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eCIAT

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ISSN 1684-9833 • Year 3 / No.14 /July 27, 2012

The Executive Secretariat Informs

The Executive Secretariat Informs Clarification Note: Modification of the Fifth CIAT Innovation in Tax Administration Awards Program LAC Forum on “Tax Incentives and Informality in a Time of Fiscal Consolidation” The CIAT Executive Secretariat promotes tax initiatives for dissuading tobacco consumption

Clarification Note: Modification of the Fifth CIAT Innovation in Tax Administration Awards Program The Inter-American Center of Tax Administrations wishes to inform the Tax Administrations of the member countries that, in view of several requests received for changing the date of implementation of the innovative practices of the 2013 Contest, it has been decided to change the Rules of the Contest as follows:

Virtual Meeting on Electronic Invoicing

Previous text:

The Tax Administrations Inform

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Brazil –launching of mobile application for smartphones and tablets

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Chile – Tax revenues increased 7.6% through May 2012 Dominican Republic – Executive Body presents the Duarte, Sánchez y Mella award in the Great Silver Cross rank to the DGII Jamaica - Imposition of GCT on Printed Matter Nicaragua - DGI officials attend workshop on Act No. 476 – “Civil Service and Administrative Career Act Panama - DGI improves taxpayer assistance Paraguay – Informative audiovidual on IIT is presented Peru – SUNAT sanctioned over 24,000 taxpayers who were not providing vouchers South Africa - One Million Tax Returns submitted in record time Information IBFD News Post of the Month Training New in the web Other Documents

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Only practices implemented between January 2008 and June 2010 will be considered.

Only practices implemented between January 2008 and December 2011 will be considered.

If you require additional information on the CIAT 2013 Innovation in Tax Administration Awards Program, please contact Mr. Socorro Velázquez at Tel. +(507) 269-1270, FAX +(507) 264-4926 or via electronic mail at: svelazquez@ ciat.org.

LAC Forum on “Tax Incentives and Informality in a Time of Fiscal Consolidation” With the joint sponsorship of the OECD, CIAT, ECLAC, IDB and the Ministry of Finance and Public Credit of the Republic of Colombia as host, the LAC Forum on “Tax incentives and informality in a time of fiscal consolidation” was held in the city of Bogota, on July 12 and 13, 2012.

The General Director of the Directorate of National Taxes and Customs-DIAN, Mr. Juan Ricardo Ortega inaugurated the event. Other participants were Mr. Juan Alberto Fuentes, Director of ECLAC’s Economic Development Division, Ms. Grace Perez-Navarro, Deputy Director of the OECD’s Centre for Tax Policy and Administration, Mrs. Francesca Castellani, IDB Economist and Mr. Márcio F. Verdi, CIAT Executive Secretary.

Several experiences dealing with Tax Policy and Incentives were discussed in the Forum. In the initial panel: “Current tax policy debate in Latin America and the Caribbean”, the delegates were invited to report on the main tax policy challenges in their countries, as well as to contribute their viewpoints regarding the challenges posed by the use of tax incentives and informality in relation to fiscal consolidation.

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The Second Session: “Fiscal policy and investment”, helped set the bases for discussing tax incentives. Some of the issues discussed dealt with the design of fiscal policy for improving the business climate and accordingly investment, the determinant factors in investment, the importance of taxation, the types of cross-border investments and financial structures commonly used by businesses and their implications in relation to effective tax rates on inbound and outbound investment.

In the Third Session: “Experience with corporate tax incentives to stimulate investment”, an analysis was made of how corporate tax incentives may stimulate investment, the main types of incentives, their design, as well as the main tax policy considerations for improving their yield. The delegates were asked to share their experience with the use of tax incentives for investment (such as: tax holidays, free trade zones, special tax allowances and credits).

CIAT is a public international organization which groups the tax administrations of 40 countries, (31 Amarican countries, 6 European countries, 2 African countries and one Asian country), for the purpose of providing an integral service for the modernization of those administrations, by promoting their evolution, social acceptance and consolidation through the exchange of knowledge, experiences and the rendering of specialized technical assistance.

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Contact us: CIAT Executive Secretariat / e-CIAT Newsletter P.O. Box 0834-02129 Panama, Republic of Panama.

