## tarea2024042 ## Source details **Canonical URL:** [tarea2024042](https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024042.pdf) ## Other formats - [Markdown version](/-/media/files/publications/tar/2024/english/tarea2024042.pdf.md) - [Structured JSON version](/-/media/files/publications/tar/2024/english/tarea2024042.pdf.json) --- ### Mission background and scope - A Capacity Development (CD) mission from the Fiscal Affairs Department (FAD) visited Paramaribo, Suriname from January 15- 26, 2024. - Main tasks: assess the effectiveness of the launch and administration of the Value Added Tax (VAT) and provide advice on improving the efficiency and effectiveness of VAT administration in Suriname. - Mission team: Mr. Norris Miller (FAD); Messrs. Stephen Mendes and Frode Lindseth (CARTAC); Messrs. Rick Fisher and Grenville John (FAD). - Principal meetings: Minister of Finance and Planning; Director DoTC; Inspector of Sales Tax (VAT); Inspector of Customs and Excise; Collectors for Direct Taxes and Customs and Excise; senior management of tax and customs departments; IT provider and IT consultant. - Stakeholder engagement: manufacturers associations, chamber of commerce, audit firms, shipping association, customs brokers, and agents. - Report composition: Executive Summary and six Chapters: (i) Introduction; (ii) Assessing the Launch of the VAT; (iii) Tax Administration of VAT; (iv) Analyzing VAT Operational Performance in Accurate Reporting; (v) Customs Administration of the VAT; and (vi) Reform Program and Donor Support. ### Executive summary — implementation outcomes and key findings - VAT launch date: January 1, 2023, replacing the Sales Tax. - First 12 months VAT revenue: approximately 3 percent of Gross Domestic Product (GDP) and 95.4 percent of the collection target. - VAT’s contribution to government revenue: close to 22 percent of overall tax revenue. - Primary cause of weaker-than-expected VAT collection: how the VAT was implemented and administered during the first twelve months. - Pre-launch preparedness gaps: - implementation project not fully resourced; - most VAT Orders needed to support the principal VAT Act were not developed; - staff lacked required training to ensure adequate understanding of VAT legislation; - full suite of IT solutions required to support VAT were not deployed; - taxpayers and traders did not receive sufficient information to prepare. - Policy changes impact: last-minute changes in December 2022 and amendments in September 2023 created uncertainty and delays, increased refund claims, and reduced expected VAT revenue. - Institutional model: VAT administered using same institutional/organizational settings as Sales tax; no dedicated VAT unit/department prior to integration. ### Operational performance — observed issues and risks - Registration and filing: - Approximately 4,000 taxpayers registered for VAT by end-2023. - Just over 2800 filed VAT returns (2,881 filed up to mid-November 2023). - Filing compliance for the first 11 months: 58 percent. - Concern: low threshold and incomplete registration; many registrants chose not to file VAT. - Arrears and accounting: - The stock of tax arrears is not known. - VAT liabilities not fully posted to taxpayers’ accounting ledgers, creating revenue risk. - VAT return data indicate SRD 2.7 billion was declared as payable; most of these declarations are yet to be posted. - Estimated VAT arrears could be at least SRD 1.0 billion. - Refunds: - VAT refund module not deployed at launch; refunds processed manually causing delays. - Refund profiling mechanism introduced to accelerate processing. - VAT credit/refund claims amounted to SRD 989.4 million for 2023. - SRD 214 million (21.6 percent) of refund claims was paid by end-2023. - As at end-December 2023, stock of refund value was about SRD 671.0 million (67.8 percent). - Average monthly claim in 2023 was SRD 82.9 million (24.2 percent of gross monthly collection and 18.0 percent of payable reported on VAT declaration and collection on imports). - Interest is due on refunds paid after 30 days but authorities have not computed, applied, or paid interest. - Taxpayer identification and data matching: - Multiple taxpayer identification numbers (TIN) in use; separate TINs for direct taxes, VAT (FIN), and customs — absence of a single TIN limits cross-matching. - Information Technology: - New IT enables registration and online filing; several functionalities remain to be deployed. - Delays in deploying key IT functionalities exacerbated challenges (see IT module delivery timeline). - Integrity and governance: - Integrity reported as a significant issue by stakeholders and officials in OTA and customs; comprehensive governance and oversight review recommended. ### Customs-specific findings and risks - Customs preparedness insufficient for VAT implementation on January 1, 2023; ASYCUDA system not updated in time. - Controls needing strengthening: classification, valuation, and origin to ensure correct VAT collection at import. - VAT paid on importation of goods was 62.2 percent of gross collection and 63.3 percent of net collection. - November 2023: 75.6 percent of gross VAT collected in that month was on imports, or 13.6 percent VAT collected at Customs. - Customs implementation involved improvisation due to slow/inadequate preparation, late policy decisions, missing equipment, and tariff not updated before launch. - Future demands: expansion of the oil and gas sector will introduce significant new work for customs; urgent planning and capacity building required. ### Donor support and technical assistance - Suriname will benefit from the FAD-HQ managed Global Public Funding Partnership (GPFP): four years of technical assistance in strengthening revenue administration. - CARTAC will continue to provide support for areas not covered by the GPFP. - Recommended: customs diagnostic mission and a separate customs oil sector diagnostic mission. ### Key actions recommended for early 2024 (summary of priorities) - IT and automation: - Deploy all remaining modules of the new IT system in 2024; ensure a single taxpayer accounting system that maintains detailed accounts for each taxpayer; automate most business processes. - Single taxpayer