tax amnesty union of banks of armenia armenia 2007
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Tax AmnestyTax Amnesty
Union of Banks of ArmeniaUnion of Banks of ArmeniaArmenia 2007Armenia 2007
In different time periods different tax amnestied In different time periods different tax amnestied had been conducted around the worldhad been conducted around the world
Europe Europe ((Belgium, France, Ireland, Italy, SwitzerlandBelgium, France, Ireland, Italy, Switzerland))
Latin AmericaLatin America ( (Argentina, Bolivia, Brazil, Chile, Argentina, Bolivia, Brazil, Chile, ColumbiaColumbia))
AsiaAsia (India, Malaysia, Pakistan, Sri Lanka)(India, Malaysia, Pakistan, Sri Lanka)
PacificPacific (Australia, Indonesia, New Zealand, The (Australia, Indonesia, New Zealand, The Philippines)Philippines) and sometimes more than onceand sometimes more than once
From November 29, 1982 till the present day, a From November 29, 1982 till the present day, a considerable number of more than 60 amnesty considerable number of more than 60 amnesty programs have been conducted in US statesprograms have been conducted in US states
What does Tax Amnesty What does Tax Amnesty bring?bring?
Tax revenue in the short runTax revenue in the short runAccording to a 1998 According to a 1998 sourcesource
the the highesthighest amount of money collected amount of money collected through a tax amnesty did not exceed 2.6 % through a tax amnesty did not exceed 2.6 % of total tax revenuesof total tax revenues
the the lowestlowest revenue was equal to revenue was equal to 0,000,0077%% of of ttotal tax revenues otal tax revenues
Reduction of the administaration cost Reduction of the administaration cost No cost associated with audit and No cost associated with audit and enforcementenforcement
Repatriation of the capitalRepatriation of the capital
What does Tax Amnesty What does Tax Amnesty bring ?bring ? – cont’d – cont’d
Bring Bring the evaders «back to the route the evaders «back to the route of honesty»of honesty»
New taxpayers enter the system New taxpayers enter the system Increase in compliancesIncrease in compliances
InformationInformation about the taxpayers and about the taxpayers and their activitiestheir activitiesNote:Note:In general the state require the taxpayers In general the state require the taxpayers coming forward under coming forward under amnesty to amnesty to submit an application disclosing information submit an application disclosing information about operations.about operations.
Source: German Law Journal # 4Source: German Law Journal # 4
The important aspects of The important aspects of the amnestythe amnesty
DurationDurationOne-time-only grace periodOne-time-only grace period
2 months – 1 year2 months – 1 year It may be prolongedIt may be prolonged
Multiple amnesties Multiple amnesties in US from 1982 till present 60 amnesty in US from 1982 till present 60 amnesty
programs programs
Permanent standing amnestyPermanent standing amnesty in US 1919-1952in US 1919-1952 Similar programs in the tax system of Similar programs in the tax system of
CanadaCanada GermanyGermany The NetherlandsThe Netherlands
NorwayNorway SwedenSweden
The important aspects of The important aspects of the amnestythe amnesty
Agents of the government for Agents of the government for implementing the amnestyimplementing the amnesty
BanksBanks Credit organizationsCredit organizations
With corresponding retail operations licenses
The important aspects of The important aspects of the amnestythe amnesty
The eligibility of taxesThe eligibility of taxes In general it may refer to all taxesIn general it may refer to all taxes May vary from country to countryMay vary from country to country
GermanyGermany Income taxIncome tax Corporate taxCorporate tax Turnover taxTurnover tax Wealth taxWealth tax Trade taxTrade tax Inheritance taxInheritance tax Gift taxGift tax Tax deductionsTax deductions
State of MichiganState of MichiganTax Amnesty Tax Amnesty
ProgramProgram 20022002 WithholdingWithholding
Individual Income Individual Income TaxTax
Single Business TaxSingle Business Tax
Tobacco ProductsTobacco Products
EstateEstate
IntangiblesIntangibles
InheritanceInheritance SeveranceSeverance Motor Motor
FuelsFuels
The important aspects of The important aspects of the amnestythe amnesty
The eligibility of The eligibility of participantsparticipantsThose that are not under the Those that are not under the
investigationinvestigation IndividualsIndividuals Firms/BusinessesFirms/Businesses
State of MichiganTax Amnesty Program 2002
Amnesty Tax Collection from Individual and Businesses
$18,8
$63,1
0
10
20
30
40
50
60
70
Individual Taxes Business Taxes
Mill
ion
s
The important aspects of The important aspects of the amnestythe amnesty
PercentagePercentageVaries from country to countryVaries from country to country
India 30% (July-December, 1997)India 30% (July-December, 1997) Italy 2.5% (November 2001- May 2002)Italy 2.5% (November 2001- May 2002) South AfricaSouth Africa: different (August 2006- May 31, : different (August 2006- May 31,
2007)2007)
FromFrom ToTo LevyLevy
R - R 35,000 No levy payable
R 35,000 R 100,000 2% of the amount above R 35 000
R 100,000 R 250,000 R1 300 + 3% of the amount above R 100 000
R 250,000 R 500,000 R5 800 + 4% of the amount above R 250 000
R 500,000 and above R15 800 + 5% of the amount above R 500 000
R ( South African Rand )=ZAR1 US dollar =7.3 ZAR
ExampleExample
What does it give to the What does it give to the participant?participant?
