/y2011n24

ISSN 1684-9833 • Year 1 / No.24 /March 4, 2011

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The Executive Secretariat Informs CIAT Executive Council Meeting The CIAT Executive Council met in Panama City on February 24 and 25, 2011. The Council mainly discussed the activities and budgetary execution reports for the current period, as well as the draft Budget and Annual Operational Plan to be approved by the General Assembly at the Administrative Session scheduled to be held next April 5, in Quito, Ecuador.

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The Executive Secretariat Informs

The Deputy Director of Examination of AFIP, Argentina, Mr. Horacio Curien, who represented the Federal Administrator of Public Revenues, presented an alternate document to the CIAT Executive Council’s draft Multilateral Voluntary Agreement for the Exchange of Information.

CIAT Executive Council Meeting Harmful International Tax Planning Control Committee to submit initial results shortly CIAT participated in 2nd meeting of International Tax Compact Core Group Executive Secretary Participates in National Tax Compliance Meeting The Tax Administrations Inform Costa Rica - Changes massive control scheme Chile - Forty per cent of invoices issued in Chile are electronic

From left to right: Mr. Carlos M. Carrasco Vicuña, Director General of the Internal Revenue Service of Ecuador, Mr. Pablo Ferreri Director General of Taxation of Uruguay and Chairman of the Board of CIAT and Mr. Márcio F. Verdi, Executive Secretary of CIAT.

Ecuador - SRI achieved 103.9 compliance, thereby exceeding the 2010 collection goals México - SAT publishes its Tax and Management Report Paraguay - Tax Administration of Paraguay increases taxpayer control United States -IRS official stresses importance of common ground in competent authority arena Training New in the Web!...

Events Other documents Our Documents

In the picture: Participants of the Executive Council meeting.

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Harmful International Tax Planning Control Committee to submit initial results shortly The Harmful International Tax Planning Control Committee will submit shortly the first results of its work, to be used by the Tax Administrations of the CIAT member countries.

They will be securely available (with special access codes) to the Tax Administrations, inasmuch as they include sensitive information on regulatory as well as managerial aspects applicable to international taxation.

The Committee is formed by representatives from Argentina (which chairs it), Brazil, Canada, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, France, Italy, Kenya, Mexico, The Netherlands, Paraguay, Portugal, Spain, United States, Uruguay and the CIAT Executive Secretariat whose efforts and dedication resulted in the pertinent documents and studies.

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

These products are:

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Compilation of comparative legislation on international taxation, which was coordinated by Brazil. It discusses tax treatment in different countries of the concept of residence, treatment of nonresidents, anti-abuse measures, among others.

Comparative study on tax havens coordinated by Argentina. This study examines tax legislation and examination strategies applied with respect to tax haven operations.

Data base with international tax planning schemes and instruments, arising from the experiences of the tax administrations represented in the Committee and coordinated by the Committee Chairman and the CIAT Executive Secretariat.

There are currently 30 cases reported and shortly the computerized system will be available for accessing, loading and consulting them, according to different search criteria. A special document was also prepared, summarizing and comparing the 30 cases reported.

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

Also in process is a comparative study on examination of intragroup services, to be concluded shortly. The latter is being coordinated by Spain.

In addition to working on said products, this Committee also allows for rich interaction among the delegates, who exchange news and working experiences.

In order to learn more about the background of this Committee, it originated from the Working Group on International Tax Planning Control formed by Argentina, Brazil, Canada, Chile and Mexico. Subsequently, Spain, United States, Italy, The Netherlands and Portugal joined the Group. In September 2003, at the CIAT Technical Conference held in Lisbon (Portugal), the Working Group held its preparatory meeting, after which it met on several occasions in Buenos Aires (Argentina) and concluded its work with the elaboration of the “International Tax Planning Control Manual”, which was presented at the 41st CIAT General Assembly held in Barbados.