identification: - Mandate the use of a single TIN (Fiscal Identification Number - FIN); start by issuing FINs to all importers currently assigned FINs when a taxpayer is registered for VAT. - Issue FINs to all government entities and require third-party information provision to the OTA. - Compliance monitoring and account management: - Establish a small, dedicated team to closely monitor compliance with VAT registration, filing, and payment requirements. - Ensure timely posting of all VAT returns before the end of the month following the due date for filing, ideally within 24 hours of filing. - Refunds management: - Estimate the level of refunds for 2024 and identify a funding source to pay VAT refunds. - Implement VAT refund risk assessment criteria and a three-lane fast-track mechanism: green (low risk, fast-track), orange (medium risk, quick desk review), red (high risk, requires audit). - Develop and publish detailed rules, via an Order, under Article 17 (8) for the treatment of “refund of tax, credit, and interest” and define the date a taxpayer’s “right to a refund of tax arose”; develop operational procedures for timely processing of refunds. - Customs controls and capacity: - Strengthen controls in classification, valuation, and origin to ensure correct VAT collection at import. - Prepare customs for the demands of the expanding oil and gas sector. - Integrity and governance: - Initiate a comprehensive review of governance and oversight within the Directorate of Taxes to strengthen integrity. - Processing and arrears: - Process all outstanding VAT returns received to date and post respective liabilities to taxpayers’ accounts. - Identify and take steps to collect VAT arrears. - Targeted taxpayer support: - Develop and deliver advisory programs for large taxpayers and complex sectors. - Develop targeted awareness programs and materials; segment taxpayers with defined criteria. ### Selected precise recommendations and deadlines (from Table 1 and report text) - 1.1 Finalize development of the remaining VAT Orders and Decrees. 04/2024 - 1.2 Develop procedures to facilitate government entities and other persons to acquire VAT-free supplies while protecting the revenue. 06/2024 - 1.3 Consolidate all responsibilities to manage VAT under the Inspectorate Sale Tax and stabilize the implementation of the VAT before considering broader organizational reforms. 12/2024 - 1.4 Segment taxpayers with defined criteria. 07/2024 - 1.5 Develop a policy mandating the use of a single FIN. 04/2024 - 1.6 Mandate all importers/exporters to use the FIN. 06/2024 - 1.7 Mandate the use FIN for every other person transacting with the DoTC. 12/2024 - 1.8 Develop and deliver advisory programs for large taxpayers and complex sectors. 06/2024 - 1.9 Develop more targeted awareness programs and materials to address key concerns of stakeholders. 07/2024 - 1.10 Establish a small team dedicated to closely monitoring compliance with VAT registration, filing, and payment requirements. 03/2024 - 1.11 Process all outstanding VAT returns received to date and post the respective liabilities to taxpayers’ accounts. 03/2024 - 1.12 Identify and take to steps to collect VAT arrears. 04/2024 - 1.13 Develop a 2024 VAT audit plan, select audit cases based on limited risk criteria and findings discussed in Chapter IV. 06/2024 - 1.14 Establish a dedicated VAT Refund Bank Account, identify the funding source to pay VAT refund, and forecast the levels of refund needed for 2024. 04/2024 - 1.15 Commence depositing, monthly, 15 percent of gross VAT collected, subject to the amount forecasted. 04/2024 - 1.16 Develop a refund procedure for non-VAT registrants who are entitled to VAT refunds. 07/2024 - 1.17 Develop and publish VAT Order in line with Article 17(8). 07/2024 - 1.18 Commence payment of interest on VAT over-due refunds. 06/2024 - 1.19 Develop an implementation plan that would guide the development, testing, and deployment of the remaining VAT functionalities, by April 2024. 04/2024 - 1.20 Develop an option to allow taxpayers to submit VAT payments online. 12/2024 ### Key statistics and projections related to VAT and refunds - DoTC is expected to collect SRD 26.5 billion for 2024. This is 33.5 percent above the 2023 collection. - VAT is projected at SRD 5.6 billion for 2024, 30.7 percent above 2023’s collection, and to contribute 20.9 percent of total expected revenue. - Net VAT revenue collected for 2023 is approximately 3.0 percent of Gross Domestic Product (GDP). - VAT credit/refund claims amounted to SRD 989.4 million for 2023. - VAT paid on the importation of goods was 62.2 percent of gross collection and 63.3 percent of net collection. - November 2023 represented 75.6 percent of gross VAT collected in that month, or 13.6 percent VAT collected at Customs. - VAT collected on domestic operations was 37.8 percent of gross collection and 39.7 percent of net collection. - Table 2 summary (values as presented): - 2023 Projection: Direct Taxes SRD 10,697.0; Indirect Taxes SRD 10,358.2; of which VAT SRD 4,450.9; Total Tax Revenue SRD 21,055.1; VAT % Total Rev. 21.1 - 2023 Collection: Direct Taxes SRD 9,910.6 (92.6% performance); Indirect Taxes SRD 9,967.5 (96.2% performance); of which VAT SRD 4,247.9 (95.4% performance); Total Tax Revenue SRD 19,878.1 (94.4% performance); VAT % Total Rev. 21.4 - 2024 Projection: Direct Taxes SRD 11,918.6; Indirect Taxes SRD 14,628.6; of which VAT SRD 5,550.0; Total Tax Revenue SRD 26,547.2; VAT % Total Rev. 20.9 ### Operational rationale for a dedicated VAT Refund Bank Account and funding mechanism - Purpose: isolate funds for refunds to improve transparency and predictability of refund payments. - Funding rule recommended: Commence depositing, monthly, 15 percent of gross VAT collected, subject to the amount forecasted (implementation date 04/2024). - Using the projection of SRD 5,550.0 million, 15 percent amounts to SRD 832.4 million, or SRD 69.4 million monthly. ### Refund processing, controls, and operational imperatives - Legal/process framework: - Filing a credit VAT return triggers an immediate request for a refund; authority has 30 days from date of filing to pay the refund; interest due on approved delayed refunds. - Refund status (end-2023): - VAT