Collection efficiency: the healthy balance between tax facilitation and tax control

In Ecuador, during the first quarter of 2022, the Internal Revenue Service collected USD 6,653 million, representing a 37% growth in central tax collection, compared to the value collected in a similar period in 2021. In April 2022 alone, the collection exceeded 2 billion (USD 2,188 million), an increase of 54% compared to the collection reached in April 2021. This result represented a historic collection in the country.

In addition to signifying economic growth, this important achievement is also the consequence of a healthy balance between tax facilitation and control.

On the one hand, these results denote the effect of tax facilitation and administrative simplicity. The Internal Revenue Service has worked hard on the simplicity and automatization of its processes. Aware that tax facilitation and tax culture are indispensable to boost tax collection results, in December 2018, the Internal Revenue Service implemented simplified online declarations. This service promotes voluntary compliance through agile information processing and offers taxpayers tools such as profiling questions and suggested values, which strengthens simplicity in compliance. For example, thanks to this implementation, the filing time of VAT returns went from an average time of 30 minutes to one of 6 minutes. Within the framework of this important facilitation process, it should be mentioned that more than a decade ago (2009-2010), 5 out of 10 taxpayers submitted their VAT tax returns on time and 3 out of 10 those of Income Tax; now, 9 out of 10 taxpayers submit such returns on time.

On the other hand, the significant growth in collection figures also reveals the constant and permanent control and collection actions carried out by the Internal Revenue Service. In fact, in the first quarter of this year, USD 372 million was managed by control processes, and USD 271 million was collected via tax collection actions.

Taxation is a means of raising public revenue, but it is also an instrument of general economic policy, which stimulates investment, reinvestment, savings, and their use for productive purposes and national development, always taking into account the requirements of stability and social progress, seeking a better distribution of income, with progressiveness, equity, and justice. That is why proper governance is a key element in the socio-economic growth of countries. Hence, tax efficiency is a primary principle of the tax regime, for which a constant interrelationship between tax facilitation and tax control is necessary.

 

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