Friday, February 13, 2009

An open letter to President Barack Obama on the Tax Gap in the USA

This is letter addressed to the new President bringing his attention to America's large Tax Gap, and what to do about it.

Dear Mr President,

Firstly, my sincere congratulations on your election to the position of the most powerful leader in the First World.
I believe you will do justice to your position, and be the catalyst for many changes that this country must face.

I write to you about one of those challenges.

It relates to a suggested solution to the major deficit the Federal government has as a result of the current $ 8,7 trillion debt, and added to this the fact that the Federal Government has spent the approximate $ 50 trillion owing to the baby boomer generation now retiring (being social security and health benefits). The total $ 58 trillion estimated debt makes up close to 70% of the nations GDP.

The USA has only been in a worse position once, and that is at the close of the 2nd World War when the total deficit was about 120% of GDP. The world was very different then, and the USA embarked on major expansions in their economy, both internally and internationally. The USA was a surplus exporter. The position, as you know is different today. America is a net importer as the consumers of the nation continue to incur more debt to fund their consumption driven lifestyles. To change this culture will take something close to a miracle, and to simply rely on this fact, in my personal view would be a mistake.

One solution area lies with the current tax system that is operating and functioning in the Federal Government.

The current annual TAX GAP in the USA is at approximately $ 350 bn per year! That is an astounding figure when you consider this is tax actually due to the Federal Government, that is collectible, but that is not actually collected because the tax system is not developed enough! For a country that can monitor the activities of subversives the other side of the world, this seems amazing. The Federal Government is walking away from $ 350 bn in taxes that is actually payable. That translates to approximately $ 3,5 trillion in the next ten years.

To collect this $ 3,5 trillion in the next 10 years will make a big difference to the outcome of your administration.

It will require some careful strategies, and that is where I come in. Before I go further, the following part is not to promote the book that I write of, but to offer you and your administration initially my knowledge and expertise, at no cost, to assist with a solution - as a contribution to this great nation. My abilities and contribution can then be judged and the appropriate equitable arrangement can be made into the future.

I have recently published a short book on Tax Risk Management for taxpayers. It is published by Lexis Nexis. Details of my background as International Tax Attorney and the book are available on my website

I am more that happy to send you a pdf copy at no cost. I can also arrange to send you printed copies at no charge. The book deals with the process that corporations should follow to co-operate with the IRS, so as to ensure they pay all taxes due, and co-operate withthe IRS, to ensure a smoother tax process into the future where they are in for no surprises. The IRS is currently running a test program with about 70 corporations applying the principles set out in my book.

These principles, if properly applied throughout the USA to large corporations, and importantly, to small ones as well, will change the approach of Americans to tax, and it will contribute greatly to collecting that $ 350bn tax gap.
The strategy must start with the advisors of these businesses, and the advisors of individual taxpayers, to change teir mindset, to voluntarily pay what is actually due. To make sure they calculate what is properly due, and pay it - in the face of now dealing with a more reasonable IRS who can focus their money and efforts chasing down the big tax evaders.

This email can only give you some information. As I have offered, I am happy to share my full strategy with you and your administration, if you decide so.

All the best Mr President Elect.

Warm regards,

Daniel Erasmus

1 comment:

Anonymous said...

I hope the President heeds your advice. In this day of a shrinking economy and massive government spending, it seems ridiculous to leave $350b a year uncollected.