returns submitted in 2023 reflect total credits of SRD 989 million. - SRD 214 million (21.6 percent) was paid by the end of 2023. - As at the end of December 2023, the stock of refund value was about SRD 671.0 million (67.8 percent). - An estimated SRD 11.5 million is expected to be paid by the end of January 2024. - Operational imperatives: - Authenticate VAT registrants. - Deploy a purpose-built automated risk assessment system to review VAT refund claims. - Establish special arrangements for regular exporters. - Provide for payments of interest on delayed refunds. - Use forecasting, verification/audit and third-party data to estimate monthly refund claims. - Avoid paying approved refunds where the taxpayer has unfiled returns; consider changing claim date to when previous returns filed or the authority makes an assessment. ### Filing, data quality, and compliance analytics - Filing compliance (2023): - Average VAT on-time filing for large taxpayers in 2023 was approximately 26.6 percent. - Average VAT on-time filing for non-large taxpayers in 2023 was 23.6 percent. - Approximately 18,000 expected VAT returns were not filed in 2023, including 1,800 VAT returns from large taxpayers. - Data quality issues: - Common declaration errors include output VAT reported but no supplies, deferment on imports reported though deferment not implemented, output VAT on zero-rated supplies. - Unit/multiplier errors caused gross overstatement (examples: figures multiplied by 1,000). Initial aggregate figures corrected: Initial Output VAT SRD 25,727.5 — Revised SRD 5,047.8; Initial Net VAT SRD 13,612.4 — Revised SRD 1,845.3. - Declaration outcomes (January–November 2023): 16,555 (68.7 percent) payable; 2,880 credits (12.0 percent); 4,658 (19.3 percent) nil. - Composition and concentration: - Output VAT on standard-rate supplies accounted for 80.4 percent of total output VAT. - Domestic input VAT accounted for 52.5 percent of total input VAT. - Net VAT reported averaged SRD 163.9 million monthly (73.5 percent payable; 26.5 percent credit). - Large taxpayers accounted for over 90 percent of net VAT reported. - Sector shares of net VAT: Mining 30.0 percent; Manufacturing 20.6 percent; Wholesale and retail 19.4 percent. - Key analytical ratios and observations: - Overall TIT/TOT is 65.2 percent. - Five sectors have TIT/TOT above 100 percent, indicating negative net VAT. - Zero-rated supplies (domestic and exports) represent 63.1 percent of total supplies; domestic zero-rated supplies 35.9 percent; exports 27.2 percent. - Recommendation: review returns to identify reporting errors, conduct registration audits, segment taxpayers, and capture VAT-free sales information. ### Organizational arrangements, staffing, and taxpayer services - Organizational findings: - VAT responsibilities fragmented across Inspectorate Sales Tax, Inspectorate Direct Taxes, Collector of Direct Taxes, and customs offices; VAT Implementation Team no longer in place. - Recommendation: consolidate VAT management under Inspectorate Sales Tax (target 06/2024) and stabilize implementation before broader reforms (12/2024). - Staffing and training: - Human resources required not fully identified; need staff for registration, education, data analysis, filing/payment monitoring, audits. - Training before launch and during 2023 insufficient; priority to re-establish small team of core VAT experts and train-the-trainers program (target 04/2024). - Taxpayer service: - Taxpayer Services Division staff of seven established but not mature; staff lacked sufficient VAT knowledge at launch. - Recommendations: develop taxpayer services strategy (by 07/2024), deliver advisory program for large/complex taxpayers (by 06/2024), and produce targeted awareness materials (by 07/2024). ### IT status, gaps, and priorities - System acquired: Multi Tax System (MTS) and Multi Collection System (MCS) with interfaces. - Delivery timeline highlights (status as presented): - Online VAT registration and assignment of FIN: October 2022 — Released. - Online filing of VAT returns: January 1, 2023 — Delivered. - Processing and Assessment of VAT returns: June 2023 — Delivered late (should have been in place by February 16, 2023). - Monitoring filing/payment compliance: July 2023 — Delivered late. - Management of VAT refunds: July 2023 — Not ready for February 2023 claims. - Management information reports: Still ongoing — Not all released. - Key missing functionalities: (i) online payment portal for taxpayers to make VAT payments; (ii) taxpayers cannot view account details online; (iii) several management information reports missing. - Integration risk: legacy system handles CIT, PIT, Wage Tax; new system handles VAT; target to integrate all core taxes by January 2025. - IT deployment targets and deadlines: - Develop an implementation plan for remaining VAT functionalities, by April 2024. - Finalize development and deployment of all management information reports for all core tax administration functions, by April 2024. - Finalize development of all audit and collection enforcement functionalities, by April 2024. - Develop facility for taxpayers to view transaction and account details online, by September 2024. - Develop option to allow taxpayers to submit VAT payments online, by December 2024. - Develop strategy and plan to integrate management of CIT, PIT, Wage Tax, and VAT under the new system, by August 2024. ### Customs operations — valuation, PCA, FIN, and preparedness - Undervaluation: - Motor vehicle valuation investigations: uplift evidence — Values uplifted by approximately 16.5 percent in 2022 and by 37.40 percent in 2023. - Customs investigations increased duties and taxes (approx. 16 percent increase in 2022 and approx. 