If the goal of the IRS is to collect as much tax money as possible, they would, in such a case, have all the incentives to protect your illegal business from being busted.

The IRS has testified against the government on behalf of defendants, but you are still open to harm from illegal parallel construction.

The IRS couldn't manage to keep the detailed tax records of every american out of propublica's hands... Does anyone think they can keep them out of other agencies hands?

I would imagine that in cases where you're earning a significant enough amount of money, the issue isn't whether the government knows you're up to no good, the issue is whether they have admissable evidence that you're up to no good.

My contention is that the mere knowledge that you are reporting income is actionable information to the government and the IRS has no way to guarantee it does not get out.

We should work under general provision: if data is gathered, it will be used. Even if it is not legal today for IRS to do something, it does not mean it will not be tomorrow. And law unfortunately works backwards too.

They don't not share them out of the goodness of their hearts. They're so intentionally understaffed and overworked that they probably don't have time to refer all but the most egregious cases.