Evening Star Newspaper, March 1, 1932, Page 10

CAPONETAY ASE OUTLNED N FORIN Burnet, in Radio Interview, Describes Problems of Levy Collection. ‘The recent drive by the Bureau of Internal Revenue against Al Capone and other gangsters has netted the Government hundreds of thousands of dollars from other delinquent taxpayers -’hlo heeded the handwriting on the % %is a0 otlier pertinent matters re- lating to tax collection were discussed last night by David Burnet, Commis- sioner of Internal Revenue, in the first National Radio Forum interview. The ( Forum discussion was airanged by The | Btariand broadcast over the coast-to- | coast hookup of the National Broad- | casting Co. It was heard locally through | station WRC. L4 Questioned by Editor. | Mr. Burnet, answering questions by | Oliver Owen Kuhn, managing editor of The Star, said publicity given the Ca- pone case had “pricked the conscience” of many taxpayers who had failed to file returns to make honest returns. | Many of these taxpayers, he said, wes engaged in gambling and other busi- nesses of an illegal nature, and their decision to pay up has increased ap- | preciably the Governmen:’s revenue. Commenting on the fact the Govern- men§ shares indirectly m illegal profits through taxes collected, Mr. Burnet said this must necessartly be so unle: the eriminal element is to be especially favored as a tax-exempt class. Marked success has been had, he said, in en- forcing levies against racketeers. Taxpayers Generally Honest. Declaring that 9999-100 per cent of the taxpayers are “scrupulously | honest in making their returns,” Mr. Burnej said he conceived the Bureau of Internal Revenue to be as much a | representative of the individual tax- payer as of the Government. The bu- sald, stands ready to help the taxpayer at all times. Although the bureau was represented by the commissioner as being willing and anxious to pay rebates whenever they are due, the percentage of refunds to taxes paid is very small, approxi- mating 3 per cent. Over a period of the past 15, years, he said, nearly $47,000,- 000,000 in revenue has been collected, while-less than $1,350,000,000 has been refunded. Large refunds, which are given wide publicity, he declared, are more than offset by additional levies | and collections. h'rhe full text of the nterview fol ws: Mr. Kuhn—Mr. Commissioner, the average man looks upon the Bureau of Internal Revenue as an agency of the Government, the sole purpose of which is to take money from him es taxes. Is that, in fact, the bureau’s only inter- est? Mr. Burnet—Mr. Kuhn, will yéu not let me digress a moment to express the sincere and grateful appreciation that we of the Bureau of Internal Revenue feel toward the press and the radio for the opportunities and facli- ties that are afforded us for giving to our fellow citizens information con- cerning the work and aims of the bu- reau. It is, indeed, a noteworthy service. Now to answer your question. As Commissioner of Internal Revenue, it has always been my idea that the bu- reau is quite as much a representative | of the individual taxpayer as it is of the whole people as a Government. The jobr of the Bureau of Internal Revenue is to ascertain the tax that is due from the taxpayers and to the | Government. If the amount due is less than has been paid we should be, and we are, as diligent to see that the excess is returned to the payer as we are to collect the additional tax. We | have been striving for years to have that understood by the taxpayers of the country. | |a simple | immediate payment of taxes. broadcast by the National Broadeasting THE EVENING DAVID BURNET, Commissioner of internal revenue, who last night disclosed that the Govern- ment’s recent income tax crive on racketeers has brought many responses from other delinquents. Mr. Burnet was interviewed by Oliver Owen Kuhn, managing editor of The Star, in the National Radlo Forum, arranged by The Star and Co. least complicated type of cases. More often than you would suspect, our peo- ple will ind that a taxpayer has made mathematical error. His addition or subtraction is erroneous. His computation of the tax may be inaccurate. He will fail to take ap- propriate deduction on account of his marital status, or on account of de- pendents. We do not require that claims be filed for the return of these overpayments, and in many thousands of cases, but for our. routine investiga- tion of the return, the taxpayer would never recover his money. For the cal- endar year 1931 refunds of this nature were made to 58,296 taxpayers. Q—Once each year there is made public and circulated through the press {of the country the names of taxpayers | who have received refunds of taxes from the Government and the amounts of money paid back to them. It is also known that the Government collects large amounts of additional tax. Could you give us some explanation of why the Federal tax collecting system so operates as to result in the refunding of overpayments and the collecting of additional taxes? A—I am glad you have asked this question. I realize from inquiries that have come to me personally that many dicate that tax refunds attract more attention than the collection of tax deficiencies. The fact that the Gov- ernment finds it necessary to_collect additional