13 percent in 2023). - Post-Clearance Audit (PCA): - PCA unit currently unstaffed; PCA not used though recommended. - Recommendation: reconstitute PCA unit and provide resources/training (target 09/2024). - FIN and information sharing: - Adopt the FIN in all declarations and transactions (target 06/2024) to enable cross-matching and risk management. - Establish a working group with tax to share and explain information (target 09/2024). - Consider TRACKER tool and associated TA from FAD. - Customs systems, tariffs, and implementation issues: - No UAT server procured; ASYCUDA World not updated with HS2017/HS2022 tariff and exemption lists at launch. - Customs still operating with HS2012 tariff; work to configure HS2022 commenced in June 2023. - Resulting misapplication of VAT on some goods and cases of over-collections estimated at 1 percent of revenue. - Recommendation: update the tariff to HS2022, by December 2024. - Customs resourcing and organizational weaknesses: - Staffing: about two-thirds of establishment in post; PCA has no resources; recruitment incomplete with about one hundred vacant posts. - Recommendation: recruit and train fifty new officers, by December 2024; develop and implement comprehensive integrity-strengthening program, by December 2024. - Preparing for oil and gas sector expansion: urgent planning and capacity building for customs needed. ### Audit, enforcement, and arrears management - Audit: - Inspectorate Sales Tax prioritized auditing refund claims; 237 audits completed reducing refund claims from SRD 175 million to SRD 116 million — reduction of SRD 60 million or 33.9 percent. - No documented annual VAT audit plan; no audit risk selection criteria; audit SOPs not fully developed. - Recommendation: develop a 2024 VAT audit plan and select audit cases based on limited risk criteria, by June 2024. - Payment posting and arrears management: - Payments placed in suspense accounts due to incorrect/no FIN, no tax period, or no tax type indicated. - Taxpayers cannot pay VAT online to OTA. - Recommendation: process all outstanding VAT returns and post liabilities by March 2024; identify and take steps to collect VAT arrears by April 2024. ### RBM sample — Improve processing of VAT refunds (Annex III milestones) - Baseline: capability of VAT refund and processing system is insufficient. - Target: improve adequacy of VAT refund process to meet a B score in the TADAT framework (indicator P8-28). - Milestones with donor support: - A dedicated compliance team established and in operation to follow up on missing VAT returns. — March 1, 2024 — Yes - A process in place to secure that VAT returns received are processed within one week of receipt. — March 1, 2024 — Yes - A process in place to pay interest on late processing of VAT refund claims. — July 1, 2024 — Yes ### Summary of essential features for an effective refund system - Core features required: - Authentication of VAT registrants. - Automated risk assessment system for refund claims. - Special arrangements for regular exporters. - Provision for payments of interest on delayed refunds. - Funding mechanism to ensure approved refunds are paid on time (good practice: pay refunds from VAT collections, not general budget). - Operational priorities: - Timely processing and payment of legitimate refunds while preventing fraudulent claims. - Build forecasting capacity and use verification/audit and third-party data to estimate monthly refund claims. - Improve IT functionality, SOPs, audit capability, posting of liabilities, and compliance enforcement. *Source: Preface and Executive Summary, tarea2024042* ### Preface _____________________________________________________________________________ 7 ### tarea2024042 - Preface ### Mission background and scope - A Capacity Development (CD) mission from the Fiscal Affairs Department (FAD) visited Paramaribo, Suriname from January 15- 26, 2024. - Main tasks: assess the effectiveness of the launch and administration of the Value Added Tax (VAT) and provide advice on improving the efficiency and effectiveness of VAT administration in Suriname. - Mission team composition: Mr. Norris Miller (FAD); Messrs. Stephen Mendes and Frode Lindseth (CARTAC); Messrs. Rick Fisher and Grenville John (FAD). - Principal meetings: Hon. Kermechend Stanley Raghoebarsingh, Minister of Finance and Planning; Ms. Marita Wijnerman, Director DoTC; Mr. Maikel Bruijne, Inspector of Sales Tax (responsible for VAT); Ms. Charda Girwar, Inspector of Customs and Excise; Collectors for Direct Taxes and Customs and Excise; senior management of tax and customs departments; IT provider and IT consultant. - Stakeholder engagement: private sector associations representing manufacturers, chamber of commerce, audit firms, shipping association, customs brokers, and agents. - Report composition: Executive Summary and six Chapters: (i) Introduction; (ii) Assessing the Launch of the VAT; (iii) Tax Administration of VAT; (iv) Analyzing VAT Operational Performance in Accurate Reporting; (v) Customs Administration of the VAT; and (vi) Reform Program and Donor Support. ### Executive summary — implementation outcomes and key findings - VAT launch date: January 1, 2023, replacing the Sales Tax. - First 12 months VAT revenue: approximately 3 percent of Gross Domestic Product (GDP) and 95.4 percent of the collection target. - VAT’s contribution to government revenue: close to 22 percent of overall tax revenue. - Primary cause of weaker-than-expected VAT collection: how the VAT was implemented and administered during the first twelve months. - Pre-launch preparedness gaps identified: - implementation project not fully resourced; - most VAT Orders needed to support the principal VAT Act were not developed; - staff lacked required training to ensure adequate understanding of VAT legislation; - full suite of IT solutions required to support VAT were not deployed; - taxpayers and traders did not receive sufficient information to prepare. - Impact of policy changes: last-minute changes in December 2020 created uncertainty and delays, increased refund claims, and reduced expected VAT revenue. - Customs implementation in 2023 characterized by improvisation and compromise due to slow/inadequate preparation, late policy decisions, missing equipment, and tariff not updated before launch. - Institutional model: VAT is being administered with the same institutional and organizational settings used to administer the Sales tax; authorities did not establish a dedicated VAT unit/department prior to integration. ### Operational performance — observed issues and risks - Registration and filing: - Approximately 4,000 taxpayers registered for VAT. - Just over 2800 filed VAT returns. - Filing compliance for the first 11 months: 