IMPROVING TAX COMPLIANCE. 6th IMF-Japan High-Level Tax Conference For Asian Countries Tokyo; April 7, 2015

Transcription

1 IMPROVING TAX COMPLIANCE 6th IMF-Japan High-Level Tax Conference For Asian Countries Tokyo; April 7, 2015

2 Outline Measurement and trends Some key methods and issues Managing compliance Supporting compliance management

3 MEASUREMENT AND TRENDS

4 Measuring noncompliance Widely cited (MIMIC) estimates are nonsense to be used with caution Informative traces can be found E.g. change in consumption/income Informality is too loose lumps together very different forms of noncompliance

5 Compliance gaps are the way to go 16% 14% 12% 10% 8% 6% 4% Calculated by an increasing number of RAs but very far from all UK VAT Compliance Gap Do not necessarily indicate recoverable revenue Alone, do not indicate remedial action needed Various ways to calculate 2% 0% Actively promoted through RA-GAP program

6 Compliance gaps were generally falling Latin America ave (VAT) EU ave (VAT) Australia (GST) Japan (VAT) Colombia (CIT) Mexico (CIT) Mexico (Excise) UK (CIT) UK (Excise)

7 but then Changes in averages, vs LVA Change in compliance gap ESP LTU EST HUN DNK ROU CZE PRT SVK SVN IRL FRA NLD GRC BGR LUX BEL ITA GBR FIN 0 JPN Change in output gap SWE DEU AUT MLT POL Weaknesses of many RAs exposed

8 SOME KEY METHODS AND ISSUES

9 Fundamentals of RA Sticks and carrots Key roles for: Underreporting Gap Net Misreporting Percentage $120B 100% 90% 80% 70% Withholding Third party information $64B 56% 60% 50% 40% Segmentation % Links with policy $11B $12B 1% 8% 11% 20% 10% 0% Behavioral aspects I. Amounts subject to substantial information reporting and withholding (Wages & Salaries) II. Amounts subject to substantial information reporting. (Pensions & annuities, unemployment compensation, dividend income, interest income, Social Security benefits) III. Amounts subject to some information reporting. (Deductions, exemptions, partnerships/s-corp income, capital gains, alimony income) IV. Amounts subject to little or no information reporting. (Nonfarm proprietor income, other income, rents and royalties, farm income, Form 4797 income, adjustments)

10 And some empirics on compliance For panel of VAT compliance gaps, 26 EU plus Japan, : Output declines significantly worsen compliance but the effect seems fairly short-lived Spending on tax administration has a significant long run effect in improving compliance

11 The hard to tax Emerging issues 70 High Wealth Individuals Income Tax Liability of Top 5% Income Tax Liability, % US UK Netherlands

12 MANAGING COMPLIANCE

13 Revenue administrations Key for assuring compliance and wider state-building and are large complex organizations Tax Receipts Compared to Revenues of Largest National Companies Percent of GDP USA UK Japan Chile That have been through turbulent times and face rapidly changing environment ahead

14 Organizational management requires. Strong and empowered HQs Streamlined office network Turnover of Commissioners by Region % 60.0% 50.0% Sufficient Autonomy Assuring Integrity 40.0% 30.0% 20.0% 1 Commissioner 2 Commissioners 3+ Commisioners Adequate, stable financing 10.0% 0.0% AFR (31) APD (21) EUR (36) MCD (16) WHD (26)

15 as was an issue during the crisis, Changes in Tax Administration Spending, In percent of GDP Romania Mexico France New Zealand Sweden Korea El Salvador Indonesia Italy Australia Ireland Malaysia Israel Austria United Kingdom Bolivia Russia South Africa Ecuador Demanrk Latvia Honduras Uruguay Iceland Cyprus Argentina Slovenia Canada Poland Singapore Portugal Saudi Arabia Germany United States Chile Japan Belgium Spain Source: CIAT, RA-FIT, OECD

16 And squaring up to challenges, such as Pressure to take major expenditure functions...with a quite different set of clients and needs Change management reform while maintaining revenue performance

17 To do lists: 1. Operational management Better focus, especially in DCs, on main compliance risks Identify compliance gaps and sources Better segmentation of taxpayers to tailor responses More effective audit and collection of tax debts Strengthened taxpayer services Legal changes may be needed Over-reliance on comprehensive audits 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 19% 28% 53% LOW INCOME COUNTRIES (16) Audit Mix, % 25% 23% 50% 52% 25% 23% LOWER MIDDLE INCOME COUNTRIES (20) UPPER MIDDLE INCOME AND HIGH INCOME COUNTRIES (19) 44% 33% Grand Total (55) Desk Audits Issue Oriented Audits Comprehensive Audits

18 2. Information management Back to basics key for reliable data Enhance RA capacity to monitor compliance Front- and back-ends New frontiers and new risks Pre-populated tax return e-invoicing, e-accounting, etc. Extending digital services to banking, accounting sites

19 3. Stakeholder relations (Accountants, industry associations, etc.) Still largely ad-hoc Need for proactive relationship with taxpaying community in developing countries Variety of channels, formal and informal Fairly recent approach of enhanced relationship Risky for countries with weak enforcement capacity

20 SUPPORTING COMPLIANCE MANAGEMENT

21 with new analytical tools 20% RA-GAP: Actual vs full compliance 15% 10% 5% 0% RA-FIT: Collects RA data and establish baselines/benchmarks TADAT: Assessment tool Accountability and Transparency Integrity of the Registered Taxpayer Base Operational Efficiency and Effectiveness Assessment and Mitigation of Risk Tax Dispute Resolution Performance Outcome Areas Supporting Voluntary Compliance Ensuring Accuracy of Reporting Payment of Obligations Filing of Tax Returns