Vat introduction administrative issues
Download
1 / 41

- PowerPoint PPT Presentation


  • 113 Views
  • Uploaded on

VAT Introduction-- Administrative issues. By Paulo dos Santos CARTAC. Who is afraid of the VAT????. The VAT today. 120 countries have a VAT 4 billion people pay it It raises more than US$18 billion or 25% of total tax revenue. 1948 1967 1970/80 1990. France, at manufacturing level

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about '' - eara


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Vat introduction administrative issues l.jpg

VAT Introduction--Administrative issues

By Paulo dos Santos

CARTAC



The vat today l.jpg
The VAT today

  • 120 countries have a VAT

  • 4 billion people pay it

  • It raises more than US$18 billion or 25% of total tax revenue


Vat introduction the chronology l.jpg

1948

1967

1970/80

1990

France, at manufacturing level

Brazil, at all levels (Brazilian states)

It spread to 63 countries

More than 120 countries have VAT

VAT introduction—The Chronology


Vat is efficient in small islands under 1 million population l.jpg
VAT is efficient in small islands(Under 1 million population)


The situation in the caribbean region l.jpg
The situation in the Caribbean region

  • In operation

    • Barbados, Dominican Republic, Haiti, Jamaica, and Trinidad & Tobago

  • Repealed

    • Belize, Grenada


Why some countries repeal vat l.jpg
Why some countries repeal VAT?

  • Political commitment to repeal it

  • Poor performance due to poor planning for introduction

  • Inadequate definition of registration threshold


The vat implementation flow l.jpg
The VAT implementation flow

Decide on VAT

Introduction

Decide on policy

Aspects

Decide on adminis-

trative aspects

Operate

the VAT

Prepare for VAT

introduction

Introduce

the VAT


The most mentioned constraints to vat introduction l.jpg
The most-mentioned constraints to VAT introduction

  • Tax administration effectiveness

  • Culture of bookkeeping

  • Adult literacy level

  • Implementation cost


Tax administration effectiveness l.jpg
Tax administration effectiveness

  • Weak administration = poor VAT performance

  • But…

  • Under a weak administration any tax performance will be poor

  • Some countries use VAT as part of a strategy to strengthen tax administration

  • Train staff during VAT introduction


Culture of bookkeeping why bookkeeping l.jpg
Culture of bookkeepingWhy bookkeeping?

  • Pricing product accurately

  • Knowing if business is making or losing money

  • Knowing the cash flow (short & long run)

  • Working with bankers (financing)

  • Paying taxes due


Culture of bookkeeping how to change it l.jpg
Culture of bookkeepingHow to change it?

  • The Peruvian culture regarding invoices

  • Enforce bookkeeping requirement

  • Establish threshold that ‘filters’ those unable to bookkeeping


Slide13 l.jpg

Adult Literacy Rate and VAT Revenue

(in selected countries)


Decide on the vat policy aspects l.jpg
Decide on the VAT policy aspects

  • Tax base

  • Tax rate

    • 1 positive rate

    • Zero rate for exporters

  • Registration threshold


Registration threshold in selected countries l.jpg

Ivory Coast

Madagascar

Chad

Sri Lanka

Barbados

Rwanda

Trinidad & Tobago

Fiji

El Salvador

50,000

45,000

40,000

33,000

30,000

28,000

25,000

7,000

5,700

Registration threshold (in selected countries)


Decide on vat administrative aspects l.jpg
Decide on VAT administrative aspects

  • Which organization is going to administer the VAT?

  • How frequently should taxpayers file and pay?

  • What the invoicing requirements should be?

  • How will VAT refund operate?


Which organization is going to administer the vat l.jpg
Which organization is going to administer the VAT?

  • Customs

    • Most VAT revenue come from imports

  • Inland Revenue Department

    • VAT is based on financial records as income tax

    • VAT applies to domestic transactions as well

    • VAT should apply on services too


Despite the decision coordination is a must l.jpg
Despite the decision, coordination is a must.

  • Customs information on VAT paid on imports

  • Customs information on exports

  • Joint audit (post release)


How frequently should taxpayers file and pay l.jpg
How frequently should taxpayers file and pay?

  • Transaction-based tax requires frequent reporting

  • But the volume of returns and payment can be large

  • Different treatment according to taxpayer size

  • Possible problems

    • Compliance control

    • Cross-checking

    • Revenue flow


Invoicing requirements l.jpg
Invoicing requirements

  • Invoices are like checks drafted on the Treasury.

  • What should be the invoice contents?

  • How final-consumer invoice should be?

  • How to enforce compliance with invoicing requirements?