taxes seems to be taken for granted and accepted as a matter of course, while the amounts which it re- funds give rise to questions as to the cause of these refunds. The income tax statutes demand the The Fed- eral tax procedure is, therefore. based on the plan that payment must be made in whole or in part when the | return is filed. Then the question of | controversial items is taken up for set- tlement. If upon examination tte tax return is found to be correct, there will, of course, be no overpayment and no deficiency. If, however, the tax shown on the return and paid is found to be overstated, this will call for a refund or credit of the excess; while if it is found that the taxes are understated, the Government must assess and col- lect the deficiency. has overpaid Fis tax does not owe the Government money for another year, the overpayment is refunded by check. If the taxpayer does owe the Govern- Q—Your answer suggests to me that | our listeners would like to have you tell them something concerning the | circumstances that lead to the refunds we hear so much about. { A—In spproaching this subject it seems to me it would be well, first, to consider the vast majority and the! ment money, the accounts are settled through the simple process of offsetting the overpayment against the deficiency. After this is done, there may be, of course, a balance due to either the Government or the taxpayer. The bureau records show that by far the larger part of the overpayments are due to causes beyond the control of either the Government or the tax- persons are interested in this matter. | The inquiries which I have received in- | If the citizen who | payer at the time the taxes in ques- | tion were paid. Q—What has been your experience concerning the “shifting” of taxes from one year to another? A—-It sometimes happens that after a tax return is filed the taxpayer will present a claim for refund, as provided by law, contending that certain income or deductions belong in a different year from that reported on the return, or the bureau may make this finding in the course of its examination. Where it is found necessary, under the law, to shift certain income or deductions between years, this shifting will cause an underpayment of tax in one year and an overpayment in another. I have had a check made of a large group of cases involving shifts of in- come or deductions to see how this works ‘out from the practical angle This check shows that overpayments amounted to $23.427,246.40, while the | deficiencies amounted to $24,577,301.11, | the net result being in favor of the | Government to the extent of $1,150,- 054.71. Q—Mr. Burnet, it is sald that many | of the large refunds are the result of | court decisions or changes in legisla- tion. Perhaps you would care to cite an example of a decision by a court that has occasioned large refunds. A—Yes, Mr. Kuhn, I recall such a | decision of the Supreme Court of the | United States. Life insurance com- | panies claimed that a provision of law resulted in a tax upon the income from tax-exempt securities, and that it was unconstitutional. = The court sustained thte taxpayer's contention, and we refunded to insurance com- panies approximately $35,000,000. |~ Congress has at various times pased | retroactive legislation which changed or modified the provisions of prior leg- islation. These changes often made necessary the refunding of taxes. An ‘example is found in the various acts where Congress - validated the taxpay- ers' claims for refund or credit which | had been filed too late under the previ- | ous acts, | _ Otker items producing refunds are final adjustments of allowances for | depreciation and obsolescence, for de- | pletion of natural resources, inventory | errors, prior year losses, valuations of properties, credit for foreign taxes, non-taxable income, amortization of war facilitles, changes in invested cap- ital, affiliation changes and so forth. Q—Mr. Commissioner, could you give us an idea of the amount of re- funds made to taxpayers compared with the amount collected? | A—The percentage of refunds to | taxes paid 1s very, very small. Over & | period of 15 years, it has been less than 3 per cent of the total tax paid. In these years nearly $47,000,000,000 in | revenue have been collected, while less than $1,350,000,000 have been refunded. To Fave a clear understanding of the | whole situation, the radio audience should realize that while we sometimes refund large sums, we are at the same time collecting very large sums in addi- | tional \taxes. The figures covering the How A Famous Walking Stick cbzmged hands *My fine crabtree walking stick, with gold head curiously wrought in the form of the cap of liberty, I give to my friend, and the friend of mankind, GENERAL WASHINGTON. If it were a sceptre, he has merited it and would become it." —From the will of BENJAMIN FRANKLIN | Revenue Taxation. NLY by a will could that gracious bequest have been made. If you haven’t made a will the State has—and the State’s will, not your wishes, will determine what must be done with your property. ’ But if you have made your will and appointed us as Executor, the full force of the law stands behind your wishes. The choice is entirely in your own hands. We cordially invite you