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Enhancing Africa’s Tax Collection and Management Mechanisms using Smart Technologies

One tax administration in Africa, for example, launched an aggressive two-week effort to improve its registry. During this period, the authority closed selected branches and sent their officials into the field to identify and register informal businesses in specific areas. Taxpayer registry entries increased https://1investing.in/ by 20 to 30 percent in the targeted districts. In Stage I, we will build the most comprehensive database in existence of local taxation capacity in Ghana. To do so, we will begin by digitizing complete records of revenues by source as well as collection costs and administrative costs of revenue collection.

For more information, refer to Taxpayer Bill of Rights, Publication 1, Your Rights as a Taxpayer, Publication 594, The IRS Collection ProcessPDF, and Publication 1660, Collection Appeal RightsPDF. Access and download collection of free Templates to help power your productivity and performance. A simple look at the number of audits shows a decline in the number of audits after a peak in 2010. If you’re a member of the Armed Forces, you may be able to defer payment.

  1. We also drew on information from our proprietary global tax-benchmarking database, which contains the details of over 100 tax practices in more than a dozen countries.
  2. Although tax administrations usually have large-taxpayer units, these LTUs often use the same processes, rules, and resources as general tax offices.
  3. Simplifying the tax code encourages voluntary compliance, while at the same time sending the message that efforts to formalize the system are a priority.
  4. While these factors are important in all such programs, they are especially critical in rapidly growing markets, where implementation is particularly challenging.

First, though the number of cases in collections has a positive effect on collections revenue, the total amount of accounts receivable for collections does not have the same relationship. This analysis showed that more cases entering collection leads to more collections revenue, independent of accounts receivable. This relationship could mean that cases new to collections are more likely to make payments. With this knowledge, management could decide to have collection officers focus on cases new to collections. Second, incoming calls have a positive influence on collections revenue. An incoming call from a business ensures that someone is contacting DOR concerning the case.

Voluntary compliance increased substantially thanks to the perception of increased controls. As a result, revenue from the corporate income tax has risen by over 30 percent year on year. To counteract this, registration should be made more rigorous and feedback systems introduced to ensure that taxpayers regularly update their information. Additionally, quick and simple controls can be put in place to raise the alarm if taxpayers fail to comply with their obligations.

Between FY 2010 and FY2013, the agency’s budget was reduced by about 8%. By communicating specific tax initiatives even to residents who weren’t necessarily affected by them, one country more than doubled their impact because the general population felt obliged to comply with broader tax rules. Indirect taxes are taxes imposed on transactions such as imports and exports and the production and consumption of goods and services. Examples include value-added taxes, legal transaction taxes, manufacturing taxes, and custom taxes on import duties. Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more.

Collection Process: Filing or Paying Late

Regrettably, the proceeds from these corruptive acts are subsequently hidden through money laundering and tax evasion. These factors have been described as significant impediments to sustainable socio-economic development and growth for the African countries of the mineral, oil, and gas. Income taxes are levies imposed on the total financial income of an individual, such as wages, investments, and salaries. Primarily, the revenue collected is utilized for the welfare of taxpayers; this means that the specific benefit received is independent of the individual payment. However, there are some exceptions, such as payroll taxes, where the taxpayer will directly benefit from medical coverage and retirement benefits. First, IRS should shift funds from low-return to high-return areas in order to conduct more audits.

Tax Collection Methods: Understanding Business Tax Collection and the Psyche of Evasion

An OIC is an agreement between a taxpayer and the IRS that resolves a taxpayer’s tax liability by payment of an agreed upon reduced amount. Before an offer can be considered, you must have filed all tax returns, have received a bill for at least one tax debt included on the offer, and made all required estimated tax payments for the current year. If the taxpayer is a business owner with employees, you must have made all required federal tax deposits for the current quarter and the two preceding quarters. To confirm eligibility, you may use the Offer in Compromise Pre-Qualifier tool. Although large-scale structural reforms are an important part of a well-functioning tax administration, they are extremely challenging to implement, and they take time.

States are losing tax revenue for a variety of reasons; this paper explores some of the major factors causing states to lose out on tax revenue. It addresses the tax gap, or unpaid taxes due and the economic inefficiencies caused by tax evasion. It analyzes the psyche of noncompliance in an attempt to discover the most efficient manner of collecting taxes. This understanding of noncompliant behavior is used to help identify the most effective tax collection methods available.

Tax Collection Methods

The low levels of local taxation are widely acknowledged to be a constraint on growth and development by the Ghanaian government, and policymakers do not agree on how best to promote greater revenue collections. These three factors, officer NOA’s, number of collection cases, and incoming phone calls all effect total collections in a statistically significant positive manner. There are other collection activities that a priori might seem to be related to these factors as well, but this analysis showed no connection.

Tax Administration:

Taxation is involuntary; hence it does not require consent from the residents. Therefore, the government may resort to the use of force and threats to implement successful taxation. The Brookings Institution is a nonprofit organization based in Washington, D.C. Our mission is to conduct in-depth, nonpartisan research to improve policy and governance at local, national, and global levels. But deficit hawks in Congress should take note and consider changing their perspective on funding. The “tax gap” accounts for a substantial portion of the current annual deficit.

As a result, self-employed Africans will rarely contribute to their country’s taxes and social security. Property taxes are generally imposed on physical property, such as land and buildings. Property taxes finance tax collection methods key public services, such as fire departments, schools, roads, security, and rapid medical services. The tax systems in most rapidly growing economies are highly informal and often unnecessarily complex.

Levies on net worth are based on the taxpayer’s assets value minus total liabilities, while expenditure taxes are paid on income that is not directed to savings. Payroll taxes are levies imposed on employees’ income to finance social security funds. Normally, the payroll tax amount is automatically deducted from the income and paid by the employer on behalf of the employee. Given variations in enforcement activity and their prospective payoff, changes in IRS funding can mean a change in the types of enforcement activities the agency pursues, as they try to maximize revenue collection. In other years, IRS collects less and less revenue, increasing the unrealized tax gap.

When taxpayers are contacting the CP/LLC branch they are usually trying to work toward resolution. Another possible explanation for the correlation could be that taxpayers are calling in due to a refund offset. If a taxpayer owes tax liability for a business or for their individual income and he or she has been properly assessed as an officer of the business, then any tax refund due to that person, state or federal, will be offset and applied to the tax debt. This information emphasizes the importance of adequate phone coverage to CP/LLC Collections. “Taxes are the life-blood of government, and their prompt and certain availability an imperious need (Justice Owen J Roberts, Bull V US 295 U. S. 247 (1935))” (Scharf). Tax collection is necessary to ensure revenues are collected to fund governmental services.

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