TADAT REFLECTIONS: Impacts, Lessons and Beyond

Transcription

1 TAAT REFLECTIONS: Impacts, Lessons and Beyond International Monetary Fund Seminar Panel iscussion 1: The TAAT Assessment Experience Key Takeaways Mr. George Santoro Secretary of State for Finance Alagoas/Brazil June 2018

2 Summary 1. Socioeconomic Indicators: Brazil and Alagoas 2. Fiscal Federalism: Brazil 3. Alagoas Revenue Composition 4. The TAAT Program in Brazil 5. Evaluation of TAAT in Alagoas 6. TAAT and Strategic Planning 7. Conclusion

3 Socioeconomic Indicators: Brazil Gross omestic Product GP (2016) US$ in trillions International Comparative Russian GP US$ in trillions GP per capita (2016) US$ 8, Gini Index (2014) Mexico Gini Population (2016) in millions pop/km² Source: World Bank

4 Socioeconomic Indicators: Alagoas Gross omestic Product GP (2015) US$ in billions 20 º /27 Brazilian states ranking 0.77% % Brazil GP International Comparative Nicaragua GP US$ in billions GP per capita (2015) US$ 3, º /27 Brazilian states ranking Human evelopment Index HI (2014) º /27 Brazilian states ranking South Africa HI Source: 1. IBGE Brazilian Institute of Geography and Statistics. 2. Trading Economics

5 Socioeconomic Indicators: Alagoas International Comparative Population (2017) Uruguay United Arab Emirates 3.37 in millions pop/km² 3.46 in millions pop/km² Economy GP by Sector (2017) Highlights 66.79% Tertiary 13.87% Industry 10.49% Primary Services and Public Administration Chemical, Plastics, Oil, Gas, Sugar and Alcohol Sugar cane, rock salt The newest and fastest growing hotel chain in Brazil From 2007/ % growth in hotel units and 74.9% in beds Oil and Gas exploration (land/sea) Alagoas is the largest land gas producer in whole country Source: IBGE Brazilian Institute of Geography and Statistics.

6 Fiscal Federalism: Brazil Tax Revenue Levels of Government Brazil (2016) Table 01 Brazil has a good level of fiscal decentralization and this is a factor that underscores the importance of state and counties tax administrations and the need to improve them. Tax Revenue by Tax Relevance Brazil (2016) Table 02 Levels of Government Tax Revenue US$ millions % of Tax Revenue Federal 365, % States 135, % Counties 33, % Total 534, % Source: Tax Burden in Brazil 2016: Analysis of Taxes and Bases of Incidence Federal Revenue of Brazil. Tax Tax Revenue US$ millions % of Tax Revenue ICMS Value Added Tax 108, % Income Tax 102, % Contribution to Social Security 88, % Cofins 53, % Service Time Assurance Fund 32, % Others 149, % Source: Tax Burden in Brazil 2016: Analysis of Taxes and Bases of Incidence Federal Revenue of Brazil. The main Brazilian tax is ICMS value added tax on goods and services is a state tax. Table 02 shows the importance of states administrations, 20.37% of Brazilian tax revenue is competency of states tax administrations. In this sense, TAAT is a important tool to improve this level of Brazilian government.

7 Alagoas Revenue Composition US$ Revenue 2,220,222, ,733,048, ,639,281, Tax Revenue 990,162, ,167,739, ,220,210, ICMS Value Added Tax IPVA Property Tax on Motor Vehicles 828,223, ,731, ,016,390, ,670, ,532, ,492, ITC Transmission Tax Cause eath and onation of Any Goods or Rights IRRF Withholding Tax 4,960, ,005, ,610, ,236, ,035, ,211, Other Taxes 12,071, ,434, ,505, Transfers of Federal Government 1,114,756, ,280,759, ,199,932, Other Revenues 115,303, ,548, ,137, Source: SEFAZ/AL General Balance of the State.

8 The TAAT Program in Brazil 2017: more than 300 trained advisers, moreover carried out the evaluation in the State of Alagoas 2017: training for auditors from the state of Goiás and São Paulo Partnership of the TAAT Secretariat with the IB and ENCAT National Meeting of State Tax Coordinators and Administrators. 2018: evaluation in the State of Rio de Janeiro and planned evaluation in the State of Goiás in July, São Paulo in August and Brasília in September 2018: training proposal for "assessment mission leaders" and risk matrix

9 Evaluation of TAAT in Alagoas Training of fifty public servants from SEFAZ and the Attorney General of the State of Alagoas, public legal body that is responsible for judicial collection for the State of Alagoas. Presentation of the diagnosis.

