Executive summary – a pathway to tax compliance
In general terms, voluntary disclosure programmes are opportunities offered by tax administrations to allow previously non-compliant taxpayers to correct their tax affairs under specified terms.
When drafted carefully, voluntary disclosure programmes benefit everyone involved – taxpayers making the disclosure, compliant taxpayers, and governments.
Voluntary disclosure programmes complement the rapid improvement in exchange of information and the ability of governments to detect offshore evasion.
They are an integral part of a broader compliance strategy – they need to be considered as part of a variety of compliance actions that tax administrations and governments take in order to encourage all taxpayers to meet their obligations.
Section I explains how voluntary disclosure programmes fit into the overall compliance strategy of a tax administration. The design of a voluntary disclosure programme should be such that taxpayers who come forward voluntarily pay more than they would have done had they been fully compliant from the outset, but face less punitive sanctions than evaders who make no disclosure but are detected by their tax administration.
Voluntary disclosure programmes can generally be grouped into two categories – permanent programmes and temporary initiatives. The OECD’s Forum on Tax Administration (FTA) has developed a decision tree to assist administrations that are considering a voluntary disclosure programme.
The decision tree provides an overview of the factors that tax administrations need to take account of when designing and administering a voluntary disclosure programme – weather it be permanent in nature or established on a temporary basis. In particular, decision makers should:
i) establish a reason for the programme,
ii) determine the scope,
iii) establish the terms,
iv) establish the reporting requirements,
v) consider the opportunity for intelligence gathering, and
vi) develop a communication strategy.
Section III identifies principles on which a successful voluntary disclosure programme should be based. A successful programme will:
- be clear about its aims and terms,
- deliver demonstrable and cost-effective increases in current revenues;
- be consistent with the generally applicable compliance and enforcement regimes;
- help to deter non-compliance;
- improve levels of compliance among the population eligible for the programme; and
- complement the immediate yield from disclosures with measures that improve compliance in the longer-term.
In order to improve uptake in voluntary disclosure, section IV provides a list of topics on which it would be desirable to provide a greater level of certainty for taxpayers who are considering participating in voluntary disclosure programmes.
Taxpayers’ primary concern is to understand exactly what will happen if they make a full and accurate disclosure and whether criminal charges will be brought. Taxpayers are also concerned about the confidentiality of the information that is provided, both because of the reputational damage that might result from any publicity and for reasons of personal security.
Taxpayers want reassurance that the financial terms on which their liabilities will be settled will not be prohibitive. They also want reassurance that once the disclosure is complete, they will not be unduly targeted for enhanced scrutiny in the future.
Finally, the last section of this paper compares the key features of voluntary disclosure programmes in 47 countries.
Countries considering the introduction of measures in this area can use this information to compare different strategies.
They can also use the information to review their own measures with a view to redesigning or adapting them.