Phone (507) 265-2766 / 265-5994 Fax: (507) 264-4926 E mail:ciat@ciat.org Web Site: http://www.ciat.org

The Fourth Session of the second day: “Best practices in the use of tax incentives”, was devoted to a general overview of the best practices in the use of tax incentives from the perspective of the OECD as well as LAC countries, with respect to assessment, transparency and accountability. The participants shared their proposals-perspectives for facing these goals (through the measurement of tax expenditure, tax expenditure reports and cost-benefit analysis) in the granting and administration of tax incentives.

In the Fifth Session: “Fiscal Policy to address the Informal Economy”, the specific problem of informality, a widely extended practice throughout Latin America was analyzed both from the tax policy and administration as well as public expenditure sides.

The Sixth Session: “Tax Indicators” was devoted to the presentation of the First Edition of the Tax Statistics in Latin America Publication, which has been produced jointly by CIAT, ECLAC and the OECD (as well as an update of the current statistical work); with a discussion of its main results and findings.

Finally, in the Seventh Session: “Next Steps”, it was decided that the next meeting of the LAC Fiscal Initiative will be held in July 2013, in Montevideo, Uruguay, sponsored by the DGI of Uruguay.

Final Considerations were made by Ms. Ana Fernanda Maiguashca, Technical Deputy Minister of the Ministry of Finance and Public Credit of Colombia.

The Forum was indeed highly productive due to the current importance of the issues discussed and the quality of the speakers attending, as well as the motivation and interest of its participants.

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The CIAT Executive Secretariat promotes tax initiatives for dissuading tobacco consumption In coordination with several organizations from the tax and health spheres, CIAT held on July 10-12 in Panama City an event on “prices, taxes and illegal trading of tobacco products”. The main objective was to discuss aspects dealing with the effective implementation of the Framework Convention on Tobacco Control (FCTC) approved by the World Health Organization in May 2003.

On July 10, 2012, the CIAT Executive Secretary, Mr. Márcio F. Verdi, together with representatives from the World Bank, the Pan-American Health Organization, the National Commission for the implementation of the FCTC in Brazil, the Secretariat of the FCTC and the Ministry of Health of the Republic of Panama inaugurated a historical event wherein health and public finance authorities and experts actively discussed experiences regarding measures, in particular those dealing with taxation, for dissuading tobacco consumption.

Present in this event were representatives from several tax administrations of CIAT member countries, among them, Costa Rica, Barbados, Colombia, Peru, Panama, Ecuador, Uruguay, Paraguay, Brazil, Nicaragua and Suriname.

In this regard, CIAT has decided to cooperate with all players involved, to motivate the discussion of the effective implementation of the FCTC, some of whose measures to reduce the demand for tobacco products involve fiscal and pricing policies as provided in its Article 6. This article states that: “The parties recognize that tax and price measures are an effective and important means of reducing tobacco consumption by various segments of the population, in particular, young persons”.

On the other hand, another of the subjects for discussion during the days of the event ,which is of interest to many CIAT tax administrations dealt with Article 15 of the FCTC which states that “the elimination of all forms of illicit trade in tobacco products, including smuggling, illicit manufacturing and counterfeiting are essential components of tobacco control”.

These matters require that the tax administrations of the countries of the world (174 are already members of the FCTC) be informed of the progress achieved in its effective implementation and it is precisely here, wherein CIAT plays an integrating and informative role.

Photo of the main table of the opening ceremony, from right to left. Ms.Ludmilla Butenko, World Bank Representative in Panama; Mr. Nikogosian Haik, Chief of the FCTC Secretariat (Switzerland); Ms.Tania Cavalcante, Coordinator of the Executive Secretariat of the National Commission for the Implementation of the FCTC in Brazil (Conicq); Hon. Franklin Vergara, Minister of Health of Panama; Mr. Enrique Perez, Representative of PHO / WHO in Panama and Mr. Márcio F. Verdi, CIAT Executive Secretary of the Inter-American Center of Tax Administrations (Panama)

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Virtual Meeting on Electronic Invoicing Within the framework of the project being carried out with the support of the European Commission by the CIAT working group for developing a scheme for the exchange of electronic invoices in international trade, a working meeting was held on July 12 through the use of the CIAT platform, whose purpose was to review the proposed design. The participants included colleagues in six countries. In France, with the latest local time, the meeting started at 5:00 p.m.; in Mexico City it was 10:00 a.m. Virtual meetings will never replace the possibilities for interaction in a face-to-face meeting, but they do allow for doing a job that could hardly be done through the mere exchange of electronic mails. Some of the participants used their computer equipment and the facilities of their modern navigators, while others preferred to use their iPads as interphase.

