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Tax Administration
This technical note introduces analytics for compliance risk management in tax administration. Together with its accompanying toolkit, the note is intended as a starter kit to support capacity development in compliance planning, risk, and intelligence groups. Developed primarily for emerging analysts new to tax administration, the note presents both theory and practical aspects of analytics. Its toolkit is comprised of an initial collection of analytics templates designed to assist in turning the theory presented into practice in the areas of: (1) compliance planning; (2) taxpayer profiling; and (3) audit case selection.
Brazil
Brazil’s economy has shown remarkable resilience amid the ongoing disinflation. Economic activity has grown steadily, surpassing expectations, reflecting favorable demand and supply factors. With proactive and adequately restrictive monetary policy, headline inflation has declined to the target tolerance interval. Longstanding challenges remain, including elevated public debt and slow convergence to higher living standards. The authorities have advanced their ambitious sustainable and inclusive growth agenda, including the approval of a landmark VAT reform.
Building Tax Capacity in Developing Countries
Tax capacity—the policy, institutional, and technical capabilities to collect tax revenue—is part of a deeper process of state building that is essential for achieving the sustainable development goals. This Staff Discussion Note shows that developing countries have made some progress in revenue mobilization during the past decades. However, much more is needed. We find that a staggering 9 percentage-point increase in the tax-to-GDP ratio is feasible through a combination of tax system reform and institutional capacity building. Achieving this calls for a holistic and institution-based approach that focuses on improving policy, administration and legal implementation of core taxes. The note offers practical lessons and guidance, based on IMF capacity building experience in this area.
Costa Rica
This Technical Assistance Report presents the estimates of tax gaps for general sales tax (GST) and corporate income tax in Costa Rica. The estimated GST compliance gap in Costa Rica increased from 29 percent in 2012 to 31 percent in 2016. The compliance gap in 2016 was equivalent to 1.9 percent of GDP. The estimated compliance gap is higher than the average value-added tax compliance gaps of European countries and Latin American countries. Large GST compliance gaps relative to GDP are observed in manufacturing, trade, and hotels and restaurants. The estimated GST policy gaps were at about 4 percent of GDP from 2012 to 2016. Most of the GST policy gap consists of the GST expenditure gap, showing the effects of policy choices.
Enhancing Tax Compliance in the Dominican Republic Through Risk-based VAT Invoice Management
Invoices document economic transactions and are thus critical to assess tax liabilities. We study a reform in the Dominican Republic that aimed to integrate invoice management into a broader, more comprehensive, risk-based compliance strategy. By rationing authorized invoices based on an extra scrutiny of each taxpayer’s compliance history, the reform led to significant and persistent improvements on filing, payment, and information reporting obligations and a modest increase in reported tax liabilities. Our study shows that deterrence effects over compliance behaviors are strengthened when the tax administration makes explicit and active use of taxpayers’ information, no matter if the invoicing framework is paper-based or electronic.
Quantifying the Revenue Yields from Tax Administration Reforms
Despite the criticality of tax administration (TA) reforms in enhancing domestic revenue mobilization, few studies have attempted to quantify the revenue impact of such reforms. This paper fills this gap by estimating the revenue yields associated with various tax administration capabilities, based on the International Survey on Tax Administration (ISORA), the Tax Administration Diagnostic Assessment Tool (TADAT), and TA reform episodes datasets (identified by Akitoby et al., 2020). It uses a Hausman-Taylor cross-country panel regression and an event study for specific TA reform episodes. Our results (using the ISORA data) show that an increase in the overall strength of TA from the 40th per...
Costa Rica
Costa Rica has been hit hard by the COVID-19 pandemic, notwithstanding the authorities’ proactive policy response and the country’s well-established universal healthcare system. The socio-economic impact has been significant, exacerbating an already fragile outlook and pre-existing imbalances, with a significant toll on economic activity and unemployment—especially among women and the young. The shock has further weakened the country’s fiscal position, undermining the expected yields from the ambitious fiscal reform launched in late 2018, and generated a large financing gap. Financial support through the Fund’s Rapid Financing Instrument (RFI) in 2020 provided temporary relief to respond to the pandemic, including by catalyzing financial assistance from other official partners, but financing needs remain sizable over the medium term.
How to Implement Electronic Fiscal Reporting (Fiscalization)
To improve the management of tax compliance risks, tax administrations are increasingly seeking opportunities to enhance their access and use of data. For many years, there has been a worldwide trend to implement electronic fiscal reporting (also known as fiscalization) to achieve these aims. Fiscalization refers to the process of automated reporting of a taxpayer’s business activities to the tax administration. When implemented as an integral part of compliance risk management processes, fiscalization will contribute to an improvement in tax compliance by making it easier for taxpayers to voluntarily comply, and discouraging taxpayers who may choose to not report their business transactions. However, fiscalization alone will not address all tax compliance risks. This how-to note provides practical guidance about the case for fiscalization and implementation approaches, including good practices and practices to avoid in relation to the key dimensions of fiscalization: data collection, data analysis, integration with compliance risk management, consumer engagement, and implementation.
Structural Transformation and Tax Efficiency
Structural transformation has resulted in an increasing share of services in aggregate value-added in advanced and developing countries across the world. We analyze the impact of this shift into services on countries’ efficiency in collecting the value-added tax (VAT). The analysis is based on two alternative measures of VAT efficiency: (1) the VAT C-efficiency, using a broad panel of 134 countries over the period 1970-2014; and (2) the VAT gap using a more granular, proprietary dataset that draws on the results of IMF’s Revenue Administraion-Gap Analysis Program covering 24 countries over the period 2004-2016. We find that a higher share of services in aggregate value-added reduces the VAT efficiency, and that this adverse effect is mainly a result of a rise of non-tradable services, which in turn contributes to a narrowing of the VAT base.
Revenue Statistics in Latin America and the Caribbean 2015
The Revenue Statistics in Latin America publication presents comparable tax revenue tax levels and tax structures statistics for a number of Latin American and Caribbean economies.
