/y2010n10

ISSN 1684-9833 • No.10 / June 25, 2010

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The Executive Secretariat Informs The 3rd Benchmarking Working Group meeting was successfully concluded The 3rd Benchmarking Working Group meeting was successfully held last June 22 to 23 in Panama City at the headquarters of the CIAT Executive Secretariat.

The Executive Secretariat Informs The 3rd Benchmarking Working Group meeting was successfully concluded Senior CIAT directors visit cuban Tax Administration Visit to the Netherlands Antilles Tax Administration The Tax Administrations Inform Chile - Highlighting benefits of electronic billing for MSMEs Costa Rica - Ministry of Treasury discloses actions to reduce deficit Spain - Technical Cooperation Agreement signed between IEF of Spain and ESAF of Brazil India – Revised Code of Direct Taxes (DTC)

The meeting counted on the valuable participation of Mr. Normand Théberge, Director General of the Canadian Revenue Agency; Mr. Sr. Subert Gilbert, Assistant Commissioner of the Inland Revenue Division of the Ministry of Finance of Trinidad and Tobago, and Mr. Ángel González, Head of the French Mission before CIAT. The CIAT Executive Secretariat was represented by the Executive Secretary, Mr. Márcio Verdi; the International Specialist, Mr. Socorro Velazquez, and the Technical Assistance Manager, Mr. Raúl Zambrano.

In this third meeting the efficacy of the first set of indicators that were originally defined by the Group was evaluated, and new features and improvements for the comparison system were identified; likewise, a new set of indicators that had been suggested by countries that were not members of the Group were defined. Finally, a strategy for the broad deployment of the system among the 38 CIAT member countries was designed. A first presentation of the efforts and achievements of the Group will take place in Paris on occasion of the CIAT Technical Conference in October.

The main objective of this initiative is to develop and provide online accessible tools to the member countries which can be used to self-assess their competencies and identify what best practices are being employed by other tax administrations which can be adapted to their system in an effort to improve performance.

Italy - Guardia di Finanza of Italy commemorates its 236th Anniversary Italy - Main tax news Panama- Main tax news Peru - Central Government tax revenues increased by 26.4% in May Training Events Publications ¡Were you aware that!... ¡¿Really?!

Officials of the TAs and members of CIAT’s Executive Secretariat who participated in the Working Group on Benchmarking for Tax Administrations

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Senior CIAT directors visit cuban Tax Administration

CIAT is a public international organization which groups the tax administrations of 38 countries, (29 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.

Executive Council Executive Secretariat The e-CIAT Newsletter is published and distributed electronically biweekly.

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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 Minister of Finance and Prices, Ms. Lina Olinda Pedraza Rodríguez, the Head of the National Tax Administration Office, Ms. Yolanda Alvarez de la Torre, and Executive Officials from the NTAO, met with the CIAT Executive Secretary, Mr. Márcio F. Verdi and the Representative of the French Mission before CIAT, Mr. Angel Gonzalez.

On June 16-17, Messrs. Marcio Verdi, Executive Secretary and Ángel González, Operations Manager and Representative of the French Mission at CIAT, visited Havana to attend training sessions and meet with over 40 directors and specialists from the National Tax Administration Office (ONAT) and form the Ministry of Finance and Prices (MFP).

Both were greeted by Lina Pedraza Rodríguez, Minister of Finance and Prices, and Yolanda Álvarez de la Torre, Chief of ONAT, who were present during the first session, held on the morning of Wednesday 16.

During the work meeting with the visitors, the Minister highlighted the importance her Ministry assigns to the meeting, showed interest for diverse topics, encouraged the participants to discuss the different topics of interest and about the best practices and experiences.

The following are among the main aspects analyzed: Challenges and responses of the Tax Administrations to the impact of the global crisis, adaptation of administrative tax control policies facing the aforementioned crisis, different practices linked to the taxpayer registry, examination, the fight against tax fraud and specialized attention to diverse sectors of economic significance.

The Executive Secretary underscored the interest to continue organizing other meetings between CIAT experts and Cuban specialists, as a way to collaborate in the promotion of training and exchange.

Both presenters and organizers assessed the sessions as very positive and fruitful.

