Willingness to pay should not be seen as an objective focused on Tax Administration, but as the natural consequence of a system in which society perceives that taxes finance a legitimate, equitable and transparent collective welfare…

ㅤㅤ

Introduction

In his inauguration speech, a tax administrator promised to “achieve voluntary compliance with tax obligations”.

He reminded me of my training in the auditing function, many, many years ago, under institutional coercive programs whose objective was also to “improve voluntary compliance”.

I always wondered what was “voluntary” about the collections derived from determinations, seizures, closures, criminal sanctions or judicial seizures, accompanied by security forces.

Many years have passed, many administrations have given me the opportunity to gain experience about tax behavior and also the consequences of not having understood it in time.

Some concepts of fiscal sociology, learned later, allowed me to recognize the true basis of the contribution, in the social satisfaction for public services and welfare-oriented state policies.

ㅤ

Compliance framework

Compliance is not an isolated or purely technical act; it arises from a complex social scenario where three key factors interact: culture, behavior and will.

ㅤ

Culture

Culture is the set of beliefs, values, knowledge, practices and modes of behavior that we share and transmit from generation to generation. It is the fabric that connects people and is manifested in language, art, religion, traditions, customs, norms and forms of social organization.

Culture has a profound and determining influence on behavior, acting as a system that guides the beliefs, values, norms, habits and behaviors of individuals in society.

ㅤ

Behavior

They are actions, reactions and expressions that a person shows in response to the environment, the way he or she acts responds and behaves, influenced by experiences, learning, emotions and values voluntarily or involuntarily, consciously or unconsciously in adaptation to the norms and expectations of society.

Behavior is shaped by the will and the social and cultural environment or by the emotional or physical state. Understanding this complexity is key to addressing issues such as education, health, justice and public policy.

ㅤ

The will

The will is the internal force that gives direction to the capacity to consciously decide and execute actions with the purpose of reaching an objective or satisfying a need.

ㅤ

The ideal scenario…

Culture defines the basis of what is socially acceptable or unacceptable, the behavior translates culture into actions and willingness determines the authenticity of compliance based on a deep alignment between the individual’s internal values, social norms and the perceived legitimacy and fairness of the system.

Voluntary compliance with tax obligations results from the social valuation of contributions as a tool for collective welfare, a behavior aligned with cultural values reinforced by incentives and sanctions, and a decision based on satisfaction with public services and policies.

The State can influence this scenario by improving public services in education, health, security and harmonizing social welfare policies, combating corruption, clearly showing the destination of public resources, ensuring fiscal equity and understanding the real causes of non-compliance in order to address them at their root.

ㅤ

Moderating social factors

There are factors that play a crucial role in the moderation of behavior and in its perception as voluntary: norms, customs and collective expectations – the frame of reference of culture – influence the behavior of individuals, whose need for acceptance and belonging leads them to modify it in accordance with social expectations.

ㅤ
Education, communication and professional integrity are factors that mobilize the will to reinforce confidence in the system as a bridge between the State and Society.

 ㅤ

Social satisfaction

A framework that frames social satisfaction or dissatisfaction can be structured in the legitimacy of the state mandate derived from representative democratic participation that demands effectiveness in the provision of public services and policies of fair distribution of wealth, with tax systems perceived as fair and policies aimed at closing economic-social gaps.

In short, the key lies in a two-way relationship between State and Society, where public policies not only seek compliance with regulations, but also the strengthening of a culture based on trust, transparency and community participation.

ㅤ

Tax Management

Atmosphere of trust

In the tax area, a voluntary change of behavior is produced – without coercion – when the tax is born from the motivation and decision of citizens aware of the importance of their contribution to the common welfare.

Non-compliant taxpayers are likely to voluntarily choose to change their behavior in communities where taxes are used for quality public services, effective social programs and reliable state management that generates a culture of compliance and a sense of collective responsibility. The Tax Administration (TA) “stimulates tax compliance” through a combination of taxpayer services and intrusive processes for non-compliance..

Administrative services alone do not generate willingness to pay, and intrusive processes blur the social, structural and democratic factors that influence the collective willingness to contribute.

When the State offers transparency in the destination of taxes, taxpayers perceive the use of their contribution for welfare and the tax administration generates trust, aligning itself with a more collaborative and less authoritarian behavior.

The administration should work to improve citizen’s trust in state institutions, especially in their transparency, the efficiency of public services (education, health, security, infrastructure) and the equity of welfare policies in order to strengthen the social pact.

The institutional role can be redefined by promoting a culture of compliance through public policies that link fiscal contributions to social benefits.

By focusing on fostering a culture of compliance based on social satisfaction and equity, the balance of the social pact is strengthened.

OECD presents cooperative and design models, which involve bringing the most important sectors of the economy closer to the management of the State.

It currently recommends greater integration between large companies and tax administration in the work of determining the economic reality, its impact on the contribution and integration of systems.

The framework aims for large taxpayers to take a more active role in tax auditing and compliance.

This approach allows taxpayers to have a more influential position to demand more effective, transparent and social welfare oriented public policies from the State.

ㅤ

Cooperative compliance

Cooperative compliance is a program open to companies to which the TA offers services of the highest quality, timeliness and legal certainty that reduce taxpayer litigation.

