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ISSN 1684-9833 • Year 2 / No.7 /October 14, 2011

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The Executive Secretariat Informs Workshop on Tax Expenditures of the Federation in Brazil The Brazilian Federal Revenue (RFB in Portuguese), in coordination with the School of Fiscal Administration (ESAF) on October 6 and 7, held in Brasilia the Workshop on Tax Expenditures of the Federation with the purpose to align efforts for an effective cost-benefit evaluation of tax expenditures.

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The Executive Secretariat Informs Workshop on Tax Expenditures of the Federation in Brazil Seminar on Taxation in Paraguay An International Authority endorses requests for information from DGI Seminar on the implementation of International Financial Reporting Standards (IFRS) and its impact on the Tax Administration 32nd Annual CATA Conference Meeting with the Tax Administration Jamaica (TAJ) Commissioner General

The first day presentations on tax expenditure measurements were conducted from a methodological, budgetary and control perspective which included the participation of international organizations and officials from different government agencies in Brazil, such as the Court of Accounts of the Federation, the National Treasury Secretariat and the Finance Ministry National Committee for the Management of “Simples”.

The CIAT’s Tax Studies and Research Manager, Mr. Miguel Pecho Trigueros, presented the Handbook of Best Practices of Tax Expenditures Measurement which is in the process of being translated into Portuguese by the RFB. The second day were held presentations by Resource Management entities including the Ministries of Sports, Culture, Education, SUFRAMA, Science and Technology and Development, Industry and Foreign Trade, and a roundtable was developed to discuss how to advance in the cost- benefits evaluation of tax expenditures.

Seminar on Taxation in Paraguay

The Tax Administrations Inform

The conference “Hacienda en tu Comunidad” (Finances in your Community) took place on October 4th in the city of Loma Plata, organized by the Ministry of Finance of the Republic of Paraguay through the Secretariat of State Taxation (SET) and the support of the European Union (EU).

Argentina - Tax Collection - September 2011 Costa Rica and Spain sign agreement Panama – B/.60 million on collection through the use of Tax Cash Registers United States of America - Eight offshore banks are the subject of United States Uruguay – DGI Collection in August 2011 Events Post of the Month Others Documents Ours Documents IBFD News ¿ Really?

This conference included two events.

Official event photo

In the morning hours, a space was dedicated for children and adolescents from the Mennonite colonies of Loma Plata, Neuland and Philadelphia, to interactively learn about taxes; an in the afternoon was held a Seminar on Taxation with the participation of Deputy Minister of Taxation of Paraguay, Mr. Geronimo Bellassai Baudo; the CIAT Tax Studies and Research Manager, Mr. Miguel Pecho Trigueros; the Trade and Economic Advisor of the European Union Delegation in Paraguay; Mr. Eric Dejoie, the President of the Cooperativa Chortitzer Ltd; Mr. Andreas Neufeld Toews, and Professor and

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Tax Specialist, Mr. Celso Simon Vergara Heinrroth, as well as the assistance of local authorities, accountants, businessmen and members of cooperatives in the area.

In this seminar, Mr. Miguel Pecho Trigueros presented the topic “Management of Personal Income Tax in Latin America” preceded by the topic “Paraguay, road

Tax Administration Review CIAT/AEAT/IEF N° 32

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

In the picture: speakers, moderators and participants of the seminar.

An International Authority endorses requests for information from DGI The CIAT Secretary called the Tax Authority to deepen data search The initiative of the General Tax Directorate (DGI in Spanish) to demand information from taxpayers’ expenditures to schools and other educational and sport institutions, not only is in line with the practices performed in the region and in developed countries, but it should also be used by the Uruguayan Tax authority. The only secret which should limit the administrations is the tax secrecy.

So it was stated by Mr. Márcio Verdi, Executive Secretary of the Inter-American Center of Tax Administrations (CIAT), a public international organization that brings together 40 countries around the world.

On a visit to Uruguay for the IV Tax Sessions organized by the DGI at the Faculty of Economics in the University of the Republic, the expert spoke with “El Observador” about instruments which the tax authorities may use to fight against tax evasion.

For Verdi, the “worst tax for society is the one which is paid by one taxpayer and not by others”. In that sense, “everyone should support the tax authority to have the necessary tools to verify if everyone is paying what corresponds” he said.