In the picture: Participants of the International Tax Compact Core Group meeting

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The objectives of this Committee are: 1. Develop mechanisms for an effective exchange of knowledge and experiences between the Tax Administrations for timely detecting and curbing international tax evasion and avoidance.

2. Compile, classify and codify schemes, maneuvers and instruments used in international tax planning.

3. Identify legislative and/or administrative restraint measures and actions that may promote tax responsibility within the corporate government sphere, as well as in the applicable detection, selection and control processes.

4. Undertake analysis and research tasks.

Likewise the main international taxation issues considered are: • • • • •

Transfer pricing control Information exchange agreements Treaty shopping Combating unfair tax management practices Promotion of other cooperation practices among the Tax Administrations.

Although the Committee essentially works through a virtual platform, three face-to-face meetings have been held since its establishment. The first one was held in Panama in May 2008, where the Bylaws and working guidelines were approved. The second meeting was also held in Panama in June 2009, on which occasion, achievements in the lines of action were presented, some adjustments were made and new challenges were included. For example, it was decided to undertake the study of tax havens. The Committee’s third face-to-face meeting was held in the City of Mar del Plata (Argentina), in April 2010, at which time some of the products were concluded.

Another meeting is scheduled to be held in May of this year in Argentina.

CIAT participated in 2nd meeting of International Tax Compact Core Group The second meeting of the International Tax Compact Core Group was held on February 23, 2011 in Brussels, Belgium. It was sponsored by the German Federal Ministry for Economic Cooperation and Development, the French Ministry of Foreign and European Affairs, the Spanish Ministry of Foreign Affairs and Cooperation and the European Commission. Its purpose was to give continuity to the ITC works initiated in 2010, strengthen the cooperation commitments acquired by the members of the Core Group and explore specific cooperation possibilities, especially at the country level and within the framework the tax and international development agenda.

On this occasion, the CIAT Director of International Assistance and Cooperation, Mr. Socorro Velazquez, discussed the development and results of the first cooperation activity organized by CIAT, GIZ, CAPTAC-RD and OTA US Treasury in El Salvador, within the framework of ITC, in order to strengthen the capabilities of the tax administrations of the Central American region. As a result of this activity, a meeting was held at the World Bank headquarters in Washington, last January to coordinate technical assistance in tax policy and administration in Latin America and the Caribbean.

The Core Group meeting successfully achieved its objectives, thanks to the active participation of representatives from France, Germany, The Netherlands, Spain, Switzerland, the African Tax Administration Forum (ATAF), the European Commission (EC), the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD), the United Nations Organization (UNO) and as observer, the International Development Law Organization (IDLO).

Upon conclusion of the Core Group meeting, the ITC Secretariat and European Commission invited the Core Group members to the presentation of the Initial Report on the “Transfer Pricing and developing countries” study currently in process, as well as to exchange information on the activities currently being carried out by the members in relation to the control of abusive manipulation of transfer prices.

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Executive Secretary Participates in National Tax Compliance Meeting The National Tax Compliance Meeting organized by the National Tax Superintendency (SUNAT) was held in Lima, Peru on February 17 and 18.

The purpose of this important event was to disseminate the Institutional Operational Plan for the current year among directors of SUNAT’s Internal Tax operational areas, officials from the normative areas and high level management, as well as to reinforce such concepts as team work, alignment and decision-making.

The CIAT Executive Secretary, Mr. Márcio F. Verdi, was invited to make the inaugural presentation which dealt with “The Importance of the Tax Administration in the Country’s Development”, covering key concepts and challenges faced by the Tax Administrations. It was also focused on the main problems of equity, social acceptance and collection efficiency and how they are being faced through the application of electronic tools and tax culture programs. Mr. Verdi also discussed transfer pricing, tax havens and cooperation among tax administrations to avoid international tax fraud, as well as the value of the service rendered by the tax administrations to Society and the State and the need that it be perceived as a quality service.

