In a modern office with large windows and designer furniture located in a central street in a Latin American capital. The telephone rings. Saul pick up the handset. His assistant tells him that Mr. GĂłmez, very nervous, is asking to speak to him urgently.Â
Saul: Saul listening.
Gomez: Saul I got a huge problem.
Saul : What happened?
Gomez: I do not even know how to start, Iâ€™m very nervous.
Saul Quiet, take your time, there’s nothing we canâ€™t fix.
Gomez : Do not say that phrase, it reminds me that there are two inevitable things in life; death and taxes. And taxes are going to kill me…
Saul: What are you saying? … Tell me the problem!
Gomez: Well, okay, I will tell you… Yesterday a guy from the tax administration came to my business and handed the manager a summons for an audit in 10 days. I have to bring I don’t know what documents and copies of God knows how many things, and invoices and if not they will come and get them, and if I resist I will get a fine, and I donâ€™t know what more… it’s all so horrible. I do not understand … And with what you already know!
Saul Shh, quiet, man. Donâ€™t worry we have a lot to hold onto.
Gomez: Is that so? Youâ€™ve gone crazy… they are going to take everything, they have all the information, I even have to give them access to bank accounts and insurance revenues that they have detected in that account you know …
Saul: Let’s see… calm down, Iâ€™ll explain.
Gomez: Yes, please explain why I’m over here climbing up the walls and you seem so smug…
Saul Look, your obligation is to cooperate with the auditors. I’ll help with that. And let the time pass, when they are finished, we’ll see what they have discovered and what not and if we do not agree, we can object and present appeals.
Gomez: But I will be crushed if they see the account balances!
Saul: That will be inevitable. Wait to see what happens, and yes, we may have a problem,Â but it has a solution… I told you long ago that was a risk we should contemplate and take.
Gomez: Do not be thinking about “paying kick…”
Saul: Please! That’s unacceptable, I would never do that.
Gomez: Neither would I, we donâ€™t do these things anymore.
Saul: I mean other solutions. Those you know – and if you don’t know â€“ let mel explain; the Tax Code provides that we can raise appeals, and listen, while these appeals are pending there is no obligation to pay or give guarantees. They cannot do anything. They must stay put!
Gomez: But then … how long can we make this last?
Saul: Ugh well itâ€™s difficult to calculate but in the worst-case scenario, and if we exhaust all legal remedies, between 6 and 7 years.
Gomez: But all this is legal? Swear to me that it is because I am a good citizen and I donâ€™t want any troubleâ€¦
Saul: How would it not be legal? Article 20 of our Code says so: â€śWhile administrative and judicial remedies are running, the tax debt cannot be executedâ€ť. Or, to put it simply, it canâ€™t be charged until it is confirmed.
Gomez: Ugh, you donâ€™t know the weight this lifts off my shoulders. What a relief. You donâ€™t know how much I appreciate this information. I was hysterical, what you have told me will make me sleep peacefully. Also, because you can think of something to do with the company, maybe my children are almost ready to take care of it, or a new entity or something like that… anyway, we now have time to think. Get to it right away so that we arenâ€™t caught in the bullâ€™s horns.
This conversation is not real, but it could be.
Since the laws in some of our countries keep stating that: until the final determinations of the judicial appeals are reached, it is not possible to execute tax debts, this creates a perverse incentive for challenging the administration’s decisions in every instance, inflating the number of bad debts that are eventually impossible to collect.
In addition, and perhaps worse, it dissolves like a sugar cube the risk perception effect of the audit functions of tax administrations.
We can deplete rivers of ink and study many proposals, all of them interesting and necessary -all aimed at improving the quality of the control procedures, removing any aggressive or baseless audits, to achieve greater speed in the processing of these appeals, improving the system of public and private consultations or incorporating mechanisms of cooperative relationship. Why not, however, consider alternative methods of dispute resolution.
There is a far way to go… but as far as we may walk in the right direction, if we cannot make it so that it is not better to call Saul, we will have advanced very little.
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