In India’s Call Center Talents Put to A Criminal Use: Swindling Americans New York Times reporter Ellen Barry details the methods and motivations behind the IRS and other federal government employee impersonation scams that have victimized thousands of vulnerable Americans. NYT reporter Barry also speaks with some of the callers, two of whom are Indian teenagers who blew the whistle on the call center operation to American investigators. The article is quite sad, as it includes the stories of some of the victims themselves, one of whom lost her life savings and drained her bank account to avoid threatened prosecution and possible deportation.
One part of the story stood out for me. The key to the success of the scam, according to the Indian teen call center employees, is the “psychological fact” that some Americans deeply fear their government.
That reminds me of a talk I heard Tulane Professor Steve Sheffrin give at the American Tax Policy Institute November conference on Improving the Tax System Using Advances in Social Knowledge and Technology. Professor Sheffrin’s talk is streamed here. In the talk he discussed the spate of IRS impersonation scams. At about the 45 minute mark he emphasized that most call scams are based on greed; for example the Nigerian prince fund transfer scams hook in victims looking to make a quick buck.
Unlike those scams, as Professor Sheffrin and today’s NYT article discuss, the IRS scams prey on the visceral fear that some people feel toward IRS and government in general. Sheffrin considers why some people fear the IRS so much that in a few minute phone call someone who had no knowledge of a tax problem might be inspired to transfer thousands of dollars in I-tune cards to callers thousands of miles away. While he notes that the callers do use effective social engineering techniques (e.g., using 202 area codes for calls and awareness of some individualized information), the prevalence of the scam says quite a bit about how some people view the IRS and the tax system generally. Included in that view is the erroneous sense that IRS power is unbounded, a theme I was familiar with from my time directing a tax clinic when some clients came to us thinking that a correspondence examination or collection letter was the first step in a parade of horribles. Underlying the fear is the public’s lack of understanding of the tax system and how it works.
These scams suggest to Professor Sheffrin that the IRS has to pay more attention to its image. They also raise questions about how the IRS goes about its daily business of communicating with taxpayers, an issue we have looked at lately with at times the IRS sending misleading or at best confusing compliance letters. Professor Sheffrin contrasts IRS with the California Franchise Tax Board which is much more adept at involving the public in its operations.
As we roll into the new year, a new Congress and new Administration, there is the steady rumble of a possible reform of the IRS as part of overall tax reform. IRS is working hard on building its future state of digital communications with taxpayers. The “success” of the scammers as typified in the NYT article suggests that IRS and Congress face many challenges in rebuilding and rebranding an agency. It is hard to communicate seamlessly with taxpayers if the taxpayers think the IRS is just a phone call away from hauling you to jail or seizing assets on a previously unknown tax bill.