From left to right: Mr. Márcio F. Verdi, CIAT Executive Secretary and Ms. Nahil Hirsh Carrillo, National Tax Superintendent

Other presentations considered the perspectives of the Peruvian economy, of SUNAT and the need to work in teams and aligned with the institutional objectives. Specific proposals of the Institutional Operational Plan were discussed and workshops were also held for considering best practices in achieving the proposed goals.

Official photo: The National Tax Compliance Meeting

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The Tax Administrations Inform Costa Rica - Changes massive control scheme Noncompliance gaps have been traditionally approached by means of plans addressed to independently selected groups of taxpayers in each plan.

In 2010, the Regional Directorates undertook local actions which dealt with several noncompliance gaps as well as the follow-up of the veracity of taxpayer returns.

Today, under the guidance of the General Director, Francisco Villalobos, control involves integral actions, intensive coverage and follow-up of the taxpayers’ fiscal behavior, endeavoring to achieve voluntary compliance at the voluntary phase and applying harsh measures to those who are unwilling to pay.

This was the origin of the 2011 Perceptible Presence Plan –PPP- which puts to test the Tax Administration’s power of persuasion, it being bet that 90% of cases will solve their situation in the voluntary phase. Persuasion is the key Word of the PPP. The PPP has two fronts: -those registered – of whom there is third-party information as to the fact that they file inaccurate returns and -those in hiding- whose message to the compliant taxpayer is ill-fated. A total of 17.000 taxpayers in those conditions will be approached.

Several forms of noncompliance are considered, the most important one being, inaccuracy in the 2009 and 2010 fiscal periods. Initial contact is established with the taxpayer. If he insists on his irregular situation, the tax behavior in the past three years is examined and if he persists, a tax assessment process is undertaken and risk is created before the taxpayer who is reluctant to improve his tax behavior.

Roxana González, Regional Director, PPP Maribel Zuñiga Cambronero Correspondent

Chile - Forty per cent of invoices issued in Chile are electronic The increasing use of electronic tax documents in the country set a milestone in January of this year when, of the invoices issued, 40% were electronic invoices which totaled over 9 million documents.

The increasing trend has been constant, to the extent the taxpayers have experienced the multiple benefits of this tool, in terms of management and savings for their business.

In 2010, approximately 108 million electronic invoices were issued. This represented a 13% increase with respect to the previous year.

Bernardita Moraga Correspondent

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Ecuador - SRI achieved 103.9 compliance, thereby exceeding the 2010 collection goal The Internal Revenue Service successfully closed the 2010 fiscal period with 103.9% compliance with respect to the collection goal set for that fiscal year, obtaining 7.864 million dollars , which constitutes a contribution to the treasury of over 1000 million dollars as compared to the amount planned. Such collection also implies a nominal growth of 17.5% with respect to the same period in the previous year.

The direct taxes share in the January-December 2010 period represents 43% of actual collection, which is worth noting when compared with the previous year’s share. On the other hand, indirect taxes represented 56% of total actual collection with a one point decrease.

In 2010, the most important taxes showed significant increases vis-a-vis the goal established for said period.

Among these, there was a 21.7 % increase in Value Added Tax; while the increase in Excise Taxes was 18.3%.

Cumulative VAT on Internal Operations through December 2010 showed a nominal increase of 19%, while VAT on Imports increased 25.9 %.

The collection of Motor Vehicles Tax amounted to $ 155.6 million dollars, with a 31.8% increase as compared to the same period during the previous year.

The Foreign Exchange Outflow Tax amounted to $US371.3 million dollars, as compared to US$ 188.2 million dollars collected in the same period in 2009, due to the taxed percentage increase of this tax.

Mauro Andino A. Correspondent

México - SAT publishes its Tax and Management Report The Tax Administration Service (SAT) published its Tax and Management Report for the fourth quarter of 2010. It includes information on the evolution of tax revenues by category, at current and constant prices, as well as a percentage of GDP. It also describes their behavior in relation to estimates provided in the Revenues Law, in addition to showing an international comparison.

