Regarding the recent publication of CIAT 

There is no doubt of the importance for tax administrations (TAs) of risk analysis or, more comprehensively, Compliance Risk Management, understood as a process for TAs to choose the most appropriate tool to encourage “voluntary” compliance and prevent non-compliance, considering the taxpayers’ behavior and their causes, and the TA’s capacity to act. [1]

Related to this, the segmentation of taxpayers in the TAs is a key strategy to improve fiscal management and optimize tax collection. It is based on classifying taxpayers according to different criteria, such as the size of their company, income level, compliance behavior, economic activity and evasion risk.

TAs usually divide taxpayers into categories such as large companies, small and medium-sized enterprises, microenterprises, and individuals. In addition, some implement more sophisticated segmentations based on risk analysis, sector of activity or compliance history.

For this reason, it seems important to summarize these issues following the recent publication “Panorama of Tax Administrations in the CIAT Countries” [2]  Volume II, which collects information on multiple aspects of TAs.

It was based on data from the latest version of the International Survey of Tax Administration (ISORA), collected in 2023 and referring to the situation of TAs in 2022, in which the tax administrations (TAs) of 166 countries participated.

Other especially important topics covered in this volume II are institutional and governance mechanisms, human resource management, fiscal operations and relations with stakeholders.

1. Segmentation of taxpayers

According to the recent CIAT publication, the most widespread segmentation technique is constituted by the special units or programs for large taxpayers (UGC), present in 85.5% of the ISORA countries, in 94.4% of the CIAT countries and in 87.5% of the LAC countries.

The most common criterion when defining a large taxpayer is the volume of operations / turnover;  in second and third place are the sector and income.

Specific regimes for high-net-worth taxpayers (HNWI) are present in 28.9% of ISORA countries. In the CIAT countries, this percentage rises to 47.2%, while for LAC the figure is remarkably similar (28.1%). As for the criteria used to define HNWI, the two most common, by far, are assets or equity, and income.

Simplified schemes for small taxpayers are present in almost two thirds of the ISORA countries (65.7%), while in the CIAT countries that figure rises to 72.2% and in LAC it drops to 50%.

In addition, these simplified regimes are much more common as the income level of countries decreases. The most common types of simplified regimes are proportional invoicing and simplified participation in ordinary regimes.

2. Compliance risk management

In 2022, 75.3% of ISORA participants had an official compliance risk management strategy and almost all of them (96%) had a formal method to identify, evaluate and prioritize the main risks.

In the CIAT countries, the percentages were even higher (80.6% and 96.6%, respectively), while in LAC they were slightly lower (71.9% and 91.3%, respectively). In addition, 55.4% of the participants in ISORA had personnel specialized in auditing for international taxation and a somewhat lower percentage (48.8%) concluded advance pricing agreements. Both figures were higher among the CIAT countries (75% and 61.1%, respectively) and slightly lower in LAC (53.1% and 40.6%, respectively).

The most frequent periodic estimates of the tax gap are those made for VAT (44.6% of ISORA TAs), while for personal income tax (PIT), corporate income tax (CIT) and other taxes, the figure drops to around 25%. In both CIAT and LAC countries, it is more common to make gap estimates in all cases.

The biggest challenges related to compliance risk in international tax matters are recruiting and retaining the right staff, obtaining data to determine, analyze and manage compliance risk, using that data, developing an effective compliance improvement plan, having an appropriate legislative framework for international compliance risks and creating an effective organizational structure for international compliance risks.

With regard to the elements included in the general compliance procedure, a very large majority of the ISORA, CIAT and LAC countries allow taxpayers to voluntarily correct errors or omissions in their returns and remind and urge them to comply with their tax obligations: 92.2% and 95.2%, respectively, of the ISORA countries; 91.7% and 94.4%, respectively, of the CIAT members; and 93.8% in both cases of the LAC countries.

Likewise, responding in a proportionate way to non-compliance, ensuring that taxpayers benefit if they declare errors or omissions early and cooperate fully with the administration, as well as having or being developing a formal framework for compliance interventions are other common elements in this matter.

