ICT as a Strategic Tool to Leapfrog the Efficiency of Tax Administrations

Chapter 3. The Registry

The chapter on the registry is quite extensive, presenting concepts, exposing problems, suggestions, and possible solutions for: normative, legal and taxation aspects of the registry, the processes and procedures for the registration and updating of the registry; characteristics of the Tax Identification Number (TIN); centralised procedures of registration, and unification of the TIN; the reliability of the information, its improvement and support; a method for the assessment of the level of maturity and quality of the registry by the administration, new technologies and trends, the management of the tax non-compliance risks;  tax residency, and electronic fiscal domicile.

The essential nature of the registration for the taxpayer is the consequence of receiving the TIN in the Registration Act, necessary to submit tax returns, make payments, communicate with the administration in a general way, and required in financial and commercial transactions. Today, in many countries, there are plenty  of obstacles for the citizen who does not have a TIN. For the administration, it derives from the registry being the original source of basic information to identify, locate, classify the taxpayers and create their tax obligations. The TIN is also the integrating element of the taxpayer’s information, allowing systems to control the obligations to declare and pay, the creation of the tax Current Account and allowing the crossing of information with other taxpayers for whom he has sold or purchased goods or received or provided services.

The registry requires a law that supports it, so that the necessary requirements for its existence and administration can be implemented, including penalties and fines for infringements. The document presents alternatives for adopting the type of regulation most suited to the country’s culture and political organization.  In the chapter are explained: the standard information that must be part of the registry, the possible status of a non-registered taxpayer and the need to rely on formal procedures for changes to these status. It emphasizes the importance of the vector that establishes the taxes and subsidiary obligations to which the taxpayer is subject, and the specification of acts distincts from the direct administration-taxpayer relationship, but that require the presentation of the TIN.

The document presents new technologies that facilitate the registration and updating processes and reliability in the captured information. Even slightly used, other features can be of great help: biometric identification; Entry and updating the registry via apps available for the tax authorities; geospatial mapping:  blockchain technology to integrate all the agencies participating in the licensing and registration of new businesses at the national, regional and local level; the mandatory use of TIN digital certification (token) for submission of tax returns, invoices and electronic documents in general, addressed to the tax administration providing the safe, secure and reliable communications. A study by CIAT shows the statistics of use of several channels for registration in their member countries.

The reliability of the registered data is a permanent concern of the tax administration. An effective control of omitted and defaulters depends on the updated validity of data of identification, location and obligations of taxpayers; additionally, the data of economic activity and type of society are important for the risk management and audit. The reliability of these data is essential to notify, inspect, audit and take legal and administrative actions in the correction of irregularities. The text recommends measures and techniques for the reliable recording and updating of data. We highlight the integration of processes between the commercial boards and national registers of legal entities with the registration bodies of the tax administration and the inspection prior or following registration, for companies that will operate in activities considered risky for VAT evasion or that are owned or managed by individuals classified as high risk.

Globally and in several ways, tax administrations have been reducing the time and cost needed to start companies, simplifying and unifying processes and simplifying the registration and licensing of companies. Alternatives are presented to achieve these objectives. There are also suggestions for, even if they are not simultaneous with other registration bodies, facilitating the registration and updating of information using online forms, observing the restrictions indicated in the text. At the same time, the aim is to encourage the legalisation of informal micro-enterprises by creating new types of individual legal entities. The characteristics of this type of entity and the justification for its creation are presented in the text.

Occasionally dysfunctional records are found, and it is not possible to use them to detect omissions in the submission of declarations, to communicate with taxpayers or to support the audit. The main problem is the existence of a high proportion of taxpayers with active status who are not in operation, or at least not updated in the registry. The document discusses the possible causes of these deviations, the ways to avoid them and presents recommendations for debugging the information from the registry. CIAT has developed a tool that allows administrations to make an autodiagnostic of their registries, useful for evaluating and setting improvement targets. The document presents an overview of this method, which proposes to analyze the registry according to 4 dimensions: sufficiency and completeness of information; maturity of processes and procedures; veracity and detection of unregistered taxpayers; laws and regulations.

The communication to the taxpayer of resolutions and acts affecting their rights and interests is a legal requirement for tax administration. In the countries of Latin-Germanic culture it is mandatory to make formal notifications, under penalty of losing the effectiveness of the administrative act. The text describes the usual requirements for a notification to produce effects on the form and content of the document, the address, the means of delivery and from whom the notification may be received. Until a few years, the rule was to send the notification to the taxpayer’s tax domicile, informed in the register. Some administrations accepted address updates by the annual income tax return. It is an expensive, time-consuming and inefficient system, with frequent edict notices published in the press or posted on the head offices of the tax authorities.

The creation of the electronic domicile of the taxpayer, already adopted by the majority of countries, according to ISORA, has facilitated, provided agility and security to the communication between the administration and the taxpayer for a very low cost. The authorized electronic address has all the legal elements of a tax domicile.  Notifications, instructions, and communications in general are forwarded by the administration to this e-mail address in the Tax e-mail box, located in the virtual office of the tax administration. This is a one-way street. Additional support services may be provided by using instant messaging, SMS or emails sent to mobile phones and addresses registered by the taxpayer to warn that a communication is reaching the mailbox.  The chapter presents the key strategic decisions for the implementation of the electronic domicile and its main characteristics. It includes everything you could need to know about electronic domicile.

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