CIAT endeavors to use this and other technologies to facilitate collaboration and consensus. Attached is a pair of pictures of the meeting.

The participants in the meeting were: Iván Beltrán, SII-Chile; Newton Oller, SERAZ-Sao Paulo, Brazil; Fernando Martínez, SAT-Mexico; Eudaldo Almeida de Jesús, ENCAT-Brazil; Juan Crlos Lalangui, SRI-Ecuador; Rodrigue Dufaur, CE-France; Alvaro Bahía, SEFAZ-Bahía, Brazil; Vinicius Pimentel De Freitas, SEFAZ-Río Grande, Brazil; Socorro Velazquez, CIAT; Raúl Zambrano, CIAT.

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The Tax Administrations Inform Brazil –launching of mobile application for smartphones and tablets The Secretariat of Federal Revenues launched an application intended for smartphones and tablets with the Android e iOS (Apple iPhone) operational systems. This first application has functionalities intended for individuals. It will allow for directly consulting in the bases of the Secretariat of Federal Revenues information regarding the payment of refunds of IIT returns, as well as the cadastral status of a registration in the IIF. Four services were made available in this version: • • • •

IIT Refund Service wherein it is possible to consult the result of IIT refunds of returns filed since 1999.

The IIF Consultation service allows for promptly and practically visualizing the cadastral status of registration in the Secretariat of Federal Revenue’s base. This is one of the most frequently requested services in the Secretariat´s Internet page.

The service on Orientations about refunds attempts to respond to the main questions regarding the Individual Income Tax refund.

The Evaluation service allows the user to collaborate in improving the application. In addition to notifying the services available, for navigation and clarity of information, the user may send suggestions for future versions. The application, developed by Serpro, is free and may be downloaded to the Android (Google Play) or Apple.

Chile – Tax revenues increased 7.6% through May 2012 Accumulated Net Tax Revenues through May 2012, amounted to 10 billion 108.148 million Pesos, which represents an actual increase of 7.6% with respect to the same period in 2011.

Such evolution of tax revenues corresponds mainly to the behavior of Income Taxes which account for 36.1% of this increase.

Dominican Republic – Executive Body presents the Duarte, Sánchez y Mella award in the Great Silver Cross rank to the DGII The President of the Republic awarded the Duarte, Sánchez y Mella Order in the Great Silver Cross rank to the General Directorate of Internal Taxes for its outstanding meritorious services, on commemorating its fifteenth anniversary. This is the highest honor and most distinguished award to merit granted by the Dominican Republic.

Jamaica - Imposition of GCT on Printed Matter After consultations with the Book Industry of Jamaica (BIAJ), the Ministry of Finance and Planning announces the following amendments to the Revenue Measures FY 2012/2013 related to Printed Matter.

Nicaragua - DGI officials attend workshop on Act No. 476 – “Civil Service and Administrative Career Act In order to guarantee efficiency in public administration and ensure the rights and duties of State officials, the Public Function Office conducted the seminar on “Job Classification System in Public Administration”. It is based on Act No. 476, Civil Service and Administrative Career Act and was intended for Directors, Heads of areas and Income Administrators of the General Directorate of Revenues.

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The Job Classification System is a basic organizational instrument which must be obligatorily applied by the different State Administration institutions, and serves as basis for defining and applying the Human Resources Management Systems.

Panama - DGI improves taxpayer assistance The General Directorate of Revenues provided training to the taxpayer assistance staff, following the installation of a queue management system which endeavors to provide a better service.

Paraguay – Informative audiovidual on IIT is presented The State Undersecretariat of Taxation of the Ministry of Finance has made available to citizens a video explaining the Individual Income Tax (IIT) to be implemented shortly. The purpose of this material is to provide the public details regarding the tax to be implemented in August.

The video is entitled: “What should be known regarding the Individual Income Tax (IIT) and is available in the “TributacionParaguay” channel in Youtube. The audiovisual may be reproduced by accessing the Internet address: http://youtu.be/8-TI_A663GE or it may be searched from Google, videos section.

Elizabeth Fernández de Corrales Correspondent

Peru – SUNAT sanctioned over 24,000 taxpayers who were not providing vouchers In the first semester of the year, the National Superintendency of Customs and Tax Administration (SUNAT) sanctioned 24,852 taxpayers for not providing payment vouchers or other documents without tax value (remittance receipts, sales vouchers, proforma invoices) to their customers. These actions were the result of permanent examination campaigns underway in Lima.

