Friday’s “thing”

The 49th CIAT General Assembly in Lima concluded successfully and, as it has happened for a few years, the following day we also hold a successful workshop with the World Bank Group and the International Tax Compact – ITC.  With more than 60 participants, this session on Friday dealt with technology- related issues, and some of these issues, because of their nature, confront traditional positions within the tax administration and in the CIAT environment.

The first topic to which I will refer is pre-filled returns, about which I wrote a post a couple of years ago.  During the assembly, some new features were presented. Silvana Quinteros, of Argentina’s AFIP, commented on good results achieved with returns pre-filled with regard to social security contributions. Further in this Friday session, Flavio Araujo of the Receita Federal of Brazil told us about the good reception of these returns for individuals, in particular on mobile platform. Juan Francisco Redondo, head of the Permanent Mission of Spain to CIAT, surprised many of us by commenting on the 23 million draft returns prepared by the State Tax administration Agency this year. The greatest novelty, in my opinion, was yet to come: Santiago Menéndez, Director General of the Agency, announced new plans to make mandatory the electronic sending of invoices for the VAT taxpayers from 2017. Spain does not bet on a model of electronic invoicing, like those which are successfully developed in Latin America, but on the integral transmission of data, a short time after operations take place. This mechanism, which is understandable in the context of Spain which should harmonize its VAT-related processes in the framework of the European Union, will allow, as announced by the Director, prepare draft returns for the Value Added Tax.

Paul Panariello of Revenue Solutions’ presentation referred to improving compliance through the use of data analysis and crosses, and highlighted the compliance management guided by data, which progressed from data crosses and monitoring, to complex analysis and recognition of patterns to actually achieve predictive models of behavior. Among the lessons learned, it is worth to remember that the analysis of data should be just an enabling tool, and not an end in itself for the administration; These processes require time to mature and reach adequate levels in the quality of data to support the decision-making process; and it is appropriate to start with smaller and safer processes, for example, the management of administrative collections before the selection of cases for audit.

Will Rice, of Fast Enterprises, gave a presentation on behavioral economics and some  implications in relation to voluntary compliance, which included some references to experiments conducted by HMRC (1) , about the compliance improvement from notes which included information on  the compliance level of citizens from the country, town or neighborhood, while the control group received only the traditional text without mention of the levels of compliance. The improvement was clear in all three cases, and more significant if the taxpayers ‘group mentioned was closest. In the dialogue which followed, Carlos Vargas, from DGT of Costa Rica, commented an on-going experience in which the texts of notifications were adapted to make it look more “Tico” (Costa Rican Spanish) language and less looking like a “lawyer speech”, with an important and feedback of satisfaction. Natasha Avendaño, from the DIAN of Colombia described an unexpected notification resulting from a  DIAN mass control program which was sent to the newly appointed Director because of some inconsistency of information in relation to withholdings previously applied, effect which was well used to send to taxpayers the message that no one is away from the eyes of the administration.

Michael Snaauw of the CRA’s Canada, who commented on issues of e-commerce and digital economy, talked about Bitcoin (a topic on which I’ve written 1, 2 and even 3 posts). Michael reminded us that the use of encrypted currencies is not an exclusive concern for the Administration, but also and mainly for other agencies, since they are used to operate transactions of dubious legality (doubtful here is clearly an understatement). But in his explanation, two issues caught my attention. The first is that an administration may have to “accept” Bitcoins, likes it or not, not necessarily as a means of regular payment but for resulting in assets held by a particular organization, whose existence may be taxable, and even may be seized. The CRA considers these operations as barter for tax purposes. The second is the effect that the position on the use of encrypted currencies adopted by the legislation and the administration may have on businesses who legitimately want to offer this method of payment. At the same time, a couple of newspaper articles confirmed the opening of the first Cafe which accepts the currency in Buenos Aires.

The presence of two private companies in this type of event is a novelty, and certainly contrasts with a long tradition of events organized by CIAT. This practice, that we “copy” from a regular activity of the   Federation of Tax Administrators -FTA grouping the tax administrations of the United States, is only a starter of what we hope at the technology fair that we will have in Miami in 2016. This fair will be an event in which officials of our administrations, primarily in the business areas, can come in direct contact with companies that develop technology products that can serve tax administrations. The diversity in size, resource and technological evolution of administrations is wide. That’s why some may attend the fair with the intention of evaluating specific solutions for certain problems, other may come to seek inspiration on other approaches and new possibilities. From the secretariat, we hope that the fair will be a success.

I wish to conclude by paraphrasing Pedro Amo, from IFC, who was the master of ceremonies for this event. Inspired with behavior issues, he reminded us of the importance of completing the evaluation of the event: “80% of people in your country who read this post, will share it with their friends who may be interested through social networks, and 60% of those who live in your city are eager to leave a comment below”. Of course, these numbers are just a joke, but they illustrate the message.

Good luck

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