10 Evaluation of TAAT in Alagoas The tool provided a big picture of the current situation of SEFAZ / AL as well as the training provided the international best practices of tax administrations to overcome the challenges and problems presented. Mr. Leopoldino Mello, Tax Administration Superintendent The great challenge of TAAT training was the adaptation of expertise in income tax to the view of value added tax (ICMS). This is the big issue of TAAT for state level in perspective of TAAT for nations. Ms. Alexandra Silva, Tax Administration Superintendent

11 Evaluation of TAAT in Alagoas: Transparency for Results TAAT is available at SEFAZ Alagoas and TAAT (IMF) sites The wide dissemination of the TAAT evaluation gives transparency to its taxpayers, which is a practical value for the fiscal management of the State of Alagoas

12 Evaluation of TAAT in Alagoas: Lessons Learned TAAT generated greater integration and engagement of the SEFAZ Team with the current moment of the institution and with its future It enabled the identification of strengths and weaknesses in the Tax Administration and Accounting areas of SEFAZ, as well the judicial collection of the State Attorney General's Office The wide and unrestricted disclosure of the appraisal report positively exposes the Tax and Accounting Administration, as it provokes the awareness of responsibility for results and drives the performance for improvements in management TAAT can be used as a basis for the formulation of a strategic planning of the Tax Administration, considerably reducing the time for the preparation of strategic planning, as well as improving the quality of the planning.

13 Strategic Planning: Next steps at the beginning of 2018 Improved Tax Revenue and ebt Profile Strategic Planning started in February New Management of Secretary of State for Finance George Santoro TAAT on October 23 until November 5 End of Strategic Cycle SEFAZ/AL

14 TAAT and Strategic Planning Indicator Scores 2017 Summary Explanation of Assessment Strategic Projects Projects/Activities Objectives POA 1: Integrity of the Registered Taxpayer Base P11. Accurate and reliable taxpayer information. C Information held in the registered taxpayer database includes all relevant details. There are separate, but linked, high integrity taxpayer identification numbers (TIN) at the federal and state levels. Procedures exist and are regularly applied for identification, suspension and removal of inactive taxpayers, but audit reports are not available. 1. Big ata & ata Mining 1. Improve taxpayer information to analyze and monitor its fiscal activities, ensuring effectiveness on tax collect. P12. Knowledge of the potential taxpayer base. C Actions to detect unregistered taxpayers are taken, but only on an ad hoc basis. POA 2: Effective Risk Management P23. Identification, assessment, ranking, and quantification of compliance risks. P24. Mitigation of risks through a compliance improvement plan. P25. Monitoring and evaluation of compliance risk mitigation activities. The extent of intelligence gathering and research to identify compliance risks is not comprehensive and mostly limited to internal data sources. There is no structured process to identify, assess, rank and quantity tax noncompliance risks and to manage them. There is no monitoring and evaluation of the impact on and changes in taxpayers compliance behavior. 2. Artificial Intelligence (AI) for Collection Tax Gap 4. Compliance 2. Artificial Intelligence (AI) for Collection Tax Gap 3. Monitoring of the largest taxpayers 2. Ensure comprehensiveness in the identification, assessment and quantification of risks of noncompliance with taxes. 3. Encourage selfregulation. P26. Identification, assessment, and mitigation of institutional risks. There is no structured and formalized process to identify, assess and mitigate institutional risks. 4. Compliance 4. Mitigating risks through a compliance improvement plan.

15 TAAT and Strategic Planning Indicator Scores 2017 Summary Explanation of Assesment Strategic Projects Projects/Activities Objectives POA 3: Supporting Voluntary Compliance P37. Scope, currency, and accessibility of information. P38. Scope of initiatives to reduce taxpayer compliance costs. P39. Obtaining taxpayer feedback on products and services. C B Although there is a range of information on the main rights and obligations of taxpayers, but these are not adapted to the 5. Best Practices in needs of disadvantaged groups. Public Sector Information is kept current, although there is no written Communications: procedures to ensure this. SEFAZ website, and other service igital and channels are provided to taxpayers at no cost. 62 percent of Governance Strategies the calls from the taxpayers were answered in less than six minutes. There is a simplified system of taxation for small taxpayers called Simples Nacional, and misconceptions of law and rules are analyzed to improve information products. No survey is conducted to monitor taxpayers perception of taxpayer services and products. 7. Artificial Intelligence for tax calculation 5. Public Sector Communications: igital and Governance Strategies 6. Sefaz Interconnected 8. Simplification of Tax Legislation 6. Sefaz Interconnected 5. Establishing best practices for communication and a governance policy. 6. Providing communication services at no cost. 7. Reducing taxpayer compliance costs and to give more confidence to the tax calculation. 8. Improving the business environment of the state. POA 4: Timely Filing of Tax eclarations P410. Ontime filing rate. C 72 percent of all taxpayers and 91 percent of large taxpayers filed their declaration for ICMS Normal on time. 9. Artificial Intelligence 9. Monitoring compliance with obligations. P411. Use of electronic filing facilities. A All taxpayers use electronic means to file declarations during the three years examined (2014, 2015 and 2016).