Armando Lopetegui Martínez Correspondent

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Visit to the Netherlands Antilles Tax Administration On June 10-11, the Technical Assistance Manager made a technical visit to discuss with officers from the local and island administrations the potentials that must be supported by an integrated information system in a modern administration.

The discussions were framed within the context of the birth of Curaçao as a country on October 10.

The discussions on systems included comments on lessons learned in the provision of online services through the Internet, including returns and electronic payments, use of work flows, implementation of risk criteria in examination and compliance control processes both for the selection of cases and the development of the same, and tools that provide support to decision-making.

The Tax Administrations Inform Chile - Highlighting benefits of electronic billing for MSMEs The “Electronic Billing for MSMEs” Seminar, organized by the Santiago Chamber of Commerce (CCS), counted with a great attendance, which included the participation of the Director of the SII, Julio Pereira, and of the President of the CCS, Peter Hill, and where over 120 members became appraised of the advantages of the electronic billing system and the benefit it represents for their businesses.

The President of the CCS mentioned that electronic billing is an “integral part of the enterprises modernization process, because it allows to improve productivity and lower costs”. He also stressed the energy savings implied by its use, allowing enterprises to approach their interaction with the environment in a responsible manner.

Bernardita Moraga Correspondent

Costa Rica - Ministry of Treasury discloses actions to reduce deficit The Government of Costa Rica responded to the world crisis by increasing public expenditure, to compensate the drop in external demand and in private internal demand. This allowed an economic contraction lower than that of other countries.

When the private sector recovers its dynamism, the government must reduce its deficit. Doing this, however, is not easy, because many of the expenditure increases made are irreversible. This leads to the conclusion that, in order to reduce the fiscal deficit, the effort must be focused on increasing revenue, through administrative and legislative measures.

The administrative measures proposed by this government will include a renewed effort in the collection of the delinquent tax portfolio, a more intense examination of high-risk groups from the evasion point of view (liberal professionals, medium commerce), the registration of informal enterprises and the fight against contraband. Changes must be made to the legislation in the medium term, which are already being analyzed with the different sectors.

Maribel Zúñiga Cambronero Correspondent

Spain - Technical Cooperation Agreement signed between IEF of Spain and ESAF of Brazil Mr. José María Labeaga Azcona, Director General of the Institute for Fiscal Studies (IEF) of the Ministry of Economy and Treasury of Spain, and Mr. Mauro Sérgio Bogéa Soares, Director General of the Public Treasury School of Brazil (ESAF) of the Ministry of Treasury of Brazil, signed a Memorandum of Understanding on June 8, 2010, whereby they commit to develop actions, with the purpose of promoting technical cooperation.

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Additionally, the agreement establishes the exchange of knowledge and experiences, in the field of continuous education and training of public officers, who constitute their respective audiences. The objective of said actions are: a) to expand continuous education and training opportunities for directors and officers of the public treasury of Brazil and Spain; b) to promote the exchange of technical and educational material; to authorize the translation and publication of technical papers edited and published by ESAF and by IEF; d) to create the necessary conditions for the translation and adaptation of the courses, by means of distance learning systems, offered by ESAF and by IEF; e) to promote the exchange of teachers between the Parties; f) to make viable the offer of short-term internships for officers from the public treasuries of the respective countries; and g) to promote technical cooperation in the action areas of ESAF and IEF.

Signature by both General Directors

From left to right: Eudaldo Almeida (ENCAT General Coordinator), Mauro Sérgio Bogéa (ESAF General Director), José Mª Labeaga (IEF General Director), Celia de Pablos (Director of the IEF Public Finance School)

India – Revised Code of Direct Taxes (DTC) A draft Direct Taxes Code (DTC) along with a Discussion Paper was released in August, 2009 for public comments.

The Central Board of Direct Taxes in the Department of Revenue has now released a revised Discussion Paper on the draft DTC on 15th June, 2010. This has been placed in the public domain to seek responses on the modified proposals. The major issues which have been addressed relate to Minimum Alternate Tax (MAT) on gross assets, tax treatment of savings - Exempt Exempt Tax (EET) vis-a-vis Exempt Exempt Exempt (EEE) basis, status of Double Tax Avoidance Agreements vis-a-vis the domestic law, the administration of the General Anti-avoidance Rule (GAAR), taxation of income from house property on a presumptive basis, tax treatment of capital gains and tax treatment of nonprofit organizations, etc.