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The Tax expert and advisor to four government administrations in Brazil, said that those tax authorities that only use the information provided by taxpayers and their historical databases to carry out the tax collection control, “will never reach their full development and nor will they be able to verify that people pay what they should pay. “ The Regulatory and Control of Personal Data Unit issued last week a favorable view about expanding the power of the DGI to demand from educational and sports institutions information on people who pay tuition and fees.

However, some private-sector experts point out that the mechanisms used by the local administration in order to obtain tax information infringe the right to privacy.

In the region as well as in Europe and North America, “all tax authorities have full access to the information. “That is not breaking anyone’s privacy”, categorically said Verdi.

The authorities should go beyond with the use of data provided by third parties, he said. “The Tax authority now has the absolute necessity of using information from financial transactions, credit cards, notary records,” he pointed out by way of example.

The creative use of databases which can be accessed by the DGI and the use of the latest technological instrumental are a worldwide trend and is being adopted also in Uruguay, explained the expert.

In fact, the DGI has already completed a data crossing between the luxury cars sales and the tax returns of their buyers, as well as real estate property transfers.

However, Verdi points out that there must be a clear counterpart from the DGI. The Tax Administration should ensure the confidentiality of the data. “The Tax authority should have access to all information, which should be treated confidentially, only for purposes of calculation and verification,” he explained.

For Mr. Verdi, the Uruguayan administration, together with Ecuador and Dominican Republic were the ones which registered the most progressed in terms of professionalization during the last decade at the regional level.

Mr. Márcio F. Verdi, CIAT Executive Secretary and Mr. Paul Ferreri of the DGI, in the Seminar Tax Conference.

DGI experts in a panel of the Fourth Tax Conference

Personalized VAT During the TAX Sessions, a group of researchers from the DGI Economic Advisory presented a series of research papers. One of them simulates the implementation of a personalized VAT, where each taxpayer pays a different rate, according to the position they hold in the distribution of income.

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The research, which is in its final phase, shows that within a banking context, where access to financial instruments would be generalized to the families, through credit and debit cards – as well as companies – the possibility to perform operation with the plastic cards - the system is not only viable but it would allow to reduce the Gini index by 2.83 points, which measures inequality.

Sources from the Ministry of Economy (MEF) told “El Observador” that it is not only an academic exercise conducted by the researchers: It is a medium-and long-term goal for the administration to develop tools that individualize the tax burden and allow to deepen into the distributive policies.

Currently, VAT is a regressive tax. This means that once the tax is paid, the Uruguayans available income distribution becomes 1.03 points more unequal on the Gini index.

However, the study conducted by the technicians Gustavo González, Marcelo Montero, Leticia Olmos and Fernando Peláez determines that, once a personalized VAT is implemented, the tax would positively contribute to redistribution.

According to the researchers, the previous requirement for the application is universal access to financial services, because it would be implemented only on credit card and debit card purchases.

Seminar on the implementation of International Financial Reporting Standards (IFRS) and its impact on the Tax Administration As a result of a request by Mr. Carlos Marx Carrasco, Director-General of the Ecuadorian Internal Revenue Service, the CIAT Executive Secretariat together with the requesting tax administration have made enormous efforts to coordinate a historic activity which allowed to include on the tax administration international discussion agenda a topic as important as the analysis of the impacts that International Financial Reporting Standards (IFRS) presented on the tax laws and tax administration processes.

The aforementioned activity was held last September 28 and 29, 2011, and it opened with Mr. Miguel Acosta, Director of Fiscal Studies Center of SRI in Ecuador and Gonzalo Arias, CIAT International Cooperation Manager speeches.

Shown above are the speakers who participated in the Seminar on the It also included over 100 officials from SRI in implementation of International Financial Reporting Standards (IFRS) and its Ecuador, Mr. Bernard Marchant, Chile’s tax expert, impact on the Tax Administration Julio Piza, Colombian tax expert, and senior officials of the Public Accountants Association of Pichincha in Ecuador, the Superintendence of Companies of Ecuador, the Kenya Revenue Agency and the Internal Revenue in Dominican Republic.

During the course of the event, the experts have repeatedly stressed that from a business point of view, the implementation of IFRS is an opportunity to improve corporate governance, consistency in financial reporting at international level and the consequent reduction in costs that such standardization could generate.