May vary from country to countryMay vary from country to country It is an opportunity It is an opportunity for for thosethose who became who became
evaders by chance and want to correct their evaders by chance and want to correct their mistakemistake
No later investigation & penaltiesNo later investigation & penalties Reduce civil & criminal penaltiesReduce civil & criminal penalties Pay all previous taxes by decreased Pay all previous taxes by decreased
percentagepercentage Enter into installment payment agreementEnter into installment payment agreementHowever the reduced interest rate & penalty However the reduced interest rate & penalty
provisions are provisions are somewhat of a “carrot & stick” somewhat of a “carrot & stick” approach to tax collection.approach to tax collection.More often the amnesty is followed by increased More often the amnesty is followed by increased penalties and penalties and stricter enforcementstricter enforcement..
Source: German Law Journal # 4Source: German Law Journal # 4
When to do the tax When to do the tax amnesty?amnesty?
When it is expected to do When it is expected to do changes in the tax lawchanges in the tax law increase in taxesincrease in taxes
The legislative power intends to The legislative power intends to end a period of timeend a period of time
Budget gaps/Revenue shortfallsBudget gaps/Revenue shortfalls
DisadvantagesDisadvantages It makes taxpayers aware of the tax evasionsIt makes taxpayers aware of the tax evasions It is a signal that tax evasion is not a big guiltIt is a signal that tax evasion is not a big guilt The generated revenue does not cover the The generated revenue does not cover the
expenses expenses It underlines the weakness of the tax It underlines the weakness of the tax
enforcement policyenforcement policy Decrease the receivables of the consequent yearDecrease the receivables of the consequent year
The amnesty in 2002 in Michigan decreased the The amnesty in 2002 in Michigan decreased the revenue of the FY 2003 by $18.4 millionrevenue of the FY 2003 by $18.4 million
May not attract the targeted hard-core evaderMay not attract the targeted hard-core evader Taxpayers will decrease the compliance and wait Taxpayers will decrease the compliance and wait
for a new amnestyfor a new amnesty
DisadvantagesDisadvantages – cont’d – cont’dAspects of equality between tax evaders and honest Aspects of equality between tax evaders and honest
taxpayerstaxpayers
In case of the amnesty the government refrains In case of the amnesty the government refrains form punishment form punishment
The taxable person gives up his/her anonymity and The taxable person gives up his/her anonymity and opens concealed fortunes or incomesopens concealed fortunes or incomes He/she will have to pay full taxes not only for the past but He/she will have to pay full taxes not only for the past but
future periods as wellfuture periods as well
The fiscal motives and the intention to lead people back to The fiscal motives and the intention to lead people back to
legality are reasons justifying the unequal treatment legality are reasons justifying the unequal treatment resulting from the tax amnesty.resulting from the tax amnesty.
Source: German Law Journal # 4Source: German Law Journal # 4
Instead
However, the proponents of tax However, the proponents of tax amnesty note:amnesty note:
““Honest taxpayers generally do not Honest taxpayers generally do not appreciate risks and are not likely to appreciate risks and are not likely to change their habits.”change their habits.”
How guarantee How guarantee effectiveness?effectiveness?
Attract tax dodgers by wiping out past Attract tax dodgers by wiping out past burdens by decreasing or even burdens by decreasing or even eliminating back taxeseliminating back taxes
Increase post amnesty enforcementsIncrease post amnesty enforcements Increase penalty and audit ratesIncrease penalty and audit rates
Impose sanctions on those taxpayers who Impose sanctions on those taxpayers who had not taken the advantage of the benefits had not taken the advantage of the benefits provided by the amnestyprovided by the amnesty
Well publicize Well publicize Organize taxpayers’ education programsOrganize taxpayers’ education programs Improve customer service qualityImprove customer service quality
How guarantee How guarantee effectiveness?-cont’deffectiveness?-cont’d
Assure that it is one-time-only opportunityAssure that it is one-time-only opportunity Otherwise the effect will not be satisfyingOtherwise the effect will not be satisfying
Almost Twice as Many Tax Returns Filed Under 1986 Tax Amnesty Program
47,175
81,043
128,218
13,854
53,00166,855
0
40,000
80,000
120,000
160,000
New Taxpayers ExistingAssesments
Total
Num
ber
of R
etur
ns
1986 2002
State of MichiganState of MichiganTax Amnesty Tax Amnesty ProgramsPrograms
RussiaRussia 80% of transactions of large enterprises take place through a 80% of transactions of large enterprises take place through a
barter system, because there is no liquid cash available to barter system, because there is no liquid cash available to pay taxes.pay taxes.