58 percent. - Concern: low threshold and incomplete registration; many registrants chose not to file VAT. - Arrears and accounting: - The stock of tax arrears is not known. - A substantial amount of VAT liabilities has not been posted to taxpayers’ accounting ledgers, creating a risk to revenue. - Refunds: - Timely processing of VAT refunds was a major challenge because the refund module was not deployed; refunds were processed manually causing delays. - A recently introduced VAT refund profiling mechanism is expected to accelerate processing. - The value of VAT refunds and the number of cases is significant and are likely to increase as VAT filing compliance increases. - Taxpayer identification and data matching: - Authorities are still using multiple taxpayer identification numbers (TIN). - Absence of a single TIN limits opportunities for matching revenue information across departments. - Information Technology: - Delay in deploying key IT functionalities exacerbated challenges. - The new IT system enables taxpayer registration and online filing and provides timely information for VAT management, though several functionalities remain to be deployed. - Integrity and governance: - Integrity is reported as a significant issue by stakeholders and officials in OTA and customs; requires comprehensive governance and oversight review. ### Customs-specific findings - Customs preparedness was insufficient for VAT implementation on January 1, 2023; ASYCUDA system was not updated in time. - Controls needed: classification, valuation, and origin must be strengthened to ensure correct VAT collection at import; many importers have limited dealings with OTA so import VAT collection may be the only chance to collect VAT. - Future demands: expansion of the oil and gas sector will introduce significant and demanding new work for customs; urgent planning and capacity building required. ### Donor support and technical assistance - Suriname will benefit from the new FAD-HQ managed Global Public Funding Partnership (GPFP): four years of technical assistance in strengthening revenue administration. - CARTAC will continue to provide support in areas not covered by the GPFP. - Customs is to receive a customs-focused diagnostic mission; a separate customs oil sector focused diagnostic mission is recommended to prepare for growth in that sector. ### Key actions recommended for early 2024 (summary of priorities) - IT and automation: - Deploy all remaining modules of the new IT system in 2024; ensure a single taxpayer accounting system that maintains detailed accounts for each taxpayer; automate most business processes. - Single taxpayer identification: - Mandate the use of a single TIN (Fiscal Identification Number - FIN); start by issuing FINs to all importers currently assigned FINs when a taxpayer is registered for VAT. - Next step: issue FINs to all government entities and require third-party information provision to the OTA. - Compliance monitoring and account management: - Establish a small, dedicated team to closely monitor compliance with VAT registration, filing, and payment requirements. - Ensure timely posting of all VAT returns to record taxpayers’ liabilities and overall taxpayer account status before the end of the month following the due date for filing, ideally within 24 hours of filing. - Refunds management: - Estimate the level of refunds for 2024 and identify a funding source to pay VAT refunds. - Implement additional VAT refund risk assessment criteria and a three-lane fast-track mechanism: green (low risk, fast-track), orange (medium risk, quick desk review), red (high risk, requires audit). - Develop and publish detailed rules, via an Order, under Article 17 (8) for the treatment of “refund of tax, credit, and interest” and define the date a taxpayer’s “right to a refund of tax arose”; develop operational procedures for timely processing of refunds. - Customs controls and capacity: - Strengthen controls in classification, valuation, and origin to ensure correct VAT collection at import. - Prepare customs for the demands of the expanding oil and gas sector. - Integrity and governance: - Initiate a comprehensive review of governance and oversight within the Directorate of Taxes to strengthen integrity. - Processing and arrears: - Process all outstanding VAT returns received to date and post respective liabilities to taxpayers’ accounts. - Identify and take steps to collect VAT arrears. - Targeted taxpayer support: - Develop and deliver advisory programs for large taxpayers and complex sectors. - Develop more targeted awareness programs and materials to address key stakeholder concerns. - Segment taxpayers with defined criteria. ### Selected precise recommendations and deadlines (from Table 1) - 1.1 Finalize development of the remaining VAT Orders and Decrees. 04/2024 - 1.2 Develop procedures to facilitate government entities and other persons to acquire VAT-free supplies while protecting the revenue. 06/2024 - 1.3 Consolidate all responsibilities to manage VAT under the Inspectorate Sale Tax and stabilize the implementation of the VAT before considering broader organizational reforms. 12/2024 - 1.4 Segment taxpayers with defined criteria. 07/2024 - 1.5 Develop a policy mandating the use of a single FIN. 04/2024 - 1.6 Mandate all importers/exporters to use the FIN. 06/2024 - 1.7 Mandate the use FIN for every other person transacting with the DoTC. 12/2024 - 1.8 Develop and deliver advisory programs for large taxpayers and complex sectors. 06/2024 - 1.9 Develop more targeted awareness programs and materials to address key concerns of stakeholders. 07/2024 - 1.10 Establish a small team dedicated to closely monitoring compliance with VAT registration, filing, and payment requirements. 03/2024 - 1.11 Process all outstanding VAT returns received to date and post the respective liabilities to taxpayers’ accounts. 03/2024 - 1.12 Identify and take to steps to collect VAT arrears. 