to con- sult us about the practical phases of your will and the way you would like to have your wishes carried out, The Washington Loan and Trust Company HARRY G. MEEM, President ARTHUR PETER Vice President and Gemeral Coumsel WILLIAM H. BADEN Vice President and Trust Officer Assistant Trust Officers LEONARD MARBURY BERNARD L. AMISS F Street at Ninth HARRY W. GAUSS CHAS. M. IRELAN, JR. Seventeenth Street at G STAR. 15 years are as follows: Total internal revenue receipts from all sources, $46,- 915,744,440.28; total additional assess- ments and collections resulting from office audits and fleld investigations. $5.809,619,959.00; amount refunded, $1,- 345,846,165.90. This sum does not in- clude the amount allowed as credits and abatements. Q—Perhaps you would like to tell us just how these refund cases are handled. A—Small sums are refunded only after consideration by four skilled em- ployes; refunds of from $10,000 to $20.- 000 are considered by at least five em- ployes; from $20,000 to $75.000 by not less than six employes; while cases in- volved in allowances in excess of $75,- 000 will have the attention of not less than eight employes, all skilled in tax law_and accounting. The persons who pass upon these re- funds do not all work in the same of- fice. They are not all under one di- rect supervision. They do not have immediate contact one with the other. tached section of our income tax unit: slifi others in the Income tax unit, under separate supervision, review the work of the auditors attached to the section. If the amount tobe pald exceeds $20,- 000, the whole record must be reviewed in the office of the general counsel of | the bureau. Q—Are these refunds scrutinized by any authority outside tbe Bureau of Internal Revenue? A.—At this point it seems particu- larly appropriate to call attention to the further procedure in force with re- spect to cases involving the larger overpayments. It s provided by law that no refund or credit of any income, war profits, excess profits, estate or gift tax, in excess of $75,000 shall be made until after it has been submitted to the Joint Committee on Internal with an accom panying decision of the Commissioner of Internal Revenue. This procedure is, of course, in addition to the care- ful examination to which the case is subjected in the bureau. The Joint Congressional Committee consists of five Senators and five members of the | House of Representatives. It is em- powered not only to investigate re- iunds, but to investigate the admin- istration of internal revenue taxes. ‘The Commissioner of Internal Rev- enue is required by law to make a re- port to the Congress at the beginning of each regular session showing the re- funds paid in excess of $500. Although the decisions in individual cases are made public from time to time, the grouping of refunds in the report sub- mitted at the beginning of each reg- ular session of Congress usually attracts more attention and gives rise to many of the refunds. In considering this report it should be kept in mind that it in- cludes refunds based on final judg- ments of the courts and of the Board of Tax Appeals as well as those grow- ing out of the application of these de- cisions_to other cases. Q—Mr. Commissioner, the Bureau of Internal Revenue has done a big job during tbe last year in Chicago. that some of the leading characters are temporarily removed from the lime- light, can you give us an insight of the inner workings of the bureau in such cases? For example. would you or your bureau direct that agents be sent to Chicago to get Al Capone? A —Certainly not, if you mean in the sense of getting your man, or making a case, regardless of circumstances. The agents were directed in this case, as in all other caccs, careful investigation to determine whether the taxpayer had taxable in- come and whether the proper taxes had been paid. If it had been determined that taxes had not been evaded. the investigation would have been promptly closed. Q—Mr. Burnet, the press has re- ferred to an army* of Government agents being engaged in Chicago. Did you send an army to secure evidence against a single taxpayer? A. cannot speak for other branch- es of the Government. In so far as the Bureau of Internal Revenue is con- cerned, it was believed that the case was flagrant violation of law and that unusual obstacles would have to be overcome because of the business meth- ods of Capone. So the investigation was _referred to experieneed —agents familiar with the tactics of this class. The major part of the investigation was handled by seven agents and co; ered a period of about a year and a half. The seven agents during that period not only investigated the case against Al Capone, but also made in- vestigations_relating to other gangsters which resulted in several convictions and pleas of guilty. Q—Did the Government receive any indirect benefit or additional revenue in the form of taxes as a result of these investigations, otber than the taxes collected from the persons actually investigated? A—In one collection district, where this phase of the situation was looked WASHINGTON, inquirles _on | to conduct a | .