Before the decision about implementing a tax Before the decision about implementing a tax amnesty programamnesty program
What to do, apply the tax amnesty program to persons already What to do, apply the tax amnesty program to persons already convicted under the Criminal Code Article "Tax Evasion“, or convicted under the Criminal Code Article "Tax Evasion“, or not? not?
The decision was madeThe decision was madeDuration: Duration: March 1, 2007- January 1, 2008March 1, 2007- January 1, 2008
Eligibility: Eligibility: Incomes received before January 1, 2006Incomes received before January 1, 2006
Can not apply: Can not apply: Individuals whose guilt to tax crimes has Individuals whose guilt to tax crimes has been been
established by the court of lawestablished by the court of law
Percentage: 13%Percentage: 13% The taxpayer will be protected from fiscal bodies’ claims to The taxpayer will be protected from fiscal bodies’ claims to the extent of the sum on which he was paid 13%.the extent of the sum on which he was paid 13%.
Tajikistan’s exampleTajikistan’s example April1-June10April1-June10, 2003, 2003Legalized Legalized $187 million$187 million Over 1 million rublesOver 1 million rubles 61,000 euro61,000 euroThose charged with capital-related crimes would get a Those charged with capital-related crimes would get a
clean slate.clean slate.For those who legalize their capital can getFor those who legalize their capital can get Examptions from state duties on Examptions from state duties on
PatentsPatents RegistrationRegistration LicensingLicensing
Exemptions on duties on orders forExemptions on duties on orders for HousingHousing ConstractionConstraction
Tajikistan’s exampleTajikistan’s example - - cont’dcont’d
Most "dirty" money in the country comes from the Most "dirty" money in the country comes from the transport of heroin and other illegal drugs, which transport of heroin and other illegal drugs, which yields $300-400 million a year high taxes yields $300-400 million a year high taxes citizens outside the drug trade hide their citizens outside the drug trade hide their moneymoney
A big source of unofficial currency is the labor A big source of unofficial currency is the labor market. Illegal emigrants send money from abroad market. Illegal emigrants send money from abroad (Russia) about $500 million; 60% in cash(Russia) about $500 million; 60% in cash
The threatThe threatlegalization of income from contraband of narcotics and legalization of income from contraband of narcotics and
corruption can become a powerful factor for growth of corruption can become a powerful factor for growth of organized crime, threatening to undermine the national organized crime, threatening to undermine the national securitysecurity of Tajikistan of Tajikistan
KazakhstanKazakhstan
2001:2001:
Duration:Duration: 1 month1 month
Repatriated:Repatriated: $480 million$480 million
ParticipatedParticipated: : almost 3,000 almost 3,000 individualsindividualsCash:Cash: 88% of all deposits 88% of all deposits were made in cash were made in cash Percentage: Percentage: 12% tax on legalized 12% tax on legalized fundsfunds
State of MichiganState of MichiganTax Amnesty ProgramTax Amnesty Program 20022002
DurationDuration 15 May – July 1, 200215 May – July 1, 2002
Program expensesProgram expenses $1.5 million + $22.9 million waived penalties$1.5 million + $22.9 million waived penalties
Net new revenueNet new revenue $30.2 million$30.2 million $7.4 million more than expected$7.4 million more than expectedThe amnesty resulted inThe amnesty resulted in
Increase in revenue of the FY 2002 by $ Increase in revenue of the FY 2002 by $ 48.7million48.7million
Decrease in revenue of the FY 2003 by $18.4 Decrease in revenue of the FY 2003 by $18.4 millionmillion
Increase in the tax base of the FY 2003Increase in the tax base of the FY 2003
State of MichiganState of MichiganTax Amnesty ProgramTax Amnesty Program 20022002
The The purposepurpose
Taxpayers Taxpayers get “fresh get “fresh start”start”
Generate Generate additional additional revenue for revenue for the Statethe State
Michigan's Tax Amnesty Nets $31.7 Million in New Revenue &
$50.2 Million from Prior Assessments
$0
$5
$10
$15
$20
$25
SBT Interest Income TaxAnnuals
Sales Tax Income TaxWithholding
Use Tax Other
mill
ions
New Money
Prior Assessments
$21.2
$20.5
$13.8 $13.5
$6.6$4.1
$2.1
The PhilippinesThe Philippines(1972-1987) – 18 Tax Amnesty Programs(1972-1987) – 18 Tax Amnesty ProgramsGenerated:Generated: P2.9 billion P2.9 billion
On average the money generated from tax amnesties On average the money generated from tax amnesties was equal to 1.6% of total tax revenueswas equal to 1.6% of total tax revenues
The PhilippinesThe Philippines
Tax Amnesties required mandatory Tax Amnesties required mandatory filling of SALN filling of SALN
Statement of AssetsStatement of Assets LiabilitiesLiabilities Networth (Total Asset – Total Liability )Networth (Total Asset – Total Liability )
The percentage of tax is equal to 3% The percentage of tax is equal to 3% of the declared Networthof the declared Networth
Union of Banks of ArmeniaUnion of Banks of ArmeniaArmenia 2007Armenia 2007
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