Transcript COLLECTING TAXES WHY PEOPLE PAY TAXES THE CORE FUNCTIONS OF TAX COLLECTION ORGANIZING TO COLLECT TAXES Next page.

COLLECTING TAXES
WHY PEOPLE PAY TAXES
THE CORE FUNCTIONS OF TAX
COLLECTION
ORGANIZING TO COLLECT
TAXES
Next page
WHY PEOPLE PAY
TAXES -- View 1a
Rational tax theory -THE COMPLIANCE GAMBLE
• The Taxpayer won’t pay if the expected
gain from tax evasion is positive, given
the probability of being caught and the
severity of punishment.
• As the probability of being caught and
the severity of punishment is increased,
evasion declines.
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WHY PEOPLE PAY
TAXES -- View 1b
THIS VIEW DOES NOT FIT THE
EVIDENCE VERY WELL.
• Given actual audit rates and
punishments, many fewer people
should pay taxes
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WHY PEOPLE PAY
TAXES -- View 2a
Co-production Theory -PEOPLE PAY TAXES WHERE THEY ARE
MOTIVATED AND IT IS CONVENIENT
TO DO SO
Taxpayers will pay if:
1. they know what is expected of them,
2. paying isn’t onerous,
3. they value the benefits they get from get
from government AND
4. they are encouraged in the habit of
compliance.
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WHY PEOPLE PAY
TAXES -- View 2b
• Evasion is lower where people know
precisely what is expected of them -passive systems work better than active
ones in that respect.
• Evasion is lower where tax rates are
relatively low.
• Evasion is lower where there is
consensus on what government uses
taxes for and the need for taxes to
provide the money (perceived burdens
are proportional to perceived benefits).
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WHY PEOPLE PAY
TAXES -- View 2c
• Evasion is lower where people aren’t
required to make large payments.
Withholding works!
• Evasion is lower where people are in the
habit of paying taxes.
IT IS PROBABLY WISE TO ADOPT
TAXES ACCORDING TO THE LOGIC
OF UNAVOIDABILITY, RAISING
AND EXPANDING THEM
INCREMENTALLY.
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Taxpayer Active vs.
Taxpayer Passive Tax
Regimes I
• Taxpayer active systems
require taxpayers to figure
out what they owe.
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Taxpayer Active vs.
Taxpayer Passive Tax
Regimes I
• Taxpayer active systems
require taxpayers to figure out
what they owe.
Advantages:
• the taxpayer can more easily
be made to see himself as a full
partner in the process;
• It’s cheaper for the state
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Taxpayer Active vs.
Taxpayer Passive Tax
Regimes II
• Taxpayer passive systems
compute taxpayer obligations.
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Taxpayer Active vs.
Taxpayer Passive Tax
Regimes II
• Taxpayer passive systems
compute taxpayer obligations.
Advantages:
• less costly to taxpayer
• evasion is lower
• tax system must be highly
transparent or people will not
trust govt’s tax claims.
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CORE FUNCTIONS
OF TAX
COLLECTION
•
Taxpayer registration
1. Preparation of tax roll
2. Identification of taxable flows
•
•
Declaration/Assessment
Tax accounting
1. Revenue accounting -- recording and
depositing payment to appropriate accounts
2. Taxpayer accounting -- posting information to
individual taxpayer accounts
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CORE FUNCTIONS OF
TAX COLLECTION
(cont.)
•
•
•
•
Delinquency control,
compliance, and collections
Audit
Appeal or protest
Enforcement
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ADMINISTRATIVE
STRUCTURES
Organizational structure describes
how work is decomposed into
tasks, activities, or role and then
grouped into organizational units
based on geography, function, or
program
• By function
• By tax type
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COLLECTION
COSTS
• To Government
• To Taxpayers
• To both
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Think Again.
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