Roberto López Vides Corresponsal

Paraguay - Tax Administration of Paraguay increases taxpayer control The Examination Directorate of the State Undersecretariat of Taxation of Paraguay experienced a 168% increase in taxpayer examination processes in 2010 as compared to 2009. Last year internal controls increased 513% more than in 2009.

Of specific examinations undertaken and concluded through the Tax Auditing Department, 35 were not accepted and were passed on to summary proceedings, while other 9 examinations are still in process.

Completed information Elizabeth Fernández Corrales Correspondent

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United States - IRS official stresses importance of common ground in competent authority arena IRS official Michael Danilack told practitioners at the Pacific Rim Tax Institute conference in Menlo Park, Calif., that the ranks of international examiners at the IRS have shrunk in the past decade and won’t be growing soon, but that the IRS plans to expand its competent authority staff despite the current budget environment. “That’s a practice area that needs to grow substantially,” In a keynote address on January 20, Danilack, deputy commissioner (international) in the IRS Large Business and International Division, said it’s important to integrate what’s going on in the competent authority program and what’s going on in the field. Field agents “ought to know what the dynamics are. They’re the ones making the adjustments,” he said. “Those adjustments do have an effect on bilateral, multilateral issues. They need to know it, they need to understand it.”

Raúl Pertierra Correspondent

Tax Administration of Paraguay increases taxpayer control The Examination Directorate of the State Undersecretariat of Taxation of Paraguay experienced a 168% increase in taxpayer examination processes in 2010 as compared to 2009. Last year internal controls increased 513% more than in 2009.

Of specific examinations undertaken and concluded through the Tax Auditing Department, 35 were not accepted and were passed on to summary proceedings, while other 9 examinations are still in process.

Elizabeth Fernández Corrales Correspondent

Training Register now for the Customs Course, 1st ed.

CIAT invites all officials of the tax administrations and the public in general to participate in the Customs Course, 1st ed.

The Customs Course begins on March 21, 2011, and its objective is to disseminate the customs principles and standards, in addition to providing and assessing the main customs techniques.

To participate, you must fill out the registration form and send it to capacitacion@ciat.org

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Register now for the Management Course, 3rd ed.

Officials from the tax administration and the public in general are invited to participate in the Management Course, 3rd ed.

The Management course begins on April 11, 2011 and registrations are now open. The objective of the course is to develop competencies and skills to act strategically and make decisions in the changing world of Taxation which affect Tax Administration management.

To participate, you must fill out the registration form and send it to capacitacion@ciat.org

New in the Web!...

Thematic Bibliography No. 4. February

In its No.4 edition of February , The Thematic Bibliography deal with "Impact of the Tax Administration.

The material gathered includes studies and papers prepared by technical officials for presentation either at the General Assemblies or Technical Conferences, essays, research scholarships and articles published in the tax administration review, among others.

Events!...

Econometric Estimation of Frontier Functions and Economic Efficiency March 22 and 23, 2011 Madrid, Spain

This course will present the methodology of econometric estimation of economic efficiency. We will examine the stochastic frontier model as an econometric extension of the classical microeconomic theory of production and cost at the individual producer level. Basic models for production cost and ‘distance’ will be examined. We will examine major extensions of the models to provide scope for cross firm heterogeneity (such as heteroscedasticity) as well as unobserved heterogeneity captured by the stochastic specification of the model.

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Other documents!...

Human Rights and Development Practice Milan Brahmbhatt and Otaviano Canuto The World Bank. Economic Premise Number 50 February 2011

In the past two decades, there has been a growing engagement between development and human rights practitioners and thinkers. But are participants in this dialogue still mainly talking past each other? Or has there been valuable cross-fertilization and learning—the Millennium Development Goals (MDGs) themselves being a fruit of this convergence? This note addresses three points. The first point is the growing convergence between human rights and development thinking along several dimensions, particularly on social and economic rights.

Our Documents!...

Bibliographic News February, 2011

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