Invoice information l.jpg
Invoice information

  • Seller and purchaser names and TIN

  • Seller’s address

  • Date of issuing

  • Invoice number

  • Description of goods and services

  • Indication of unit and total selling price, including VAT paid

  • Date of printing

  • Range of serial numbers printed on that date


Final consumption invoice a decision has to be made l.jpg
Final consumption invoice: a decision has to be made…

  • Invoice or tickets show the VAT paid

  • Invoice or tickets do not show the VAT paid


How to enforce compliance with invoicing requirements l.jpg
How to enforce compliance with invoicing requirements?

  • Controlling invoicing printing

    • L.A. experience

  • Controlling invoicing issuing

    • Massive control

  • Controlling invoice registration

    • Invoicing information cross-checking

    • Start with large taxpayers' purchases


How will vat refunds operate l.jpg
How will VAT refunds operate?

  • Why the refunds?

  • How to deal with VAT excess credit

    • Carry forward

    • Refund tax credit

  • Computer screening of refund claims

    • Information cross-checking

  • Audit of claims

    • Focus on the period of the claim

    • First time claimers

    • Usual claimers

    • In-depth audit (fraud indications)



Establish the vat introduction team l.jpg
Establish the VAT introduction team

  • The team leader

  • The team members

    • Legal issue

    • Training, taxpayer education and publicity

    • Customs controls

    • Registration and taxpayer assistance

    • Filing and payment procedures

    • Audit

    • IT


Prepare the introduction budget l.jpg
Prepare the introduction budget

  • To be managed by the project leader

  • Subject to audit by the Auditor General

  • Should cover all the project expenses: training, travel, office accommodations, consultants, publicity, IT, etc.


Get external assistance l.jpg
Get external assistance

  • International expert for 18-24 months

  • Short-term experts

    • Training

    • Legislation drafting

    • Design of audit and refund programs

    • Etc.


Prepare vat legislation l.jpg
Prepare VAT legislation

  • Draft VAT legislation and regulations

  • Consultation with relevant parties

  • Review related legislation

  • Get legislation passed


Develop and deliver staff training and taxpayer education l.jpg
Develop and deliver staff training and taxpayer education

  • Start training with implementation team

  • Train all staff to be involved with VAT operation

  • Train trainers (updating training)

  • Educate VAT payers, accountants and tax preparers


Prepare and execute publicity programmes l.jpg
Prepare and execute publicity programmes

  • Publicity expert can be required

  • But, implementation team will do most of the work

    • Participate in radio and TV shows

    • Participate in seminars

    • Setting up help telephone line

    • Setting up Internet site


Develop and put in place registration procedures l.jpg
Develop and put in place registration procedures

  • Ensure that those with sales above the registration threshold are registered

  • Try to unify the TIN

  • VAT introduction can be an opportunity to clean up the old taxpayer register.


Develop taxpayer assistance procedures l.jpg
Develop taxpayer assistance procedures

  • Prepare the VAT information guide

    • (What is VAT? Why is it better than other taxes? Which rates will apply? What will be exempted?)

  • Prepare the guide to VAT registration

    • Registration form, post-registration procedures

  • Prepare the guide to completing the VAT return

    • Explain VAT legislation and operation


Develop filing and payment procedures l.jpg
Develop filing and payment procedures

  • Unique form for filing and payment

  • Full self-assessment system

  • Prompt action on non compliance.


Develop audit procedures l.jpg
Develop audit procedures

  • VAT audit is different from income tax

  • Duration of visits vary

    • Trader complexity, size, reliability

  • First months, focus on taxpayer education

  • Following months, enforce compliance


Prepare procedure and policy manuals l.jpg
Prepare procedure and policy manuals

  • Prepare instruction manuals asap

  • Manuals should be clear and comprehensive

  • Should be available through Intranet

  • Should be used for training of new staff or retraining of old staff


Develop and test it systems l.jpg
Develop and test IT systems

  • Taxpayer registration

  • Processing monthly returns and payments

  • Information validation

  • Detection returns with inconsistencies

  • Controlling stopfiling and delinquent accounts

  • Selecting taxpayers for audit

  • Screening of refund applications for audit


Develop the procedures for the transition from a consumption tax to a vat l.jpg
Develop the procedures for the transition from a consumption tax to a VAT

  • Credit should be granted to traders to avoid double taxation

  • But, require evidence that tax was effectively paid to avoid excessive claims


Implement the vat l.jpg
Implement the VAT tax to a VAT

  • Set up taxpayer service unit

  • Set up unit to monitor compliance with filing and payment

  • Set up audit unit

  • Put in place IT systems

  • Deliver VAT return forms to registered taxpayers


Operate the vat l.jpg
Operate the VAT tax to a VAT

  • Review VAT operations

  • Put in place the systems for enforcement of Filing & Payment requirements

  • Put in place the audit program


Conclusions l.jpg
Conclusions tax to a VAT

  • In administrative terms, VAT is feasible in the Caribbean countries

  • Strong political commitment

  • Well prepared implementation plan

  • Resources for implementation

  • International/regional assistance


ad