Dixit Ashutosh Correspondent

Italy - Guardia di Finanza of Italy commemorates its 236th Anniversary The commemoration of the 236th anniversary of the Guardia di Finanza took place in Rome, Italy on June 23, 2010.

Participants in this event included the President of the Republic, Giorgio Napolitano, Prime Minister, Silvio Berlusconi and the Minister of Economy and Finance, Prof. Giulio Tremonti. Other top level political, civil, military and religious authorities, as well as officials, inspectors, superintendents and agents in active service as well as retired were also present.

The President of the Republic awarded the Guardia di Finanza the War Flag and Gold Medal to Civil Merit for its relief work in favor of the population and support to local institutions during the tragic earthquake in the city of L’Aquila and the region of Abruzzo on April 6, 2009.

Thereafter, General Nino Di Paolo took over as General Commander of the Guardia Di Finanza, thus replacing General Cosimo D’Arrigo, who held the position for almost three years.

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During his career, General Nino Di Paolo has been in charge of different operational units, such as: Head of the Staff Department of the General Directorate, as well as Deputy Chief and Chief of Staff of the General Directorate. He was also Deputy Commander of the Guardia di Finanza.

Nino Di Paolo, General Commander - Finance Guard

Italy - Main tax news The Italian Government issued, on May 31st 2010, the Decree no. 78, concerning measures aimed to reduce the Italian debt, spanning from cuts in public expenditure to a stronger fight against tax evasion.

Some of the most important new rules to tackle tax evasion: A brand-new “income meter” The Italian Government has approved a new version of “income meter”, more adherent to the current socio-economic contest. In this way, the Italian tax administration will have a truthful map of luxury goods and services (cars, yachts, expensive travels, etc.) bought by taxpayers, necessary to detect who have a purchasing power higher than declared.

In particular, this new system will take into account other purchasing power indicators such as family dimension and residence.

A new path for tax collection Starting from 1st July 2011, collection modalities will change. In particular, verification notices concerning income tax and VAT will become enforceable once notified to the taxpayer. This new system will be useful to maximize and speed up the tax collection process.

Stronger fight against VAT fraud and money laundering Italy is implementing the European rule about money laundering, reducing from 12,000 Euro to 5,000 Euro the amount that can be used in cash transactions or paid by bearer bonds. News as well on the front of VAT frauds: the Decree no.

78 introduces the obligation to report to the Italian Revenue Agency on any supply of goods and services for amount exceeding or equal to 3,000 Euro.

Tackling fake companies and systematic losses To avoid frauds, companies closing their activity within one year from the start up date are kept under special surveillance.

Same attention will be focused on those companies declaring losses for more than one tax period, with the exception of losses due to compensation to shareholders and managers.

Transfer pricing According to OECD guidelines on transfer pricing documentation requirements, it has been established the obligation of keeping a standard documentation, needed to allow the tax administration to carry out all controls aimed to verify the compliance to the normal value of transfer pricing.

Stefano Gesuelli Correspondent

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Panama- Main tax news The Ministry of Economy and Finance announced that, as of July 1, the Chattels and Services Transference Tax (ITBMS) rate will be 7%, by virtue of the entry into force of Law 8 of March 15, 2010.

The standard added child-care items to the list of exempted products, it maintained the exemption of logistics services and transportation operations and applies the ITBMS to passenger air transportation tickets.

The import and sale of alcoholic beverages will accrue an ITBMS of 10%; the import and sale of tobacco byproducts will pay 15% and the food and board service in all public establishment modalities will pay a 10% rate.

Residential telephony, works; intermediations in general; the use of personnel by the owner, partners, directors, legal representatives, officers or shareholders of the company and of the services rendered by the same will also be encumbered with the 7% ITBMS. Public shows and similar paid activities carried out in Panama will also be subject to ITBMS charges.

With the tax reforms, the Government of Panama expects to collect 200 million Dollars annually to finance an ambitious social works and infrastructure program at a cost of 13 billion Dollars to be executed between 2010 and 2014.

Panama’s ITBMS is one of the lowest in the world and the lowest in Latin America.

