
In conclusion, there is need to ensure efficient tax collection regardless of the method to be used. The management of IRS thus should be well equipped by the government in terms of recruitment and training of employees in order to ensure the taxpayers comply with the tax laws.