Cooperative compliance fosters a relationship of trust, encouraging self-regulation and commitment to the community,

The model is based on a relationship based on cooperation that guarantees tax compliance and distinguishes itself in a relationship that moves from the traditional model of reaction to fraud to an approach of prevention of tax evasion and avoidance.

ㅤ

Compliance by design

It refers to the next stage in the digitalization journey by integrating TA processes with the systems that taxpayers use to run their businesses, manage their finances and interact with their customers and employees.

ㅤ

Intrusive scope

• • Coercion

To address the effects of coercion as a credit control and recovery strategy is to admit the negative impact of state policies and services on taxpayers’ behavior.

Some administrations seek to enhance their capacity to detect non-compliance by renewing their technology without foreseeing or having sufficient coercive capacity to enforce them, generating the greatest speed of the means, the strangulation of collection.

Investments in technology can be perceived as superficial if their ability to detect defaults and recover the resulting receivables is not adequately planned for.

ㅤ

• • Enforced Pressure

The threat of audit may deter some taxpayers from noncompliance, but if the determination is not effectively enforced in the recovery of the credits, the deterrent loses its force.

The lack of jurisdiction of the tax administration to enforce delinquency by itself or because of its dependence on the Judicial Power, limits its capacity to recover the lost credit, affecting the institutional morale, the public perception of tax justice and the effectiveness of the tax administration, generating doubts in its capacity to control noncompliance.

The question then remains as to whether the Tax Administration is the body capable of twisting the non-compliance will of a society that mandates services and policies to a State that is incapable of satisfying it.

 ㅤ

Is voluntary compliance with tax obligations an objective of the tax administration…?

Tax administrations that claim to pursue voluntary compliance with services and coercion face the challenge that willingness to comply depends largely on society’s satisfaction with the state’s performance and less on its capabilities.

A cultural shift is needed that transcends the traditional focus on services and intrusion and brings to the forefront a social rethinking of the role of institutions and professions in the management of public resources and services.

Tax administration, in this case, would not be the center of the relationship between Society and the State, but a delegated function of a system of policies that encompasses broader areas requiring a global vision.

The influence of the State’s management on social behavior as a shaper of tax compliance excludes voluntary compliance with tax obligations as the objective of a tax administration exclusively responsible for compliance services and intrusion for noncompliance.

The fundamental reason the tax administration must rethink its objective of “voluntary compliance with tax obligations” is that this objective overestimates its capacity to influence the will of taxpayers and diverts attention from the structural and social factors that condition tax behavior.

ㅤ

Fundamentals aspects and assertions:

Voluntary compliance depends on the social pact, not on the tax administration: The willingness to comply with tax obligations does not originate in administrative services or intrusion, but in society’s satisfaction with state governance, particularly in areas such as education, health, security and equity in the distribution of wealth.

A tax administration does not control social satisfaction: Although it can provide efficient services and adopt intrusive strategies, these actions do not address the deeper causes of tax noncompliance linked to the social perception of the legitimacy of the State and equity in the use of public resources.

The current approach diverts resources and effort: Investment in technology, audits and enforcement mechanisms can generate immediate results, but often distracts from deeper problems, such as dissatisfaction with the quality and transparency of public services.

Coercion does not generate trust: Intrusive strategies to control noncompliance can deteriorate the relationship between the State and society, weakening trust in institutions and perpetuating a cycle of distrust and evasion.

Change of approach to strengthen the social covenant: A rethinking of the objective would allow the tax administration to adopt a complementary role, focused on supporting the State to improve public policies and foster citizen confidence in institutions.

ㅤ

Proposal

The Tax Administration should focus primarily on:

• • Facilitating the technical compliance of obligations through efficient services.
• • Collaborate with other state institutions to identify and address the social and structural causes of noncompliance.
• • Provide feedback to the State on the factors that influence the willingness to pay, allowing for adjustments in public policies that strengthen the social pact.

The objective of “voluntary compliance” must evolve towards an approach that recognizes its dependence on a broader relationship between the State and society, where citizen satisfaction is the real driver of a responsible tax culture.

 ㅤ

Final thoughts

The thoughts shared here have no other objective than to induce the community to remember the moment of the origin of the mandate of the State, that in which man discovers his need to associate in property for the communal production supplying life, and to authorize a part of the association to manage and secure the resources at the price of a social contribution to fulfill its objectives.

So, the contribution was intended to ensure the right of society to live in peaceful coexistence and the right of those in charge to receive the necessary resources.

Today we live in a situation of inverted obligations and rights: it seems that the rights correspond to agents without obligations and the obligations to those who claim them, without any right whatsoever..

The idea of the mandatory State today determines the birth of social contributions in the form of taxes, poorly assumed as an inalienable right of the State, beyond the non-fulfillment of its mandate and the social dissatisfaction generated by such a situation.

The State arrogates itself its rights without obligations, that it tolerates crime to reach the decisions of the political power, to demolish in democracy the participation in them and to make believe that the voluntariness of the contribution belongs to those who have the weapons to demand it.

In other words: As for the new director to whom I referred above, perhaps experience will convince him of the constraints of his management to meet the objective he has set for himself, if he still maintains it.

I for one thank him for the opportunity he gave me to “discuss it” with the IA.

72 total views, 25 views today