Some experiences from member countries

During the CIAT Technical Conference held in Amsterdam last October 15 to 18, some tax administrations commented on developments that they have implemented in order to improve compliance.

Among these practices, I will mention those that I find interesting and even, why not, inspiring. Some administrations may, perhaps, adopt, adapt or emulate them. The papers and presentations are available on our website at the link for the Technical Conference

In India, as in other countries, with the annual information report program from the Ministry of Finance, various entities report individually specific transactions that meet certain characteristics and exceed a certain threshold. Among these, all deposits that exceed one million rupees, units of mutual funds that exceed one hundred thousand rupees, purchasing debt issued by companies or purchasing government bonds for values greater than five hundred thousand rupees. The information is used not only to verify that the reported personal incomes are consistent with the reported transactions but also to validate that the profits resulting from these transactions are included in the returns.

Regarding the program for obtaining information promoted by the Spanish Agency, they learned by experience that it is more useful to have specific returns for different types of information or required to report. Among the many information reports, some are very traditional, such as loans to acquire real estate or property registries, but others call the attention, such as transactions with Treasury bills or the one related to shares and interests in investment schemes offered by nonresidents companies. I would like to highlight the one related to electricity consumption (Model 159), not only because of the difficulties inherent in dealing with information, an uneasy task when considering the information gaps, lack of tax identification numbers related to the meters or the very frequent occurrence that the meters are associated with people different from those who occupy a property, but also regarding how they use the information, which allows to identify sources of income from non-declared rentals and very useful indicators for  the detection of what the Director for the Spanish Agency, Beatriz Miguel Viana called non-formal or informal economic activities.

In South Africa, SARS is requiring employers to make withholdings from wages as in other jurisdictions, but in addition they are requiring from employers two additional services: First, the registration of employees as taxpayers which moved the registry numbers from just under 6 million in 2009 to almost 14 million in 2012, significantly broadening the tax base, and second, they request that employers, using the salary deduction system, charge on behalf of the administration the  amounts corresponding to fines for tax noncompliance from their employees.

In Italy, as Stefano Gesuelli, the Italian Head of Mission at CIAT told us, they have implemented the “Redittomentro”, a term that could be translated “Rentómetro” or “Gananciómetro” in Spanish, or “profit meter” in English, which is a direct indicator that allows to know, according to information obtained by the tax administration, from over one hundred sources the total income and expenses attributable to a taxpayer. In case of differences between what was really obtained and the reported income, you can generate a performance determining with executive character a percentage of the difference. The “Redittomentro” focuses not on the big corporation but on small fish: professionals, merchants, craftsmen, dependent workers, etc.

Finally, the experience that inspired the name of this post comes from the Netherlands. The Tax and Customs Administration cooperates with the police to use the automatic license plate recognition system used by the police to identify vehicles for various reasons including, of course, police reasons. One of these is precisely the existence of payable tax debts associated with the vehicle or its owner. When a vehicle is located in these circumstances, it is detained and held by police until the debt is canceled. If the debt is not paid, the vehicle is auctioned and the outcome will credit the pending account, or refund the difference in cases where the result of the sale exceeds the amount of the debt. The results of the program have been very important, with more than eight thousand car seizures and with countless stories to tell, like the one of a boy who not only had his car seized, but also the one of his girlfriend who had an unpaid loan, or the citizen who carried with him a large amount of euros to pay a debt the day he was found.

Undoubtedly, the combination of information obtained on transactions in the economy, the use and application of innovative new technologies and intelligent cooperation with different actors are innovative opportunities in which we can learn from each other, and where always we find spaces to refine and perfect the goal of improving compliance and reduce litigation and with, as a result, fewer administrative and judicial appeals. Sometimes little nuances in the implementation of a practice can mean big differences.

Greetings and good luck

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