Prior to the submission of tax returns, the most common type of intervention regarding compliance by the TA is to remind taxpayers of the filing deadlines; it is conducted practically in all ISORA countries and in all CIAT and LAC countries.

The second most common intervention is to focus the campaigns on promoting compliance.

Thirdly, but at a distance, comes facilitating taxpayers’ access to data about third parties already collected by the TA.

Once the tax declarations have been submitted, but before starting the formal audit procedure, the most common types of intervention are detecting inconsistencies by comparing third-party data; requesting additional information; conducting risk examinations and detecting anomalies or outliers by data analysis.

In addition, the effectiveness of pre- or post-filing interventions (but before the audit) is measured in 42.8% of the countries in ISORA, the percentage being somewhat lower among LAC countries (40.6%) and much higher among CIAT members (66.7%).

The comprehensive audit measures are conducted practically in all countries in ISORA, CIAT and somewhat less in LAC.

In fact, in LAC the most common are audits of a specific issue. Documentary audits are the second most common in ISORA (91.6%), but much less among CIAT members (77.8%).

Something similar happens with those of limited scope, applied in 85.5% of the countries in ISORA and in 77.8% of those in CIAT. The opposite is observed in the investigations for avoidance and evasion: employed in 80.1% of the countries in ISORA and in 88.9% of those in CIAT (much less in LAC, 68.8%).

The most frequent indicator used by the TA to measure the effectiveness of audit measures in the ISORA countries is the value of the additional collection, while among the CIAT and LAC countries, the value of audits with positive results is slightly higher.

3. Concluding remarks

The recently published document is of great relevance. It presents multiple topics related to TA beyond the one synthesized in this article.

The growing importance of the topic compliance risk management and taxpayer segmentation is highlighted.

As regards segmentation, there is a tendency for the TAs to have large taxpayer units where the volume of operations is the most common criterion for defining them, as well as simplified regimes for small taxpayers.

On the issue of compliance risk management, TAs seek to have an official strategy, where hiring and retaining the appropriate personnel are the most important challenges in international tax matters.

The document highlights that prior to filing, the most common type of compliance intervention is to remind of filing deadlines, while once filed, the most common types of intervention are to detect inconsistencies by comparing third-party data, request additional information, perform risk reviews and detect anomalies through data analysis, with comprehensive and documentary audits being the most frequent, and the value of additional collection being the most widespread indicator to measure its effectiveness.

As we said in a previous work, compliance risk management requires quality information and rigorous analysis to decide in each case how the AT must operate [3].

We note with interest that this does not refer only to the selection of taxpayers to be audited but is a tool to organize and direct all the actions of the TA.

Its main utility is that it helps TAs to make decisions in a rational way and to decide what to do and what to stop doing in order to achieve the greatest effectiveness in results and an efficient allocation of available resources.

It is, in short, a methodology for orderly decision-making supported by information and with an emphasis on preventive actions.

In short, it is understood that the recently published document is particularly useful for analyzing trends and best practices of TAs.

[1] To expand, see Diaz Yubero Fernando; Collosa Alfredo. Compliance Risk Management (CRM). Fashion or necessity  for tax administrations? https://www.ciat.org/la-gestion-de-riesgos-de-cumplimiento-grc-moda-o-necesidad-para-las-administraciones-tributarias/

[2] https://biblioteca.ciat.org/opac/book/5897  Garcimartin, C. and Díaz de Sarralde Míguez, S. (2025). Overview of tax administrations in CIAT countries, results of the ISORA 2023 Survey. Volume II (Special Forms). Inter-American Center of Tax Administrations- CIAT

[3] To expand see Diaz Yubero Fernando; Collosa Alfredo. Compliance Risk Management (CRM). Fashion or need for tax administrations? https://www.ciat.org/la-gestion-de-riesgos-de-cumplimiento-grc-moda-o-necesidad-para-las-administraciones-tributarias/

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