04/2024 - 1.13 Develop a 2024 VAT audit plan, select audit cases based on limited risk criteria and findings discussed in Chapter IV. 06/2024 *Source: Preface and Executive Summary, tarea2024042* ### 1.14 Establish a dedicated VAT Refund Bank Account, identify the funding source to pay VAT refund, ### 1.14 Establish a dedicated VAT Refund Bank Account, identify the funding source to pay VAT refund, and forecast the levels of refund needed for 2024. ### Implementation actions and timelines - 1.14 Establish a dedicated VAT Refund Bank Account, identify the funding source to pay VAT refund, and forecast the levels of refund needed for 2024. 04/2024 - 1.15 Commence depositing, monthly, 15 percent of gross VAT collected, subject to the amount forecasted. 04/2024 - 1.16 Develop a refund procedure for non-VAT registrants who are entitled to VAT refunds. 07/2024 - 1.17 Develop and publish VAT Order in line with Article 17(8). 07/2024 - 1.18 Commence payment of interest on VAT over-due refunds. 06/2024 - 1.19 Develop an implementation plan that would guide the development, testing, and deployment of the remaining VAT functionalities, by April 2024. 04/2024 - 1.20 Develop an option to allow taxpayers to submit VAT payments online. 12/2024 ### Key statistics and projections related to VAT and refunds - DoTC is expected to collect SRD 26.5 billion for 2024. This is 33.5 percent above the 2023 collection. - VAT is projected at SRD 5.6 billion for 2024, 30.7 percent above 2023’s collection, and to contribute 20.9 percent of total expected revenue. - Net VAT revenue collected for 2023 is approximately 3.0 percent of Gross Domestic Product (GDP). - VAT credit/refund claims amounted to SRD 989.4 million for 2023. - VAT paid on the importation of goods was 62.2 percent of gross collection and 63.3 percent of net collection. - November 2023 represented 75.6 percent of gross VAT collected in that month, or 13.6 percent VAT collected at Customs. - VAT collected on domestic operations was 37.8 percent of gross collection and 39.7 percent of net collection. - Table 2 summary (values as presented): - 2023 Projection: Direct Taxes SRD 10,697.0; Indirect Taxes SRD 10,358.2; of which VAT SRD 4,450.9; Total Tax Revenue SRD 21,055.1; VAT % Total Rev. 21.1 - 2023 Collection: Direct Taxes SRD 9,910.6 (92.6% performance); Indirect Taxes SRD 9,967.5 (96.2% performance); of which VAT SRD 4,247.9 (95.4% performance); Total Tax Revenue SRD 19,878.1 (94.4% performance); VAT % Total Rev. 21.4 - 2024 Projection: Direct Taxes SRD 11,918.6; Indirect Taxes SRD 14,628.6; of which VAT SRD 5,550.0; Total Tax Revenue SRD 26,547.2; VAT % Total Rev. 20.9 ### Operational rationale for a dedicated VAT refund account and funding mechanism - Dedicated bank account: - Establishing a VAT Refund Bank Account isolates funds for refunds and can improve transparency and predictability of refund payments. - Funding source identification: - The action specifies identifying a funding source to pay VAT refunds and forecasting refund needs for 2024 to ensure sufficient liquidity. - Monthly deposit rule: - Commence depositing, monthly, 15 percent of gross VAT collected, subject to the amount forecasted (implementation date 04/2024) to pre-fund the refund account. ### Related administrative measures to improve refund processing and control - Develop a refund procedure for non-VAT registrants entitled to VAT refunds. 07/2024 - Commence payment of interest on VAT over-due refunds. 06/2024 - Develop and publish the VAT Order in line with Article 17(8) to provide administrative guidance. 07/2024 - Develop an implementation plan to guide development, testing, and deployment of remaining VAT functionalities. 04/2024 - Develop an online VAT payment option to facilitate collections and potentially streamline refund reconciliation. 12/2024 ### Context from VAT performance and administrative assessment - VAT was introduced on January 1, 2023, replacing the Sales Tax as part of Suriname’s reform program under an EFF arrangement. - An October 2023 TADAT assessment found substantial weaknesses across all nine performance outcome areas; VAT performed poorly relative to expectations. - Factors contributing to weaker-than-expected VAT collections and refund challenges include: - weak and under-resourced implementation program; - lack of a targeted taxpayer advisory program and limited taxpayer awareness/education; - late amendments to the VAT Act, which increased refund claims and reduced expected VAT revenue. - Net VAT for 2023 was similar to Sales Tax collection for 2022 (both approximately 3.0 percent of GDP), but timely processing of refunds would affect this comparison. ### Private sector concerns relevant to refunds and liquidity - Interest is not being paid on delayed refunds, which negatively affects compliance and liquidity for Small and Medium Enterprises (SMEs). - The focus on auditing refunds has negatively affected the administration of other VAT system aspects. - Lack of transparency and complexity in legislation, and insufficient guidance and rulings, increase compliance costs and impede effective refund processing. - Regular consultations between the DoTC and stakeholders are recommended to improve trust, confidence, and compliance with VAT and to address refund timeliness and procedures. *Italic: Source — tarea2024042 - 1.14 Establish a dedicated VAT Refund Bank Account, identify the funding source to pay VAT refund,* ### 21. The amendments in September 2023 were aimed at protecting and increasing VAT revenues ### tarea2024042 - 21. The amendments in September 2023 were aimed at protecting and increasing VAT revenues ### 1. Amendments in September 2023 and implementation issues - The amendments in September 2023 were aimed at protecting and increasing VAT revenues instead of simplifying the system. - Implementation mirrored the December 2022 approach—that is, insufficient time was given to taxpayers to prepare their systems to accommodate the changes. - With these changes, taxpayers need to be guided on how to account for VAT. ### 2. Zero percent (VAT-free) supplies to governmental entities and designated persons Findings - The Act provides for governmental entities and special designated persons to acquire taxable goods and services at zero percent (VAT-free). - This requires suppliers to: - distinguish between regular/commercial customers and VAT-free customers, - develop procedures for applying the appropriate tax rate, - account for the supply. - The array of goods and services purchased