Similarly, by way of conclusion, the importance of tax administrations to go with the process of implementation and regulation of IFRS in the country, to analyze the effects that IFRS can possibly generate on tax aspects, especially on those cases where the tax rules referred to the accounting rules; to provide permanent training to officials of the tax administrations and to coordinate actions with related organizations (professional associations, regulatory agencies,

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academics, etc.); to assess the possible impacts on aspects for the control of big enterprises and international taxation; to assess transaction costs for the tax administration and the taxpayer and thus, simplify processes for different segments of taxpayers reached by the IFRS, among other relevant aspects.

Since the implementation of IFRS could have an impact on tax aspects, CIAT considers essential that tax administrations of the member countries that have implemented the IFRS generate studies that would allow assessing the impact of these rules on fiscal policy and tax administration. This is why we consider appropriate to continue devoting efforts to the creation of areas for discussion among tax administrations, which will allow them to deal with complex or difficult issues and provide mutual cooperation to face the changes that IFRS presents in the best possible way.

Official Event Photo

32nd Annual CATA Conference The 32th Annual Conference of CATA (Commonwealth Association of Tax Administrators) has taken place in Colombo, Sri Lanka, from September 18 to 23. Assistance to taxpayers, Tax education, and Transfer pricing were the challenging tax administration topics that have been discussed.

This important meeting had the objective of presenting major and successful experiences of CATA member countries in the aforementioned topics, as well as the main challenges that they have yet to overcome in these areas.

CIAT Executive Secretary, Mr. Mรกrcio F. Verdi was invited by CATA to offer a lecture about CIATs work in the field of Ethics and Assistance to Taxpayers. His presentation provided key concepts and challenges for the CATA Tax Administrations.

The CATA conference gathered more than 40 countries, representatives from international organizations, tax experts and tax researchers.

In Photos: Exhibitors and delegates at the 32nd Annual CATA Conference

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Meeting with the Tax Administration Jamaica (TAJ) Commissioner General On September 28th, CIAT Director for International Cooperation and Assistance, Mr. Socorro Velazquez, travelled to Kingston, Jamaica for a meeting with Tax Administration Jamaica (TAJ) Commissioner General, Ms. Viralee Bailey Latibeaudiere and staff.

Several topics were discussed ranging from the recent reorganization of the tax department to enhance effectiveness and efficiency to the need for assistance in the area of Exchange of information operations. On the latter issue, Mr. Velazquez agreed to look into how assistance can be provided to TAJ. Mr. Velazquez informed on the current activities being carried out by the CIAT Executive Secretariat and the efforts being made to provide more English-language content to English-speaking CIAT members. There was interest expressed on the Electronic Invoicing workshop being planned for Caribbean countries.

A visit was also paid the Service Center and Large Taxpayer Unit.

Pictured from left to right: Bailey Sra.Viralee Latibeaudiere, Commissioner General of the Jamaica Tax Administration and Mr. Socorro Velazquez, Director of International Cooperation and Assistance CIAT

In the photo staff of the Jamaica Tax Administration with Mr. Socorro Velazquez, Director of International cooperation and assistance.

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The Tax Administrations Inform Argentina - Tax Collection - September 2011 NET VAT revenue this month reached $14,323 million with an inter-annual variation of 33.6%. VAT increased 39.1% and Custom VAT increased 21.9% due to an increase in import and the increase on the exchange rate.

Income tax reached $3,542 million with a positive inter-annual variation of 41.0% due to the increase on the taxable banking transactions.

Carlos Alberto Sánchez Correspondent

Costa Rica and Spain sign agreement As part of the actions undertaken by the Ministry of Treasury to fight tax evasion and improve tax collection, the signing of a cooperation agreement took place between this Ministry and the Spanish State Tax Administration Agency (AEAT) by which the Costa Rican tax administration will receive technical assistance to strengthen information systems and tax information systems.

Participants to the event included the President of the Republic, Mrs. Laura Chinchilla Miranda; the Minister of Treasury, Mr. Fernando Herrero; the Spanish Ambassador in Costa Rica, Mrs. Elena Madrazo and the Director-General of the AEAT, Mr. José María Meseguer.

Maribel Zuñiga Cambronero Correspondent

Panama – B/.60 million on collection through the use of Tax Cash Registers MEF Tax Revenue Director-General, Mr. Luis Cucalón met with members of the national media to provide information on the tax cash registers. He was together with Irene Carrizo, DGI Plan and Program Coordinator.