- . € into, it was apparent that this activity had pricked the conscience of many taxpayers who had failed to file re- turns or to make honest returns. Since the first publicity relating to these cases, the Government income from taxes has been increased in this dis- trict by hundreds of thousands of dol- lars which came from delinquent and amended returns from taxpayers, many of whom were engaged in gambling and various other businesses of an il- legal nature. Q—What do you mean by delinquent and amended returns? A —When taxpayers, who never filed returns, are moved to file such returns covering several previous years and pay the tax due with interest and penal- ties, such returns are called delinquent returns. When taxpayers are moved to file corrected returns, including in- come which had not been reported on their original returns, they are called |amended returns, Q~—There has been some comment in the press of the Government shar- |ing. in the way of taxes collected. in the profits derived from illegal business. A—If we falled to collect taxes in cases of this kind, we would be estab- lishing a class of tax-exempt citizens. In theory, of course, a business should not_be conducted in violation of State or Federal laws. If so conducted, and at a profit, the revenue laws tax this profit, notwithstanding its source. Q—We read in the press about large assessments made against gang- sters or persons engaged in bootlegging, gambling and so on. Does the Govern- ment ever collect these large assess- ments? A—Mr. Kuhn, assessments of this kind are frequently rushed through by the Government before the taxpayer has chance to hide or dissipate his asset: In such cases the bureau romptly places liens upon bank ac- | counts, safe deposit boxes, real estate, and, in fact, all of the known assets of the taxpayer. If the taxpayer fails to pay the taxes, interest and penalties astessed, the Government proceeds to | foreclose on the liens. It seizes the bank accounts, it sells the real estate and other assets at auction, applying the proceeds on the taxes due. During the last fiscal year the Government foreclosed a tax llen on a beautiful home on Miami Beach owned by a Chicago bootlegger. When the prop- erty was auctioned by the collector of internal revenue we got $44,000 to ap- ply on his tax. In another case the Government foreclosed a lien on a brewery property for which the tax- payer paid $475,000 in cash and then spent a large amount for improvements. This property, consisting of eight acres with valuable buildings on a railroad side track and frontage on one of the principal streets in Chicago, is now owned by the Government and will be sold when real estate conditions war- rant. Q—Is the Government warranted in attempting to clean up crime sit- uations by prosecutions for tax evasion? In other words, why should the funds of the United States Government be used, when the local prosecuting at- torneys, police officials and others ap- parently are unwilling or unable to stop the reign of crime in a particular locality? A—In investigating and prosecuting United States Government has only done its duty. The Commissioner, of Internal Revenue musb comply with the statutes, and cause the prosecution of all persons wilfully evading taxe: when evidence of the crime is obtained. That is not a policy put into execution by me as commissioner, it is the law passed by Comgress. If in prosecuting tax evaders we are able to assist any city or State in reducing the number of crimes, we are glad to do so, but we do not attempt to take any responsi- bility for stopping the activities of per- sons engaged in violating State laws You Can’t Escape the Fact That Some Paint Must Be the Best, So ALWAYS INSIST ON * PAINTS | BUTLER-FLYNN P-A-I-N-T 607-609 C St. *STUNNING!” until she SWEBT. charming, adorably femi- nine. But when he saw her skin... the glamour faded. Don’t let 2 poor complexion spoil your romance. Don't permit coarse pores, blackheads, stubborn blem- ishes to rob you of your natural love- liness. Rid yourself of these distress- ing faults. But not with ordinary com- plexion creams. 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Let Noxzema restore Nature's priceless gift, a beautiful skin. that is your most potent allure. At All Drug and Dept. Stores “feel it heal” Noxzema TUESDAY, MARCH 1, the public enemies for tax evasion the | 1932. and we do not attempt to relieve State or municipal officers of their responsi- bility for the enforcement of State laws. Q—Do the principal members of the Capone organization wear a pe- cullar diamond belt buckle to indicate their connection with that organiza- tion? A—We know that Al Capone bought 30 diamond belt buckles for $275 each on one occasion and “that they were presented to various lieutenants in his organization, 810 t0 _some prominent | perscns in Chicago. The associates of Capone were frequently seen wearing these diamond belt buckles. His body- guard, Philip D'Andrea, who was ar- Tested in the court room for carrying a Joaded revolver, wore one of these buckles. This purchase of these belt buckles was established by witnesses during the income tax case. Q—Mr. Burnet, does vou work in connection With these Chicago cases cause you to lose faith in the honesty of the American people? A—My answer to that with all the sincerity of which I am capable is that I have no such feeling with re- spect