Act in a transparent and predictable way towards taxpayers and other stakeholders
When Tax Administrations act transparently and provide certainty and clarity in the treatment of certain tax transactions, there are opportunities to strengthen trust with taxpayers. The timing is very important as the taxpayer needs to know the position before the transaction takes place. Where the Tax Administration provides the clarity and certainty required, there will be no surprises for the taxpayer at a later date, a no surprise culture.
Tax Administrations can make a significant difference by simplifying for the taxpayer. For example, Tax Administrations can greatly assist taxpayers by taking complex tax law and regulations and translating them into plain, understandable language that the taxpayer can understand.2.1 Transparency in both what we do and how we do it.
When a Tax Administration acts in a transparent and predictable manner it provides certainty for the taxpayer. Tax Administrations should inform taxpayers of how the administration functions and how their processes work. Procedures can still create uncertainty for taxpayers if they are not transparent. A taxpayer needs to know what is expected from him or her and also what they can expect from the Tax Administrations. This could be achieved by publicising information on the Administration’s website, providing guidelines on tax issues, publishing an Annual Plan/Report, having rules on the tax treatment of particular tax issues and providing details on the availability and range of customer services, and so on.
Making promises will achieve predictability and provide certainty to the taxpayer and this may contribute to reducing compliance costs and the administrative burden and increasing trust between the taxpayer and the Tax Administration.
In this regard, some Tax Administrations publish short summaries of appeal decisions or advance rulings or their regulations describing how they interpret tax codes or publish their organisational rulings e.g. organisational handbooks.
Announcing audits and signalling why certain business groups will be targeted for compliance checks provides transparency to taxpayers and could act as a preventive measure.
Tax Administrations should try to ensure that there are no surprises for the taxpayer. Tax is challenging for many taxpayers as the legislation is complex and also because of the language and jargon used. Legislation is often written in a way that is challenging to the ordinary taxpayer and it is necessary that information is provided in a format that the taxpayer can understand.
Tax Administrations should be open to using different methods to provide assurance to taxpayers regarding their tax obligations.
In many instances, decisions regarding tax legislation is not within the wherewithal of the Tax Administration. This can lead to more complexity in the tax system. Notwithstanding this, Tax Administrations have a responsibility to break the complexity down to make it comprehendible to the ordinary taxpayer. Engagement with the legislator and sharing insights from the taxpayer’s perspective may assist in making any new tax legislation clearer and easier to understand. Tax Administrations should use their influence with the relevant stakeholders to implement changes that could provide more assurances and clarity to taxpayers.