With the implementation of the use of tax cash registers, a collection between $60 to $80 million is estimated, which is the amount left unpaid on the Goods and Services Transfer Tax (ITBMS), stated Mr. Luis Cucalón, Director-General of Revenue, Ministry of Economy and Finance, at a press conference.

Esmeralda George Correspondent

United States of America - Eight offshore banks are the subject of United States Federal grand jury investigations examining whether they helped Americans evade taxes, a sign that authorities may be ready to issue subpoenas to those banks as part of a crackdown on offshore tax cheating.

In a highly unusual action late on Monday, the U.S. Department of Justice disclosed the probes on a website page discussing its tax division’s Offshore Compliance Initiative. It did not identify the eight banks by name, a move that would have been a felony under criminal procedure rules, and removed the reference on Tuesday.

The disclosure that eight offshore banks are under criminal investigation comes amid efforts by certain Swiss banks to reach a settlement with U.S. authorities over their offshore private banking services. Those talks have bogged down over questions of immunity for foreign bankers, among other issues.

Raúl Pertierra Correspondent

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Uruguay – DGI Collection in August 2011 The total net collection (e.g., excluding tax return) reached 13,297 million pesos in August 2011. This represents 2,112 million pesos more than the same month last year (18.9% variation at current prices).

Deducting the inflation effect, the inter-annual collection variation was 10.5% (Variation at constant prices).

The total gross collection measured at constant prices showed a slightly different variation: 9.9%. The difference between the variation of the gross collection and the net collection has its source in the magnitude of the tax refund which, measured at constant prices, had a variation of 3.7%.

Without considering the public companies, the collection record shows an increase in dynamic for this month: the variation of the gross and net collection in constant prices by comparing August 2011 with August 2010 was 10.4% and 11.0% respectively.

Margarita Faral Pyñeiro Correspondent

Events Advanced Course on Economic Analysis of Public Policies Institute for Fiscal Studies November 14-16, 2011.

This course is designed to train students in the advanced analysis of public policies in general and in particular, welfare policies which are approached with a new sight.

The Director of the Institute for Fiscal Studies announces the “Advanced Course on Economic Analysis of Public Policies “ that will be presented by professors Guillem Lopez i Casasnovas (Pompeu Fabra University) and Beatriz González López-Valcárcel (Las Palmas of Gran Canaria University) at the Institute for Fiscal Studies from November 14 - 16.

Those interested can find detailed information in the enclosed attachment. For additional information and registration you can contact the Administrative Secretariat for the course, Luis Esteban (tel.: 91 339 87 31; (e-mail: luis.esteban@ ief.meh.es).

Posts of the Month 09/10/2011 Como en Camelot, en Lisboa Written by: Raúl Zambrano

Others Documents SET - Paraguay moves toward Electronic Invoice Bulletin No. 38 September 28, 2011 With the purpose of moving forward to the implementation of electronic invoice in Paraguay, the Ministry of Finance –Sub-Secretary of State Taxation has conducted an international seminar on electronic invoicing in the presence of foreign experts.

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Ours Documents Thematic Tax Series

Taxpayer Assistance No.15, August 2011 This thematic series presents in its Edition No. 15 the topic of “Taxpayer Assistence.” The references compiled in this series are studies developed by technical agents either as presentations on the occasion of general assemblies or technical conferences.

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

Based on the historical cooperation relationships between CIAT and the IBFD, both organizations will sign an agreement dealing with training, dissemination, exchange of documents and research issues, at the Technical Conference to be held in Lisbon, on October 24-27, 2011.

Even though the agreement has not yet been signed, we have decided to begin exchanging news in October. For this reason, this publication includes a section with selected news items from the IBFD on tax policy and administration which will also be available in the CIAT Web site.

From now on, you may find IBFD news in the CIAT Tax News Alert on Fridays.

Indeed this initiative will allow us to improve the CIAT information sources, while providing a better service to our member countries.

¿Really?

The Tax Evolution From its origin, the obligation to pay tributes was a result of domination, in other words, the imposition of the dominant over the dominated one, either as a ruler, as a conqueror, or as an oppressor, as long as it relied on the strength in its multiple conventional and historic forms.

Therefore, the conversion of the tribute into a tax system through the formal establishment of the legislative type of rule.