Page 8 - Working Paper (Tax Policy Options during Economic Downturn)
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DDTC Working Paper 1315

                         identifies  taxpayers  considered  at  risk  for   that  should be considered when designing
                         financial  distress  and  contacting  them  by   a tax rebate program is it can be handled
                         phone to offer assistance before they have       more easily in countries where individuals
                         failed to meet a tax  obligation .  In  2008,    refunds are a normal part of the tax system.
                         the  United  States  enacted  the  Economic
                         Stimulus  Act,  which  provided  tax  rebates       Tax enforcement is also another program
                         to  low-  and  middle-income  households  as     that  needs to be  strengthened during
                         part of  stimulus  payments to more than         distress environment. It requires enhanced
                         100 million taxpayers. However, experience       enforcement in six directions  as shown in
                                                                          table 3 to cope with compliance.
                   18. Borondolo, op cit.

                                                     Table 3 - Enforcement and Strategies
                        No  Enforcement      Strategies

                          1  Safeguarding revenue   •  Consolidating the number of large taxpayer office (LTO) and ensuring that they report
                            collection from large   directly to a senior headquarters official instead of through a regional tax office;
                            taxpayers        •   Reviewing the selection criteria for assigning taxpayers to the LTO to ensure that the LTO
                                                controls at least 60 percent of the tax base;
                                             •  Increasing the number of LTO staff, particularly auditors, in line with any increase in the
                                                number of taxpayers assigned to the LTO;
                                             •  Shifting the focus of the LTO audit program towards industries most affected by the crisis
                                                and making greater use of issue-specific audits to broaden audit coverage;
                                             •  Introducing or expanding the use of industry specialist at the LTO, including for financial
                                                products, valuation, and computer-aided audit methods as well as for complex issues that
                                                span industries, such as transfer pricing, thin capitalization, and tax losses.

                          2  Securing tax    •  Broadening audit coverage for tax withholding;
                            withholding      •  Assigning higher priority to recovery of arrears involving these taxes;
                                             •  Enhancing the exchange of information with other agencies (e.g. customs, social insurance
                                                funds) that play a role in administering tax withholding;
                                             •  Reviewing and increasing penalties.
                          3  Intensifying arrears   •  Ensure early detection of tax arrears and establish appropriate time standards for follow-up;
                            collection       •  Maintain the quality and timeliness of tax arrears data;
                                             •  Target enforcement efforts on recoverable arrears;
                                             •  Leverage the telephone context center to place outgoing debt collection calls;
                                             •  Write off arrears deemed unrecoverable;
                                             •  Implement proper organizational and staffing arrangements for collection enforcement,
                                                including a greater organizational focus for large tax debt,;
                                             •  Be vested with a full set of enforcement powers.
                          4  Giving greater   •  Verifying doubtful claims, particularly in cases of larger claims;
                            attention to loss-  •  Determining whether the conditions and limitations have been correctly applied for carrying
                            reporting businesses  forward, carrying back, and transferring losses;
                                             •  Checking for possible manipulation of losses by consolidated groups and partnerships.
                          5  Enhancing the   •  Developing a targeted audit program to address cross-border evasion;
                            scrutiny of cross-  •  Expanding the number of audits of international issues, increasing the number of
                            border transactions  international tax auditors (particularly within the LTO), and providing greater technical
                                                guidance to auditors on international issues;
                                             •  Increasing disclosure requirements on international transactions;
                                             •  Publishing warnings on specific international tax planning schemes that are deemed to
                                                improperly exploit loopholes in the tax laws;
                                             •  Promoting the exchange of information with the country’s anti-money laundering agency to
                                                verify compliance and identify aggressive international tax practices;
                                             •  Entering into tax information exchange agreements with other jurisdictions and effectively
                                                using this information for control purposes;
                                             •  Introducing a voluntary disclosure program that encourages taxpayers to declare previously
                                                unreported income in offshore accounts.
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