Historically speaking, tax farming, "the principle of assigning the responsibility for tax revenue collection to private citizens or groups," is an ancient practice, according to TaxWorld.
- "Tax farming occurred in Eygpt, Rome, Great Britain, and Greece. The principle was considered very effective for tax revenue collection but suffered from a tendency of the tax-farmers to abuse the taxpayer for collection. Only when the system included checks and balances for the tax-farmer as well as the taxpayer did the system seem truly successful. The publicani of Rome were known as some of the most abusive tax-farmers. Tax farmers bid at auction for the contract rights to collect a particular tax and was held responsible for any loss. In Eygpt taxes for collected very effectively without tax farmers until the Greek Ptolemies set up rule. Under the Ptolemies the tax-farmer watched over the taxpayer and the government tax collector to prevent the scribes from imposing lighter taxes on the poor and unfortunate."
The 2001 Columbia Encylclopedia adds that
- "In the past, tax farming was practiced in most countries of Europe and Asia. In England the system was tried briefly but played no important part. It was most fully applied in France after 1681, when Jean Baptiste Colbert founded the general farms as an agency of royal administration. The collection of certain indirect taxes was leased by the king to the company of farmers general, a chartered body of 40 financiers (at one time they numbered 60) that guaranteed a fixed sum of revenue in advance. Popular hatred soon developed against the huge profits and extortionist practices of the farmers general, whose organization was abolished (1791) in the French Revolution; some 30 former members of the farm—Antoine Lavoisier among them—were guillotined in the Reign of Terror." 
The impediment to such tax farming was removed from the Bush administration's omnibus spending bill. Commercial debt collection by private agents hired by the Internal Revenue Service (IRS) would allow as much as 25 percent of the amounts recovered to be kept by the contractors.
- Legislation "enacted as part of this year's corporate tax bill, [allows] the IRS to contract with private companies. ... Under the legislation, contractors will not have access to tax return information, other than the amount owed, and will have no role in determining the amount that is owed, officials said. They will be given names, addresses, phone numbers and other identifying information about delinquent payers.
- "Private collectors will have authority to set up installment payment agreements, and gather financial information about those targeted, presumably to assess their ability to pay or to locate assets that might be attached."
- "One company that lobbied for the change is Union City-based Diversified Collection Services, Inc., one of eight companies indicted in September by a Texas grand jury, along with three Republican fund-raisers for House Majority Leader Tom DeLay, R-Texas, on charges of alleged money laundering and illegal corporate campaign contributions. ... The company has contributed about $435,000 to Republican Party organizations since 1999, Federal Election Commission records show." Washington Post, December 5, 2004.
Kathleen Goolsby and Roger Holt wrote in the December 2000 issue of Outsourcing Journal:
- "In the United States, the most visible form of tax-farming began in 1975 and has grown to include thirty-nine state governments. As outsourcing expanded and attracted numerous cities and counties, opposition was inevitable. When federal civil servants considered the potential loss of employment, agency heads and collective representatives banded together to discourage the outsourcing process.
- "The commissioner of the Internal Revenue Service (IRS) and the president of the union representing IRS employees (NTEU) are on record as being opposed to outsourcing. Even Malcolm S. Forbes in the October 1995 edition of his magazine stated, 'This idea is a bad one. Sure, enforcers outside the federal government might be more 'efficient' and cheaper, but any such savings are not worth the price of this gross invasion of privacy.'"
Goolsby and Holt reported that the concept had been put to the test in 1997, when, in order to "create a baseline, Congress set aside $13 million in the IRS budget to test privatized tax collection. The Private Sector Debt Collection Pilot Project was a program designed, implemented, controlled, and reported by the IRS. Because the potentially adverse results of the project could affect the continued function of the IRS Collection Division, the conclusion that 'the pilot program was not a successful business venture' is not surprising," they wrote.
- "A close reading of that 1997 report reveals substantial double counting of expenses as a way to 'prove' the inefficiency of privatized tax collection. IRS employees assigned to monitor the project charged their total cost (including payroll) to the contractor. Additionally, the contractor was charged with the IRS 'projection' of revenue that those IRS employees would have collected had they not been assigned to oversee the project, $30.55 million in loss opportunity costs. Adjusting the double counting reveals that collection of taxes through outsourcing is, in fact, extremely efficient.
- "In April 2000, the private study was undertaken to determine if the public would perceive that privatized tax collection is as acceptable as collection handled by civil servants. The statistically valid nationwide survey revealed that the public does not perceive private collectors and government employees as being equal, Indeed, it revealed an immense difference when it comes to privacy, communication, authority, and efficiency.
- "The 41-question survey reflected federal, state, county and municipal levels. Each entity was viewed using 50 separate demographic categories (including gender, age, marital status, household size, education, employment status, profession, and income). Out of a total of 2,050 tests to determine equal acceptance of the two entities, only seven were in the acceptable statistical range; but the specific demographic population for those seven was too small to make a definitive statement."
Based on the 1997 study, Goolsby and Holt came to the following conclusions:
- "In tax collection, citizens are more concerned about privacy of their personal records than they are about the efficiency of the collecting entity.
- "Although the facts reveal that privacy violation by contracted tax collectors is nearly nonexistent and that there have been numerous violations by the government, the public perceives the government to be a more trustworthy collector.
- "Private tax collectors do a more efficient job, but they must be monitored closely to discourage corruption and maintain the trust of citizens."
"In his model, the optimal compensation scheme must take into account the strategic interaction between taxpayers and tax inspectors:
- "Pure 'tax farming' (paying tax inspectors a share of their tax collections) is optimal only when all tax inspectors are corruptible.
- "When there are both honest and corruptible inspectors, the optimal compensation scheme lies between pure tax farming and a pure wage scheme.
- "Paradoxically, when inspectors are hired beforehand, it may be optimal to offer contracts that attract corruptible inspectors but not honest ones."
- Chris Floyd, "Green Acres," The Moscow Times, January 14, 2005.