This evidences a 290% increase in sanctions applied that are directly related to the over 100% increase in verification and control actions being carried out by the Tax Administration, thereby promoting taxpayer formalization and compliance with their obligations.

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South Africa - One Million Tax Returns submitted in record time The 1 million mark for returns received was achieved just 22 days since the Tax Season opened on 1 July 2012. Last year it took five weeks to reach the 1 million mark.

This is a phenomenal response by the South African taxpaying public. The levels of early filing have exceeded even SARS’s own expectations.

For the corresponding period last year SARS had received 681 497 tax returns – by 7:30am this morning 319 665 more returns had been submitted compared to the same period last year. This represents an increase of 62% for returns submitted during the first 3 weeks of the Tax Season.

Varsha Singh Correspondent

Information On behalf of ATAF, CIAT hereby announces opening for Executive Secretary Position The African Tax Administration Forum (ATAF) (www.ataftax.net), announces the position of Executive Secretary.

IBFD News International Bureau of Fiscal Documentation (IBFD) Cooperation-CIAT - IBFD

This section includes a selection of the IBFD news about aspects of tax policies and tax administration. This information is available on the CIAT website and in Fridays Tax News alert.

Post of the Month 17 July, 2012

Business Process and Social Networking Written by Raúl Zambrano When I was writing the paper I was going to present at the 22nd General Assembly and Technical Conference of the Caribbean Organization of Tax Administrators (COTA) in Port of Spain, on the topic of “The use of Information Technology in Workflow Management,” I decided to leave out the sexy part. Consistently, I also left that sexy part out of the PowerPoint presentation I used to help the audience cope with my English. But I did make comments on that particular aspect of IT-based collaboration that gives a title to this post and would qualify as “sexy”: the potential relation between Business Process Management (BPM) and Unified Communications (UC).

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Training Announcement of Course Given the importance we attribute to continued training in order that tax professionals may be fully updated on tax administration, customs and human resources issues we are announcing the following course: • • • •

Basic Customs Course 3rd.

Course on Human Resources Management 2nd.

Tax Audit Fundamentals 5st.

Tax Ethics Course 3rd.

If you are interested in participating, please fill out the registration form and send it to capacitacion@ciat.org, along with the rest of the requirements.

New in the web Bibliographic News July, 2012

This document provides for reference purposes, the most recent documents produced by CIAT and other editorials in the month of July; either articles or other periodic publications, research works and studies of interest.

Other Documents Tax Policy and Structure of Taxes Ceferino Costa 2012 (Available in Spanish)

The technical structure of taxes, with respect to the study, deals with those elements that are deemed basic or, that is, the stable and substantial part of taxes. They are essential elements that must be part of said structure and, therefore, must be considered by any legislation, continuing unaltered, regardless of the changes that may take place according to the orientation adopted by tax policy.

As it is evident, all of this must be reflected in the corresponding legal norms which should be adapted to such aspects as each country’s economic, social and cultural reality through the use of a precise tax technique.

Therefore, it is the presentation and analysis of what would be “models” with substantial principles and concepts related to the objective and purpose of each of the basic structures of the main types of taxes.

Accordingly, it is important to specify that the study is limited to the structures and principles that are the very essence of the models, without considering the special features shown in practice by the different taxes. It is precisely the knowledge of these principles and concepts which allows for a better interpretation and practical application of the legislations that adopt and use them as bases for designing their own tax systems.

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“Macroeconomic Report on Latin America and the Caribbean” ECLAC June, 2012 (Available in Spanish)

The Macroeconomic Report on Latin America and the Caribbean is a new publication by ECLAC, intended to respond to the need for an updated analysis of the region’s macroeconomic performance vis-à-vis changing situations. This publication complements the Economic Study on Latin America and the Caribbean, as well as the preliminary Balance on the Economies of Latin America and the Caribbean, which reports will continue to be published annually by ECLAC, together with periodic macroeconomic reports such as this one. It also includes analysis notes on the economies of all the Latin American and Caribbean countries in 2011 as well as in the initial months of 2012.

Fiscal Monitor Update

Nurturing Credibility While Managing Risks to Growth International Monetary fund July, 2012 Fiscal adjustment is proceeding generally as expected in advanced economies, with headline and underlying fiscal deficits that are broadly in line with projections in the April 2012 Fiscal Monitor. Overall, advanced economy deficits are forecast to decline by about ¾ percentage point of GDP this year and about 1 percent of GDP next year in both headline and cyclically adjusted terms, a rate that strikes a compromise between restoring fiscal sustainability and supporting growth.