BYU Law Review


Most scholars recognize both that the government needs information about taxpayers’ transactions to determine whether their reporting is honest, and that third third-party reporting helps the government obtain that information. Given governments’ reliance on tax collections, it would be risky to think that information or third third-party reporting is not needed by tax agencies. However, a recent article by Professor Wei Cui asserts that “modern governments can practice ‘taxation without information.’” Professor Cui’s argument rests on two claims: (1) “giving governments effective access to taxpayer information through third parties does not explain the success of modern tax administration” because, he argues, some important taxes taxes—such as the value added tax (VAT) VAT)—do not involve information reporting; and (2) modern tax administration succeeds because “business firms” are “sites of social cooperation under the rule of law,” fostering compliance. Both arguments are mistaken. As this Article demonstrates, third third-party information reporting is highly effective, third third-party reporting is used to enforce VATs, and firms are not inherently compliant. In fact, where individuals report on firms, firms’ compliance increases. This supports the intuitive notion that third third-party reporting increases tax compliance and that information matters in tax enforcement.


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