Effective and efficient tax administration. Dmitri Jegorov Undersecretary for Tax and Customs Policy

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2 Effective and efficient tax administration Dmitri Jegorov Undersecretary for Tax and Customs Policy

3 Prerequisites for successful tax administration Tax policy is an integral part Simple administration of complex legislation is very difficult Process-based management and service-oriented approach Tax administration is one of the easiest to be run as business In a well mapped process, everyone sees their place Audit and criminal investigation is also a service to society, to complying business Solid data intelligence is the key for segmentation of taxpayers Less paper, more IT it is inevitable Taxes are deadweight? But costly administration is surely just that.

4 A bit of history Tax board and Customs board joined in 2004 Both administrations at that time approx people now approx people First, IT was merged before merging the rest For service and for control, there was full merger i.e. no distinction of tax and customs but unified departments Service-oriented approach For e-solutions, not waiting for general infrastructure of the state

5 Service E saves time to do business Pre-filling of tax returns Faster repayment of income tax if electronic return 5 days Obligation for electronic submission by business unless under 5 entries Sending pre-filling data from shared economy platforms E-% for natural persons From 3% for 1999 to 96% for 2016 For the past 10 years, above 90% in all years Checks and risk analysis are automatic Allows for income tax repayment in 5 days and VAT repayment within 2-3 days

6 Evolution of service

7 Control Solid data intelligence is the basis access to databases Know more than you handle Ability to prioritize largest fraud No blind or random audits Usage of infoletters allows efficient use of resource Aggregate data on taxes paid is public Register of employees Obligatory registration (even by SMS) prior to starting work +4% registered employees in 6 months VAT INF All transactions with parties over 1000 euro must be reported to tax administration by the buyer and the seller for cross checks +5% VAT revenue in one year

8 Register of employees effect

9 VAT INF Project decline in VAT Gap 2014/5

10 Soon to be give back the data and share it

11 Revenue management Debt must be collected while it s fresh Debt over 6 months is old debt and unlikely to be collected Possibility to apply for installment automatic decision based on risk Possibility for installment schedule even before the debt occurs Honest business has the right to a good-night sleep Quick action for non-compliance, incl. seizure unfair competition Completely open publication of all tax debts Monitoring of transfer of business and leaving an empty shell

12 The best way to fight fraud Is like the best way to fight a disease the triangle If the patient is with the doctor, it will be cured. If the patient is with the disease, it will stay Cooperation and trust with the professional organizations and associations are crucial They know best how their line of business is done expertise, data reading skills, and an eye for fecal matters of large bovine mammals Peer pressure helps boost morale

13 A word of advice and caution Meaningful policy is crucial for successful administration of taxes In Estonia, if social tax on salaries is not paid, the employee has no social security thus employees avoid unregistered labor Company car usage will be cheaper but linked to the right to use, not the actual use with complex accounting There will be a business bank account for small entrepreneurs (up to 25 th euro) where banks will withhold 20% on revenue and transfer to the tax administration to cover for ALL taxes And taxpayers s willingness to comply depends on them witnessing politicians spending their money

14 Where to go next administration? In the future, there are no tax returns Different format of the same data Taxman needs tax data, not returns Link the systems Blockchain for administering VAT and excise taxes Blockchain: one chain, decentralized, consensus, cannot be changed retrospectively and remain unnoticed VAT / excise transactions can have their imprint (fingerprint) but not the transaction itself data security concerns solved Carousel and other types of fraud immediate attention of taxman

15 Where to go next policy? Digital is on the rise Where is value created? We are so fixed on physical locations and physical assets None of this is important in the future Internet is the jurisdiction where businesses and people operate Collaborative economy and digital nomadism What is the future of working? Will taxes be paid where public services are the best? Anonymity concerns of blockchains, role of collaborative economy platforms, and (possible?) end of consumerism due to sharing?

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