16 TAAT and Strategic Planning Indicator Scores 2017 Summary Explanation of Assesment Strategic Projects Projects/Activities Objectives P512. Use of electronic payment methods. P513. Use of efficient collection systems. P514. Timeliness of payments. P515. Stock and flow of tax arrears. P616. Scope of verification actions taken to detect and deter inaccurate reporting. P617. Extent of proactive initiatives to encourage accurate reporting. P618. Monitoring the extent of inaccurate reporting. A A B POA 5: Timely Payment of Taxes All payments (ICMS) are made by the taxpayers by electronic means. Advance payment system is used, and there is withholding at source (reverse charge) of ICMS in specific cases. The number of ICMS payments made on time in 2016 was percent of payments due, while the amount of payments was percent of payments due. SEFAZ does not have accurate data of tax arrears by age of arrears or by collectability of arrears. POA 6: Accurate Reporting in eclarations The tax audit plan covers the core tax (ICMS) and all taxpayer segments but does not select audit cases based on identified risks. Additionally, there is limited use of largescale automatic crosschecking to verify information provided in tax returns. SEFAZ provides a system of binding public and private decisions to guide taxpayers. No monitoring of the extent of inaccurate reporting in tax declarations using tax gap analysis is performed. 10. New Accounts Receivable 11. A New Framework for Supporting Tax Collection 10. New Accounts Receivable 1. Big ata & ata Mining 10. Creating a new accounts receivable to improve fiscal information. 11. Ensuring the effectiveness of tax collection. 1. Improve taxpayer information to analyze and monitor its fiscal activities, ensuring effectiveness on tax collect. 9. Artificial Intelligence 12. Assesment Tax Gap 9. Monitoring compliance with obligations. 12. Monitoring of the extent of inaccurate reporting in tax declarations using tax gap analysis is performed.

17 TAAT and Strategic Planning Indicator Scores 2017 Summary Explanation of Assesment Strategic Projects Projects/Activities Objectives POA 7: Effective Tax ispute Resolution P719. Existence of an independent, workable, and graduated dispute resolution process. A An appropriately tiered mechanism of administrative and judicial review is available to taxpayers. The dispute mechanism is widely used and the administrative review mechanism is independent of the audit process. P720. Time taken to resolve disputes. P721. egree to which dispute outcomes are acted upon. C None of the disputes are resolved within 90 days. The tax administration undertakes some analysis of tax disputes, but not regularly. The analyses often result in issuance of amendment to rules, procedures or notifications. 13. igital Government 13. Virtualizing manual processes that have a direct impact on the relationship with the tax payer, i.e., improve productivity of tax administration. POA 8: Efficient Revenue Management P822. Contribution to government tax revenue forecasting process. P823. Adequacy of the tax revenue accounting system. C SEFAZ actively participates in the preparation of revenue forecasts for the budget, monitors results and estimates tax expenditures, but does not make projections on the level of ICMS refunds. The tax accounting system is not yet fully automated and taxpayer accounts updated manually at the end of the month. 15. Artificial Intelligence to forecast (under studies) 14. Integrated Financial and Accounting Administration System 14. Automating accounting processes. P824. Adequacy of tax refund processing. Procedures for processing ICMS refunds do not use risk criteria or prerefund audits for the most sensitive cases. Only an insignificant number of ICMS reimbursement claims are paid or compensated within 30 days. 10. New Accounts Receivable 10. Creating a new accounts receivable to improve fiscal information.

18 TAAT and Strategic Planning Indicator Scores 2017 Summary Explanation of Assesment Strategic Projects Projects/Activities Objectives POA 9: Accountability and Transparency P925. Internal assurance mechanisms. C+ There is no internal audit unit within the SEFAZ to provide internal assurance to the senior management of the soundness and adherence to internal controls. SEFAZ has a welldeveloped and organizationally independent internal affairs unit that has adequate investigative powers. 4. Compliance 4. Mitigating risks through a compliance improvement plan. P926. External oversight of the tax administration. B The external oversight of the tax administration s financial performance is solid, but oversight of its operational performance is weak. The external investigation process for suspected wrongdoing is well developed and recommendations are acted upon routinely. P927. Public perception of integrity. There is no mechanism to monitor public confidence in the tax administration. 4. Compliance P928. Publication of activities, results, and plans. C+ The annual report on the financial and operational performance of SEFAZ is elaborate and made public within three months of the end of the financial year. However, SEFAZ does not publish their strategic corporate plan nor the annual operational plan. 5. Best Practices in Public Sector Communications: igital and Governance Strategies 5. Establishing best practices for communication and a governance policy.

19 Conclusion Problem Suggestions Mechanisms of internal controls in subnational entities Verification of compliance methodology more specific to the case of subnational entities inclusion of Tax Compliance Proposal or something similar Integration between Treasury and Revenue Administration in subnational entities Involvement in training between the treasury and revenue areas and evaluation aiming at involvement and interdependence between financial / accounting areas with the tax / fiscal area, due to the need for interface of the accounting records. Ex: Restitution, Compensation and Active ebt

20 Governo do Estado de Alagoas 2018 Rua General Hermes, 80, Centro, CEP: Maceió, Alagoas

21 Appendix A GP in current U.S. dollars

22 Appendix B GP per capita in current U.S. dollars