The complexity of tax legislation: analysis
Since the genesis of modern tax systems, an innate characteristic has been the complexity of tax legislation. This characteristic has occurred in both developed and emerging countries, so unfortunately there are no models to take into consideration for its simplification.
In addition, it can be argued that over time this problem has been getting worse, bringing greater difficulties to both taxpayers, tax advisors, and the tax administration [1].
Diagnosis
There is a broad consensus on this issue among all tax actors. As a simple example of this, the complexity and instability of tax systems, the existence of confusing and contradictory rules, the proliferation and dispersion of regulations and the lack of technical prolixity have been highlighted.
All this conspires against the principle of legal security or legal certainty, understood as meaning that the tax law must offer the necessary clarity to be able to know for sure its true scope for its correct application.
As stated by Villar Ezcurra (1996) [2] “the individual may be convinced that his interpretation of the rule is correct, act accordingly and nevertheless incur a tax infringement.”
But this problem does not exclusively harm the taxpayers and tax advisors, but also the efficiency of the tax administration itself, which is greatly hindered by the task, because the search for a correct regulatory application generates internal debates, consultations, diversity of interpretations within departments, with the consequent delays and therefore, lack of certainty in the taxpayers until their definitive pronouncement [3].
It is true that the complexity of tax legislation is natural because it must regulate different situations in economic relations in search of the greatest possible equity. Here the axiom that “the greater the equity, the less the simplification” would apply.
In the same sense already in the report of the “Inland Revenue” (1995) [4] of the United Kingdom “The Path to Tax Simplification”, it was argued that it is unrealistic to imagine that tax policy can be determined only by tax simplification because such a policy must sometimes balance multiple and contradictory interests, so that a certain degree of complexity is the natural consequence.
This search implies the profusion of rules to contemplate the greatest possible number of probable situations. That is why some authors like Massad (1986) [5] they have argued that the search for equity has a limit, when its result causes a proliferation of rules of very difficult interpretation and application.
In recent decades, in turn, the profusion of regulations has also had as a vector the issuance of anti-elusive rules, to avoid maneuvers aimed at exploiting loopholes in the regulatory system and thus avoid paying taxes.
Another aggravating factor has been that the tax systems have ceased to be a “harmonious model”, because of continuous tax reforms called “patches” or “remedies” to respond to sectoral claims or collection needs, often unconnected with the current system.
Therefore, in many tax codes the “excusable error of law” is accepted as an exception to mitigate the penalties originated in a complex regulation of difficult interpretation, to the extent that the obligor has behaved normally and reasonably in the situation in which it found himself.
Classes of tax legislation
This complexity can be observed in the three levels of tax legislation: 1) the primary (laws), 2) the secondary (Decrees or other provisions of the Executive Power) and 3) the tertiary (regulation or interpretation of the tax administration).
In this instance, it is worth asking whether it is possible to achieve a simplification of tax legislation?
Being the intrinsic complexity of the tax matter, the simplification so often required and demanded turns out to be an illusion, and even put as a causal or sometimes as an excuse for the lack of tax compliance.
But if it turns out to be possible, its attenuation according to the three mentioned orders.
In the primary legislation, the objective would be to achieve comprehensive tax reforms that replace the disjointed current system, the product of multiple “tweaks”, which have been perpetrated over time.
Obviously, since taxation is a very sensitive issue for the economic actors of a country, this requires, in order to achieve a tax reform of this kind, to obtain the broadest consensus, first of all to be approved in Congress, Assembly or Parliament and secondly, to be accepted “a posteriori” by the taxpayers, whose voluntary compliance is essential when measuring the success of such an initiative.
In the secondary legislation, carried out through Decrees of the National Executive Power or provisions of the Ministry of Economy, it means to have the best professional technical staff to make the general regulations approved in the Legislative Power viable and that it may have the interpretative clarity needed for its application.
Finally, in the tertiary legislation, that is, the one conducted by the tax administration itself, it can be regulatory or interpretative. As Retortillo Martín argues (1964) [6] “…As opposed to the manifestation of a declaration of will by the Administration that definitively characterizes the regulations, the interpretative provisions place us, on the contrary, before a manifestation of an act by which the Administration, instead of trying to impose its will, simply declares what, in its opinion, the scope and meaning of the norm dictated by the legislator is; there is no declaration of will but of judgment or knowledge.”
Regarding the regulatory faculty, it must enable processes that are as simple as possible and easy to understand and apply in reasonable times, with the support of the agency’s taxpayer service area (didactic dissemination of the applicable regulations and procedure, advice, etc.).
As for the interpretative faculty, it must seek, in addition to equity in the universe of possible factual situations, uniformity of criteria in matters of law to reinforce the principle of equality before the law.
Summary
While it is accepted that it is unrealistic to avoid the profusion and complexity of tax legislation, it is acceptable and possible to reduce many of its negative consequences. That is, to adopt a reasonable attitude to look for solutions instead of aggravating the existing problem.
In this way the following solutions are proposed in the tax legislation:
●In the primary, the objective would be to achieve comprehensive tax reforms that replace the disjointed current system, the product of multiple “tweaks”, which over time have been incorporated,
●At the secondary level, to make the laws issued in a general way feasible and harmonize through a regulation elaborated with a high technical level, and
●In the tertiary, the objective should be to facilitate compliance with regulations and interpretatively achieve uniformity of criteria, respecting the principle of legality, certainty and equality before the law.
As for the set of all the rules, it is required:
●the participation of expert technicians with the necessary time to achieve the “user friendly” style, that is to say, to be able to obtain rules that are easy to apply and understand. Difficulties and emergencies have become the opponents of clarity and coherence in this area, and
●apply a writing technique in language as simple as possible, generate self-sufficient texts avoiding the multiple normative references, write the propositions in affirmative form instead of negative [7], apply a more rational numbering and subdivision into paragraphs (inserting internal calls), rationalizing the definitions of the terms, etc.
REFERENCES
[1] GONZÁLEZ, Darío “Simplificación normativa tributaria: análisis comparativo” (1999) REVISTA BOLETIN AFIP Nro. 24, pág. 1283 y SAIJ (Ministerio de Justicia y Derechos Humanos de Argentina).
[2] VILLAR EZCURRA, Marta, «Las Disposiciones aclaratorias en el derecho tributario», Crónica Tributaria, pág. 93, Núm. 77/1996
[3] A lo que debe adicionársele la actividad de su cuerpo jurídico en lo contencioso judicial.
[4] Administración Tributaria del Reino Unido.
[5] Massad, Leonel R., Simplificación tributaria. Conceptos e implicaciones. Boletín de la DGI, colección 1986, pág. 358.
[6] RETORTILLO, Martín L., «La interpretación de las normas según la Ley General Tributaria», Revista de Derecho Financiero y Hacienda Pública Nro 54/64.
[7] Resulta usual en muchos textos la aplicación de dos proposiciones negativas para evitar el alcance de una norma a un sector de contribuyentes, desconociendo que dos “no” equivalen a un “si”.
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