by governments is large and includes many dual-use goods, creating a high risk that some goods can be purchased VAT-free for personal use. - The current regime of supplying a one-off letter to the specified entities, indicating exemption is open to misuse. - Currently, there is no mechanism in place to ensure that supplies acquired are used for the intended purpose. - The system creates administrative and compliance challenges and risk to the revenue. Recommendation - An Order should be developed, putting a mechanism in place to prevent abuse, and the OTA should collect information as to the supplier, purchaser, the nature of and value of the supply. ### 3. Legal framework: need for a General Tax Act (GTA) / Tax Administration Procedure Act (TAPA) Findings - A common legal framework for the administration of all taxes is urgently needed. - The authorities plan to enact a General Tax Act (GTA) in 2024. However, this has been in draft for an extended period. - The intention is for the GTA to operate as a tax administration procedure act (TAPA). - The GTA objective is to harmonize the administrative provisions of several of Suriname’s tax Acts and would replace the 1896 Collection Act and the Fiscal Identification Number Act. - To effectively administer VAT, if the GTA will not be enacted in 2024, consideration should be given for amendments to be made to the VAT Act (e.g., mandatory use of a single FIN), expand enforcement measures, and remove the link with the 1896 Collection Act. Recommendations - Finalize development of the remaining VAT Orders, by April 2024. - Develop procedures to facilitate government entities and other persons to acquire supplies VAT-free while protecting the revenue, by June 2024. - Enact the GTA or incorporate the administrative amendments in the VAT Act, by December 2024. ### 4. Organizational arrangements and staffing issues Findings - The authorities did not adopt the organizational model used by several countries in the Caribbean (establishing a dedicated unit/department to administer the VAT for at least two years and then integrating it). - VAT is being administered with the same institutional and organizational settings as the sales tax. - Organizational arrangements to administer the VAT are fragmented and must be consolidated under the Inspectorate Sales Tax. - The VAT Implementation Team in charge of the VAT launch is no longer in place. - Responsibilities are currently split: - Inspectorate Sales Tax: registering VAT taxpayers, receiving/processing VAT returns, monitoring VAT filing compliance, auditing of non-large taxpayers, investigating accuracy of VAT refund claims. - Inspectorate Direct Taxes: has the LTU reporting to it, primarily responsible for detecting inaccurate reporting of large taxpayers. - Collector of Direct Taxes: responsible for VAT collections, including collection of VAT arrears and payment of VAT refunds. - Table of department responsibilities (as compiled by mission team): - Directorate of Taxes HQ — General policy & the LTU - Inspectorate of Sales Tax (VAT) IOB — Registration, filing, assessing, audit, objection, refund approval - Direct Tax Receipt Office ODB — Collection of Sales tax and VAT; arrears management and enforced collection. - Import Duties & Excise/Customs Inspectorate IIA — Levy VAT on importation of goods, assessing import values - Receipt Office Excise and Imports OIA — Collection of VAT on importation of goods - VAT revenue performance and monitoring of VAT compliance could best be achieved if one organizational department has end-to-end responsibilities for all core tax administration functions and management of large taxpayers. - Human resources required to effectively administer the VAT has not been fully identified. - DoTC management and staff raised concern regarding the lack of sufficient resources to administer the VAT. - Need for staff to register/educate/provide services to VAT registrants, data analysis staff, staff to monitor filing and payment compliance, audit staff for large and non-large taxpayers. - No in-depth analysis yet of benefits from automation; unclear how many staff are needed. - Consider increasing number of staff in the Inspectorate of Sales Tax from the pool of new hires. - Training provided before launch and during 2023 was insufficient to ensure effective administration of the VAT. - Staff responsible for registering taxpayers and responding to inquiries received some VAT training prior to the launch, but faced ongoing challenges during 2023. - Some auditors received VAT training prior to the launch and a four-day refresher training in 2023, but concern remains that staff have not acquired the required knowledge to effectively detect inaccurate reporting of VAT. - OTA lacks standard operating procedures for most core tax administration functions. - Additional program/project management and change management skills need to be developed. - Priority should be given to re-establishing a small team of core experts trained on all aspects of VAT and a train-the-trainers program. Recommendations - Consolidate all responsibilities to manage VAT under the Inspectorate Sale Tax, by June 2024. - Develop a manpower staffing plan that identifies short/medium/long term requirements needed to administer the VAT, by December 2024. - Establish a small team of core experts and seek donor assistance to build the VAT capacity of these experts, by April 2024. - Provide more in-depth follow-up training on the VAT Act and regulations, by June 2024. - Stabilize the administration of the VAT before considering broader DoTC organizational reforms, by December 2024. ### 5. Taxpayer registration and the use of a single TIN (FIN) Key statistics and findings - On January 1, 2023, approximately 970 taxpayers were registered for VAT; an additional 1,800 taxpayers registered during January, and Suriname reached approximately 4,000 by the end of 2023. - This fell short of the initial target of 5,000. - Given the concerns related to accuracy and reliability of available data, the decision was made to launch a public awareness campaign informing taxpayers of their obligation to register if they meet the VAT registration threshold. - The Inspectorate of Sales Tax took steps