Marisel Della Togna Correspondent

Peru - Central Government tax revenues increased by 26.4% in May In May, the Central Government’s Tax Revenues recorded a real growth of 26.4%, result that constitutes the sixth consecutive month with favorable results and that reflect the recovery of the economy and the favorable international context, which influenced greater Income Tax payments and a greater Total General Sales Tax (IGV) collection.

With these results, tax revenues accumulated between January and May displayed a 21.9% real growth.

The positive results obtained in May were observed both in internal taxes and in customs duties. On the one hand, internal tax collections (excluding social burdens) had a 19.0% real growth, while revenues from customs duties showed a 24.2% real growth.

Clara Loza Ramírez Correspondent

Training CIAT makes New Call for Tutors of its Virtual Courses With a view to expanding the team of tutors for virtual courses, CIAT is making a new call for professionals with training and expertise in the tax field to participate in the selection process of new tutors. The deadline for submitting applications is 27th August 2010.

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Events VI Session of the Office of the Taxpayers’ Ombudsman. Environmental taxation in the framework of the reform to the Local Treasuries Law. The VI Session of the Office of the Taxpayers’ Ombudsman of the Madrid City Council will take place on September 22, 1010 in Madrid, Spain. The same is organized by the Institute for Tax Studies, The Ministry of Economy and Treasury and the Office of the Taxpayers’ Ombudsman of the Madrid City Council with the collaboration of FEMP, and the Institute for Environmental Dsipciplines and Sutdies (Instituto de Disciplinas y Estudios Ambientales-CEU). The topic of the Session will be “Environmental Taxation in the framework of the reform to the Local Treasuries Law”, and the diverse mechanisms that may be offered by environmental examination in the field of Local Treasuries will be analyzed.

Publications Our documents An Integral Approach in Preventing and Combating Tax Evasion CIAT Technical Conference 2006

This book includes the papers that were presented at the CIAT Technical Conference held in Madrid, Spain, on October 23 to 26, 2006. The main theme is developed around three topics: “Compliance and tax evasion control”, “Strueele against tax evasion” and “Collection”....go to document

Other documents Maringá Social Observatory (Video) EUROsociAL Fiscalidad

This video describes the philosophy and actions regarding the Tax Citizenship, as well as interesting testimonials regarding the Maringá Social Observatory.

Diritto e Pratica Tributaria Internazionale Victor Uckmar April, 2010

This review integrates, in a systematic and deepened way, the international aspects of tax law. The review goes beyond national borders and it is aimed at exploring others law systems and institutes, which most of the times have had a strong impact in the evolution of the Italian tax system.

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¡Were you aware that!..

CIAT/AEAT/IEF Research Scholarship. 1st Edition The winner of the 1st edition of the CIAT-AEAT-IEF Research Scholarship was Mr. Patricio Barra Aeloiza, currently the Deputy Director of Studies of the Internal Revenue Service of Chile, whose work dealt with “Management of Individual Income Tax”.

¡¿Really?!

Historical Summary of Income Tax The income tax was established in 1798 by British Prime Minister William Pitt, in order to obtain the funds to make war on France, and was abolished in 1816. In 1909 Lloyd George, introduced into England the progressivity of the tax and created a special tax applicable to certain income.

Switzerland introduced the income tax in 1840 and Australia in 1849. In Germany introduced in 1850 and Italy did in 1864.

In the United States was established since colonial times, as a tax on income of individuals. In 1894 a law was passed which imposed this tax, but some months later (in 1895) was declared unconstitutional by the Supreme Court of Justice, under which conflicted with the constitutional rule on the allocation of tax burdens, so it had to be abolished. In the year 1913 was adopted again.

Spain adopted it in 1900, under the system of direct taxation on income, especially applicable to corporations.

In France, it was in effect before the First World War, through the adoption of the 1914 law.

In the Soviet Union established this tax in 1927.

In many other countries had implemented this tax at the end of the last century, but reached its highest development on the occasion of the Second World War, due to increased tax liabilities of the governments of the countries involved.

Latin America appears this tax between 1920 and 1935. The first countries to establish in this part of the world in 1923 were Brazil, Mexico, in 1924 (after a first attempt in this direction in the “Centennial Act” of 1921), Colombia in 1928 and Argentina in 1932.

Source: General Directorate of Internal Taxes - Tax Education