to the great body of American taxpayers. case I do not want my radio listeners to feel that the bureau has any other thought than that 99 and 99-100ths per cent of the taxpayers are scrupu- lously honest. It is my constant aim, as well as that of the bureau's repre- sentatives wherever stationed, to put forth every effort to develop and main- tain the good will and confidence which now exist between the Bureau of In- ternal Revenue and the taxpaying public. Q—Mr. Commissioner, there is an- other matter I want to ask you about. I understand that you advocate the | settlement of tax cases in the fleld, and to that end a plan of decen- tralizing the force of the bureau has been under wa: Just how does the taxpayer benefit by this plan? A—At the outset, it seems to me to be obvious that since the tax applies alike to people in California, in Florida, and, of course, in all the territory of the United States, much time and ex- pense will be saved to taxpayers if they have the opportunity to settle their cases with representatives of the department located in points nearer to their homes. So. during the past seven or eight years, the plan of taking the bureau to the taxpayer has gone along steadily. This move has contributed more than any other one factor to our ability to become more current with our work. It enabled the department, when the 1928 act was under consid- eration, to recommend that the period of limitation for the assessment of additional taxes and for the determina- tion of refunds be decreased from three In mentioning the Capone | to two wears. The progress prior to that period had permitted us to rec- ommend the change first from a five to four year period, then from the four to & three year period. Our fleld men |have so qualified themselves as to | Justify the authority that we have vested in them to close any type of case that comes before them. At the same time, we have, of course, pre- served to the taxpayer his right of ap- peal to the Washington authorities. We. in the bureau, have the most complete confidence in the forces of collectors of internal revenue and of revenue agents in charge. That they are today closing without protest by taxpayers more than 88 per cent of all returns handled by them is proof that they have also won the confidence |of the aying public, who find these representatives of the Bureau of In- ternal Revenue as zealous to protect the taxpayers’ Interests as to protect the interests of the Government. As an {llustration of the success of our policy. I may state that the total num- | ber of income tax returns filed for the years 1917 to 1928, inclusive, was 70.- 236,762, of which there remain in the bureau for original audit but 3,956. Q—Mr. Commissioner, you may wish to offer some sound advice to those of us who should file returns of income for 1931 between now and the 15th of March, A—My advice to every one from | whom an income tax return is due is to file that return with the collector of internal revenue at the earliest pos sible date, in any event not later than March 15. The return should be pre- | pared in accordance with existing law and regulations. Regardless of the discussions in Congress on the subject of a new revenue law, income tax re- turns must be filed on or before the 15th of March. ommend to my audience that you care- I most earnestly rec-! fully read the instructions upon the return form itself. or as to any item, consult you collector of internal revenue, or revenue agent in charge, or any available employe of | the bureau. Any taxpayer who will give the preparation of his income tax | return tte utmost care, and secure ad- vice from the offices of the collectors or agents in charge on points about which he is doubtful, will render the greatest aid to himself and his Gov- ernment by making the most accurate income tax return of which he is capa- ble. You are aiding the Government to reduce costs when you take all pos- sible precautions to file an accurate return. Mr. Kubn—Thank you, Mr. Burnet. I am sure the people of the United States now have a clearer conception of the gigantic task of your divislon “You're It!” We’'ve Been If you are in doubt | as to whether you should file a return ! of the Government and I am sure 5 will thank you for your 3 consenting to be with us this evening. LIBRARY BULLETIN OUT List of Educational Opportunities May Be Obtained Free. Dr. George F. Bowerman, librarian: of the Public Library, announces that the March issue of the bulletin of “Informal Educational Opporunities in Washington,” listing lectures, courses of study, exhibitions and music events, is ready for distribution. Coples may be obtained free of cost at the central buflding of the Public Library, at Eighth and K streets, or at any neighborhood branch, or will be malled if postage is included with the request. BROOKHART WILL SPEAK Will Address Meeting of Albright Brotherhood Tonight. Senator Smith W. Brookhart of Iowa will be guest speaker at the monthly meeting of the Albright Brotherhood tonight., On March 8 the brotherhood will sponsor a musical recital at the Albright Memorial Evangelical Church. The Roland Hayes male chorus will | entertain on the latter occaslon. Copyright, 1932, T. P. 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