Tax Evasion and Avoidance: Strategies and Initiatives Used by CATA Member Countries

This book summarises the strategies and initiatives used by tax administrations around the world to prevent, detect and deal with tax evasion and avoidance, from 'command and control' approaches such as penalties and sanctions to 'responsive regulation' such as taxpayer education and assistance. The book, one of the fruits of a decade-long collaborative partnership between the Commonwealth Association of Tax Administrators (CATA) and the Governance and Institutional Development Division of the Commonwealth Secretariat, provides a detailed menu of approaches that tax administrators can select from, follow up with their own research and adapt to their particular circumstances. The authors describe the conditions that foster tax evasion and avoidance, examine the most common types of evasion and avoidance behaviours and activities experienced by CATA member countries, and consider which sectors and occupations are particularly prone to tax evasion and avoidance activities.

Table of Contents:
FOREWORD OVERVIEW OF THIS PUBLICATION Purpose and scope Relationship to other CATA publications Layout of the publication Feedback LIMITATIONS ACKNOWLEDGEMENTS INTRODUCTION Why this publication was developed Methodology MEMBER VIEWS ON THE COMMON TYPES OF TAX EVASION AND AVOIDANCE BEHAVIOURS AND ACTIVITIES Individuals not in business Businesses and corporations Some indicators of tax evasion and avoidance MEMBER VIEWS ON THE FACTORS CONTRIBUTING TO A FLOURSHING UNDERGROUND ECONOMY Economic factors Lack of employment Poor economic development/poverty The need to be competitive The nature of production Generous unemployment benefits Cultural and social factors Attitudes and perceptions towards taxation Attitudes and perceptions towards the tax system, tax administration and government Low literacy and education Administrative and regulatory factors High marginal tax rates Complexity of the tax law/system Limited resources and capacity of the tax administration Government regulations and prohibitions Developments in society Technological development Infrastructure STRATEGIES AND INITIATIVES USED TO DEAL WITH TAX EVASION AND AVOIDANCE Legislative control General and specific anti-avoidance rules Simplifying or amending the law Strong investigative powers for tax inspectors Powers to seize or remove materials Application of penalties for taxpayers Application of penalties for promoters of schemes Prosecutions and imprisonment Tax amnesties Interpretative products Choice of tax instruments Using indirect or consumption taxes Using presumptive methods of taxation Decreasing direct tax rates Using withholding taxes Using flat taxes Compliance activities Review and investigations Letters requesting additional information before initiating a formal audit Risk-based audits Random audits Joint audits/simultaneous examinations with other revenue authorities Unannounced field visits/walk-ins Mystery shopping Registration and enterprise reviews Data matching/cross-checking of information Administrative control Merging the collection of indirect and direct taxes Registering the tax base Reducing compliance cost/burden on taxpayers Emergence of autonomous revenue authorities Creating specialised units to focus on specific industries, segments or risk areas Using 'compliance models' or responsive regulation to deal with taxpayers Introducing invoicing/receipting requirements Introducing reporting, record keeping and accounting codes Requirement for tax clearance certificates Taxpayer assistance and education Providing information, tools and guidance to help taxpayers comply Reminder letters or advertisements about lodgement dates/requirements Informing taxpayers of high risk areas Educating taxpayers to seek invoices/receipts from suppliers Publicising prosecution cases and the consequences/penalties for non-compliance Providing incentives/rewards for compliance Raffles/lotteries to increase credit card usage or requests for receipts/invoices Providing taxpayers with the opportunity to voluntarily disclose Using informants and tax evasion referral hotlines/websites Providing a public register of businesses Involving taxpayers in consultative forums Publicising personal income tax information Intermediary assistance and education Establishing an independent task force of experts to advise the tax administration Establishing partnerships with industry/professional associations Developing industry codes of conduct to encourage self-regulation Regulating tax advisers and practitioners Providing incentives/rewards to intermediaries Domestic cooperation Information sharing with other government departments Information sharing with other private sector organisations International cooperation Information sharing with other tax administrations via tax treaties Joint task force Research activities Use of technology Computer-assisted verification and audit activities Data warehousing and data mining Computer forensics Staff training CONCLUDING REMARK - THERE NEEDS TO BE A WHOLE OF GOVERNMENT APPROACH TO TAX EVASION AND AVOIDANCE Appendix A Questionnaire Appendix B CATA countries that participated in the survey Appendix C Figures

About the Author :
CATA is the Commonwealth organisation for tax administrators. It helps member countries through training programmes, technical conferences and knowledge sharing to develop effective tax administrations that promote sustainable development and good governance over the long-term. With 47 member countries, CATA is presently the largest organisation of tax administrators in the world.

Review :
[A] straightforward report of successful strategies and initiatives used by taz administrators worldwide, especially in Commonwealth countries, to prevent, detect, and respond to tax evasion and avoidance .An invaluable reference and resource especially for governmental policymakers in the sphere of tax laws, regulations, and procedural implementations. "