The start of the fiscal cycle: Taxpayer Registry

We have innumerable and valuable analyses regarding the tax processes and their guidelines to optimize the monitoring and control of our taxpayers[1], as well as the causes that restrict the fulfilment of their substantial and formal obligations; and in particular, on the mechanisms to control and mitigate tax evasion and tax avoidance.

As tax experts and project managers, we implement in our daily activities sound risk management strategies to mitigate or decrease the likelihood of negative events or risks. What are we looking for as an institution? Precisely that our taxpayers comply in a timely and truthful manner with their obligations, and on our side, to make better and more efficient assistance mechanisms to facilitate voluntary compliance, in addition to implementing controls and strategies to mitigate any signs of elusive behavior.

From an objective perspective, if we analyze the causes of the events that prevent the collection cycle from developing consistently, we will realize that one of the main opportunities for improvement in our administrations lies in the quality of taxpayers ‘ information.

Here we arrive at a strategic point (and often underestimated): if our taxpayers’ data is wrong, outdated or simply not there, we exponentially increase the risk of generating inconsistencies and operating costs in the collection cycle processes.

And this is where the Registry of taxpayers, as custodian of our first information asset, must have mechanisms that allow us to permanently manage information with quality, timeliness, completeness and truth.

We enter into the matter: The Taxpayer Registry is constituted as a control instrument whose function is to administer the information of citizens with “tax significance” for tax purposes, under a unique and mandatory identifier; applying mechanisms for recording and updating truthful, dynamic, consistent and non-duplicated data.

With this, the importance of the Taxpayer Registry for our Administrations goes hand in hand with the transparency and simplicity with which we manage this information, answering three key questions: Who are our taxpayers, what do they do? and where are they?

Once we have underscored this concept, let us analyze a little more its main premises:

Completeness of taxpayer information

The Taxpayer Registry distinguishes two key moments: opening, where we start the tax cycle; and updating, a process that includes data modification, as well as the taxpayer’s change of status.

The registry should identify all of the citizens and legal entities with tax significance on the basis of their status as taxpayers or potential taxpayers; maintaining a database always active, manageable, and with business value to create new strategies of care, control, closing of gaps and management of tax risks.

Registration information can be segmented into three concepts:

  • Identification data and principal address of the taxpayer, legal representants or related third parties, classifications, regimes and main attributes.

  • Tax obligations (tax vector), start date and end date, as well as exemption criteria.

  • Branches and establishments, with additional location data and means of contact for the purpose of location and notification. It is also important to identify those places where the taxpayer does not engage in economic activity, however, and for fiscal purposes, we can locate him.

The taxpayer Registry also has the function of managing the identification numbers centrally and harmoniously under a single mandatory criterion: the tax identification number (TIN); with the following characteristics:

  • It identifies natural persons from their birth (or from the beginning of their commercial activity) and legal entities from their constitution.

  • It is an immutable identifier in time, which remains until the death or extinction of the taxpayer

  • It is assigned by the Tax Administration (or made immediately available by other regulatory bodies).

  • It has a validation digit calculated on the basis of algorithms to detect erroneous, fictitious or duplicate numbers.

Segmentation and classification

The registry must have instruments of assistance and control for the small economy, as well as for the big taxpayers; including tools for sectorizing and profiling taxpayers according to their tax importance, for example, economic sectors or size.

On the other hand, it is important to orient the state of taxpayers to simple concepts of control regarding the temporary or definitive cessation of activities; and likewise, it is essential to establish a transversal definition of business on a manageable and non-manageable basis.

The use of Information standards in the main data catalogues is also an integral part of the registry, for example, economic activities, geographical locations and type of taxpayer.

Data quality and accuracy

The Taxpayers’ Registry should maintain a quality information base for transversal consumption of institutional processes based on solid structures of income control, validation and logics to prevent duplicates.

This repository must be permanently updated by identifying those inert taxpayers, based on constant, massive and recurring debugging, based on criteria of inactivity harmonized by all strategic processes and the value chain.

Taxpayer assistance services and channels

We must achieve a relationship of trust with the compliant taxpayers and reduce their indirect costs through simple and available services, with simple and easily accessible procedures, thereby striking a balance between assistance and the fight against informality and tax fraud.

In this way, we must optimize and expand virtual services based on the granting of the tax key and the signing of the liability agreement, to enable access to queries, issuance of certificates, registration and updating of data (without omitting the application of monitoring and control mechanisms to ensure the quality of our information).

Justification and business value

The taxpayer registry must ensure the integrity, use and business value of its information focused on three precepts:

  1. The economic environment.
  2. The needs of the institutional processes as main clients.
  3. The tax legislation, as a transversal axis to delineate the administration of data for the generation and control of compliance with tax obligations.

Centralization and dynamism

The Taxpayers registry should be constituted as the main repository of information for the transversal use of the whole Administration; encouraging the dynamism and updating of the data based on the interaction of all key stakeholders, for an effective management of the identification, location and subsequent control.

When we talk about key actors, we refer to strategic partners providing information inputs: internal processes and external agencies:

Internal Processes

Internal processes have a fundamental role to play in the management of the Register, for which we must integrate them with new powers to:

  • Create new points of attention and information input.

  • Keep the information dynamic and up-to-date based on evidence with the taxpayer.

  • Manage inconsistencies and outdated data; and,

  • Manage alternate and presumed information, e.g. other addresses, contacts, activities, etc.

External bodies

External actors have an equally important attribution to internal processes in order to maintain a full and up-to-date basis. For this, we must carry out an exercise of analysis and prioritization of those external sources for:

  • Validate the identity and creation of new taxpayers: both individuals and legal entities.

  • Clean up the status and legal status of taxpayers (deceased and extinct).

  • Provide alleged and alternative data regarding authorizations and location.

Legal framework

The legal and regulatory framework of the taxpayer registry should clearly identify the powers of all responsible actors, providing the necessary powers to keep the data permanently updated. Below, we outline the most important objectives:

  • Clarify the scope and attribution of the process, as well as the formal and duties and obligations of the taxpayers.

  • Empower the administration to obtain information from public or private external entities.

  • Empower the administration to manage the taxpayer’s information ex officio for the purpose of data cleansing and cleaning.

  • Express sanctions according to the taxpayer’s conduct with regard to non-registration, non-updating and misinformation.

This article aims to demonstrate the importance, scope and key points of the registry as a central axis in our administrations; and with this, our responsibility as technical officials to ensure the integrity and veracity of our main asset: the information of the taxpayer.

[1] According to the CIAT Model Tax Code (May 2015), Article 25 lists the types of tax obligation, to which the law imposes the fulfilment of a substantial and formal obligation; in the same section, the “taxpayer” is highlighted as the principal debtor of the tax obligation.

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