Transcript Tax amnesty - Union of Banks of Armenia

Tax Amnesty
Union of Banks of Armenia
Armenia 2007
In different time periods different tax amnestied had
been conducted around the world
Europe (Belgium, France, Ireland, Italy, Switzerland)
Latin America (Argentina, Bolivia, Brazil, Chile, Columbia)
Asia (India, Malaysia, Pakistan, Sri Lanka)
Pacific (Australia, Indonesia, New Zealand, The Philippines)
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and sometimes more than once
From November 29, 1982 till the present day, a
considerable number of more than 60 amnesty
programs have been conducted in US states
What does Tax Amnesty bring?

Tax revenue in the short run
According to a 1998 source
 the highest amount of money collected through a tax
amnesty did not exceed 2.6 % of total tax revenues
 the
lowest revenue was equal to 0,007% of total tax
revenues
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Reduction of the administaration cost
 No
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cost associated with audit and enforcement
Repatriation of the capital
What does Tax Amnesty bring ? – cont’d
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Bring the evaders «back to the route of honesty»
New taxpayers enter the system
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Increase in compliances
Information about the taxpayers and their activities
Note:
In general the state require the taxpayers coming forward under
amnesty to submit an application disclosing information
about operations.
Source: German Law Journal # 4
The important aspects of the
amnesty
Duration
One-time-only grace period
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2 months – 1 year
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It may be prolonged
Multiple amnesties
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in US from 1982 till present 60 amnesty programs
Permanent standing amnesty
in US 1919-1952
 Similar programs in the tax system of
 Canada
 Norway
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Germany
The Netherlands
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Sweden
The important aspects of the
amnesty
Agents of the government for implementing
the amnesty
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Banks
Credit organizations
With corresponding retail
operations licenses
The important aspects of the
amnesty
The eligibility of taxes
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In general it may refer to all taxes
May vary from country to country
Germany
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Income tax
Corporate tax
Turnover tax
Wealth tax
Trade tax
Inheritance tax
Gift tax
Tax deductions
State of Michigan
Tax Amnesty Program 2002
 Withholding
 Intangibles
 Individual Income Tax
 Inheritance
 Single Business Tax
 Severance
 Tobacco Products
 Motor Fuels
 Estate
The important aspects of the
amnesty
The eligibility of participants
Those that are not under the investigation
 Individuals
Amnesty Tax Collection from
 Firms/Businesses
Individual and Businesses
70
$63,1
Millions
60
50
40
30
20
State of Michigan
Tax Amnesty Program 2002
$18,8
10
0
Individual Taxes
Business Taxes
The important aspects of the
amnesty
Percentage
Varies from country to country
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India 30% (July-December, 1997)
Italy 2.5% (November 2001- May 2002)
South Africa: different (August 2006- May 31, 2007)
Example
From
To
Levy
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 )=ZAR
1 US dollar =7.3 ZAR
What does it give to the participant?
May vary from country to country
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It is an opportunity for those who became evaders by
chance and want to correct their mistake
No later investigation & penalties
Reduce civil & criminal penalties
Pay all previous taxes by decreased percentage
Enter into installment payment agreement
However the reduced interest rate & penalty provisions are
somewhat of a “carrot & stick” approach to tax collection.
More often the amnesty is followed by increased penalties and
stricter enforcement.
Source: German Law Journal # 4
When to do the tax amnesty?
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When it is expected to do
changes in the tax law
 increase in taxes
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The legislative power intends to end a
period of time
Budget gaps/Revenue shortfalls
Disadvantages
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It makes taxpayers aware of the tax evasions
It is a signal that tax evasion is not a big guilt
The generated revenue does not cover the
expenses
It underlines the weakness of the tax enforcement
policy
Decrease the receivables of the consequent year
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The amnesty in 2002 in Michigan decreased the revenue
of the FY 2003 by $18.4 million
May not attract the targeted hard-core evader
Taxpayers will decrease the compliance and wait
for a new amnesty
Disadvantages – cont’d
Aspects of equality between tax evaders and honest taxpayers
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In case of the amnesty the government refrains form punishment
Instead
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The taxable person gives up his/her anonymity and opens
concealed fortunes or incomes
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He/she will have to pay full taxes not only for the past but future periods
as well
The fiscal motives and the intention to lead people back to legality are reasons
justifying the unequal treatment resulting from the tax amnesty.
