The Taxman's Web Spider Cometh

Juha-Matti Laurio writes "A five-nation tax enforcement cartel has been quietly cracking down on suspected Internet tax cheats, using a sophisticated Web-crawling program to monitor transactions on auction sites and to track operators of online shops, poker, and porn sites. Austria, Denmark, Great Britain, and Canada have joined The Netherlands in pursuing the 'Xenon' program with the assistance of an Amsterdam-based data mining company. Wired News reports that the Web crawler uses so-called 'slow search' to avoid creating excessive traffic on a site or drawing attention in the sites' server logs." The article notes that the US IRS will neither confirm nor deny using similar technology.

How's this work then?

[grassy_knoll]

From TFA:

The spider can also be configured and trained to look at particular economic niches -- a useful feature for compiling lists of business in industries that traditionally have high rates of non-filing. "For instance, weight control (yields) 85,000 hits, some for products ... also services," says Sweden's Hardyson.

Once the web pages are screen-scraped, Xenon's Identity Information Extraction Module interfaces with national databases containing information like street and city names. It uses that data to automatically identify mailing addresses and other identity information present on the websites it has crawled, which it puts into a database that can be matched in bulk with national tax records.

So the spider scrapes a publically available site for the business or shipping address, adds that to a database and then someone at a later point checks to see if there's an income tax form from that address.

Wouldn't that generate false positives if the billing address is, say, a post office box while the corporate tax forms are filed from the home office?

simple security measure?

[Travoltus]

Require logins in order to see addresses or any other identifying info. You have to do that to purchase anything anyway, on a typical site like that.

If the web spider doesn't have a login name, it can't see any identifying info.

I don't get it

[Perseid]

Mr. Spider sees an eBay store named Bob's Cat Toys. How do they know who Bob's Cat Toys actually is without issuing subpoenas? The address isn't necessarily listed anywhere until you buy something.

Re:Interesting.

[iminplaya]

Now, I don't claim my online poker winnings...If you're dumb enough to win that kind of money and think you're getting away with not paying taxes, then you deserve what you get.

Yeah, baby! Right on! Hey, buddy. The amount don't matta. Just like Christmas, it's the thought that counts. Cheating is cheating. Fascinating bit of "logic" you got there. I have a teeny, tiny problem with people who think that a "little" cheating is ok, and that anybody who cheats more than they do is a filthy crook.

Tax cheats are tax cheats.

You think?

Re:Interesting.

[pla]

In the abstract, I'm not against it. Tax cheats are tax cheats.

Why? Why do people so readily accept the idea of "death and taxes"???

If our taxes actually went to reasonable uses, I'd agree with you. Infrastructure improvement, national -de-fense, international negotiation.

But no, instead we pay (in the US, at least) a third of our income toward fuck-all. I work so a quarter of the population who could work can sit at home and munch cheetos all day watching soaps. I work so some starving artist doesn't starve. I work so unappreciative kids can get their socialized babysitting and social indoctrination. I work so our oligarchy can squeeze their kids through low-GPA MBAs and perpetuate the lines of power. I work so we can kill arabs who inconveniently live too near "our" oil.



I can think of few more noble crimes than "tax cheat".

Re:Interesting.

[JKConsult]

The amount don't matta.

I knew I should have made myself more clear. Yes, I am cheating on my taxes. And yes, it's "just as bad" (I don't really think it is, and neither do you, because volume does matter, but we're both accepting this as part of the argument) as someone who sets up shady tax shelters to save billions.

What I was saying is that I win about $100 every year playing online poker. Yes, I could go to all the trouble of trying to get some sort of documentation, add it to my income, and pay the taxes. Or, I could pocket the $30 and forget about it. I do the latter. As I said, if busted, I would freely admit to it, and would accept the punishment, as I realize that I am cheating on my taxes.

There is a logic to my position. Part of the FASB (Financial Accounting Standards Board) standards include the concept of "cost-benefit" and "relevance" to reporting financials. The first may not apply here, as it basically states that if the cost of gaining the information (depreciating, say, light bulbs) outweighs the benefits of the users of the filings having it, then you don't need to worry. The second does matter. It basically states that (as opposed to something large, like property or equipment), if you're IBM and you buy a $5,000 desk for someone, they could give a flip whether you expense it or depreciate it. Because it doesn't matter. I consider my $100 winnings online versus my salary and go with the latter option, that it's so small as to be irrelevant. If the IRS disagrees, then I'm willing to pay the piper.

Another idea, too

[Travoltus]

If the IP address is from a known list of Government sites or any known spiders, redirect them to pages free of personal information.

This would also be useful in keeping spiders armed with manually-created website logins from slurping down tons of personal information for private databases... oh crap, I'm giving them ideas!

Standards ?

[billcopc]

Now then, shall they honor robots.txt ?

User-agent: TaxSpider
Disallow: /

But really all this means is you can file a tiny tax report for your auction/poker/porn business and get away with it, as long as you file something. How will this spider tell them whether I made 20'000 or half a million from online business ? It won't. If their method of finding tax evaders depends on published HTML, I think they're screwed from the get-go. What if the address isn't in text form, but rendered to an image, overlaid on fancy graphics ? They should be obtaining records from whatever payment intermediary is involved whether it's a bank, Paypal, or a 3rd-party credit card processor. Just having any tax report from a given address is not proof that all income was truthfully disclosed.

At the end of the day, it's still a wasted fight. States argue over where taxes should be levied. Sender or receiver ? Or maybe it should be in the state where the web site is hosted. It's all just a bunch of bureaucrats trying to claim something they had no part in. My logic is that if there is no physical involvement, there should be no taxation. Playing poker online doesn't incur any costs to the city where I live; it doesn't make use of its roads and municipal services, it doesn't burden the healthcare system with injuries or violence (e.g. bars). In fact, whether I play for fun, or wager real money has no effect on anyone but the players and the "house". This obsession with taxing everything is a fallacious concept that underscores the root issue: government is sloppy with its resources. They make up these schemes to swindle always more money from the citizens, only to piss it away. Government is supposed to act on BEHALF of the citizens, in their best interests. If government were run like a regular business, with real risks, goals and accountability, it would fail overnight. It is failing right as we speak, as we witness more and more people moving away to lower-taxed nations. When the cost of government exceeds the value of its services, those who can, leave.

Re:The Federal income tax is unconstitutional

[Anonymous Coward]

Or, of course, you could realize that Russo is playing word games. And not really good ones at that.

This FAQ [evans-legal.com] explains why Russo's logic breaks down.