Source: German Law Journal # 4
However, the proponents of tax amnesty note:
“Honest taxpayers generally do not appreciate
risks and are not likely to change their habits.”
How guarantee effectiveness?
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Attract tax dodgers by wiping out past burdens by
decreasing or even eliminating back taxes
Increase post amnesty enforcements
Increase penalty and audit rates
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Impose sanctions on those taxpayers who had not taken
the advantage of the benefits provided by the amnesty
Well publicize
Organize taxpayers’ education programs
Improve customer service quality
How guarantee effectiveness?-cont’d
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Assure that it is one-time-only opportunity
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Otherwise the effect will not be satisfying
Almost Twice as Many Tax Returns Filed Under
1986 Tax Amnesty Program
Number of Returns
160,000
State of Michigan
Tax Amnesty Programs
128,218
120,000
81,043
66,855
80,000
53,001
47,175
40,000
13,854
0
New Taxpayers
1986
2002
Existing
Assesments
Total
Russia
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80% of transactions of large enterprises take place through a barter system,
because there is no liquid cash available to pay taxes.
Before the decision about implementing a tax amnesty program
What to do, apply the tax amnesty program to persons already convicted under
the Criminal Code Article "Tax Evasion“, or not?
The decision was made
Duration: March 1, 2007- January 1, 2008
Eligibility: Incomes received before January 1, 2006
Can not apply: Individuals whose guilt to tax crimes has been
established by the court of law
Percentage: 13%
The taxpayer will be protected from fiscal bodies’ claims to
the extent of the sum on which he was paid 13%.
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Tajikistan’s example
April1-June10, 2003
Legalized
 $187 million
 Over 1 million rubles
 61,000 euro
Those charged with capital-related crimes would get a clean slate.
For those who legalize their capital can get
 Examptions from state duties on
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Patents
Registration
Licensing
Exemptions on duties on orders for
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Housing
Constraction
Tajikistan’s example - cont’d
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Most "dirty" money in the country comes from the transport
of heroin and other illegal drugs, which yields $300-400 million
a year
high taxes
citizens outside the drug trade
hide their money
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A big source of unofficial currency is the labor market. Illegal
emigrants send money from abroad (Russia) about $500
million; 60% in cash
The threat
legalization of income from contraband of narcotics and corruption
can become a powerful factor for growth of organized crime,
threatening to undermine the national security of Tajikistan
Kazakhstan
2001:
Duration:
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1 month
Repatriated:
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$480 million
Participated:
 almost 3,000 individuals
Cash:
 88% of all deposits were
made in cash
Percentage:
 12% tax on legalized funds
State of Michigan
Tax Amnesty Program 2002
Duration
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15 May – July 1, 2002
Program expenses
$1.5 million + $22.9 million waived penalties
Net new revenue
 $30.2 million
 $7.4 million more than expected
The amnesty resulted in
 Increase in revenue of the FY 2002 by $ 48.7million
 Decrease in revenue of the FY 2003 by $18.4 million
 Increase in the tax base of the FY 2003
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State of Michigan
Tax Amnesty Program 2002
The purpose
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Taxpayers get
“fresh start”
Generate
additional
revenue for the
State
New Money
Prior Assessments
$25
$21.2
$20.5
$20
millions
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Michigan's Tax Amnesty Nets
$31.7 Million in New Revenue &
$50.2 Million from Prior Assessments
$13.8
$15
$13.5
$10
$6.6
$4.1
$5
$2.1
$0
SBT
Interest
Income Tax
Annuals
Sales Tax
Income Tax
Withholding
Use Tax
Other
The Philippines
(1972-1987) – 18 Tax Amnesty Programs
Generated:
P2.9 billion
On average the money generated from tax amnesties was equal to 1.6% of
total tax revenues
The Philippines
Tax Amnesties required mandatory filling of
SALN
Statement of Assets
 Liabilities
 Networth (Total Asset – Total Liability )
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The percentage of tax is equal to 3% of the
declared Networth
Union of Banks of Armenia
Armenia 2007