during 2023 to increase VAT registrants. - Given the low VAT threshold, the general view is that the number of registrants is low. - All taxpayers that meet the VAT threshold must register and VAT returns/payments should be made according to the legislative prescribed deadline. - Registration for VAT is done electronically; currently the online facility does not allow VAT registrants to update their registration details or to view taxpayer account details. - The taxpayer register is not integrated with any other national business registries. - Return data for one year indicates many taxpayers may have been assigned to the wrong sectors. - Consideration should be given for the OTA to access the Chamber of Commerce register to help check taxpayers’ nature of business. - OTA has two separate taxpayer registration databases, requiring multiple TINs: one for direct taxes, one for VAT (FIN), and one for customs — this prevents cross-matching and impacts accuracy and reliability of the taxpayer register. - Taxpayers are segmented into large, medium, and small using registration data; current segmentation based on estimated annual turnover provided by taxpayers distorts measurement of compliance. - Based on data submitted by the authorities, there are 377 large registrants, 9.3 percent of total registrants. - With more than one full year of taxpayers VAT declarations, a segmentation exercise should be undertaken by July 2024. Findings and policy on single TIN (FIN) - Today, a business receives a TIN for CIT, PIT, Wage Taxes, a different TIN for VAT (referred to as the FIN - Fiscal Identification Number), and a different TIN when dealing with Customs. - Authorities plan to use the FIN as the single TIN, which businesses and individuals will use when dealing with the revenue departments. This will require changes to the legislative framework, including the FIN Act. This could be achieved by introducing this requirement in the General Tax Act. - The use of a single taxpayer identification number (FIN) should be made mandatory. - It should be mandatory for all government entities to have a FIN; and required to file third-party information to the DoTC. - To protect and improve tax revenue, as a start, mandate all importers/exporters to use the FIN, by June 2024, for transactions with customs. - Make it mandatory for every government entity to be issued with a FIN and submit third-party information to the DoTC, by December 2024. - OTA registration function should have responsibility for issuing FINs; the FIN should remain with the taxpayer for the lifetime of that business. Recommendations - Priority should be given to using third-party data to identify taxpayers who failed to register for VAT, by April 2024. - A segmentation exercise should be undertaken, by July 2024. - Develop a policy mandating the use of a single FIN, by April 2024. - Ensure the FIN Act or GTA includes a provision to require use of a single TIN, by June 2024. - Mandate all importers/exporters to use the FIN, by June 2024. - Enhance the IT system to ensure it covers all core tax types, by December 2024. - OTA to provide Customs with all FINs issued and begin to match registration data, by April 2024. - Mandate the wider use of the TIN, by December 2024. ### 6. Taxpayer service and public awareness Findings - The DoTC established a small Taxpayer Services Division with a staff of seven; it has not yet reached the desired level of maturity. - The division was expected to assist taxpayers to register for VAT, understand how to file VAT returns electronically and make required VAT payments, and to respond to a wide range of VAT queries. - Prior to and shortly after launch, taxpayers contacted this division, but staff lacked sufficient knowledge to fully respond to VAT queries, which were directed to other areas or senior management. - A more modern taxpayer services strategy, service standards, and standard operating procedures are needed. - Further investment in taxpayer services is critical as improved services can be a more efficient means of fostering voluntary compliance and contribute to improved revenue performance. *IMF | Technical Report* ### 45. A public awareness campaign was developed for the launch of the VAT and to operationalize the ### tarea2024042 - 45. A public awareness campaign was developed for the launch of the VAT and to operationalize the ### Public awareness, taxpayer advisory, and training - Actions taken to support the 2023 VAT launch: - A video was developed to build awareness of the VAT. - A help desk was established to assist taxpayers to understand how to register, file and pay VAT. - Channels used: radio, social media, newspaper, quick response (QR) codes, website, phone, portal, and face-to-face meetings with stakeholders. - Several guides for VAT registration were produced. - Gaps identified: - Additional guides/educational materials are needed (e.g., process for completing VAT returns, overview of the VAT refund process, VAT arrears management guide, sector-targeted guides). - Proposed advisory program to ensure VAT registrants understand the VAT design/mechanics did not take place as recommended. - DoTC staff require training in VAT legislative framework, audit techniques, general business processes, and internal control. - Findings on advisory program value: - An advisory program is a principal tool to inform and educate potential and registered taxpayers and to collect technical/operational information about taxpayers’ business, VAT knowledge, and compliance attitude. - Recommendations: - Develop and deliver advisory program for large taxpayers and complex sectors, by June 2024. - Develop a taxpayer services strategy for strengthening services and education to VAT taxpayers, by July 2024. - Develop more targeted awareness programs and materials to address key concerns of stakeholders, by July 2024. ### Filing and assessment - System and access: - All VAT returns are required to be submitted electronically; kiosks were put in place to guide taxpayers on how to file electronically. - Filing compliance (2023): - Average VAT on-time filing for large taxpayers in 2023 was approximately 26.6 percent. - Average VAT on-time filing for non-large taxpayers in 2023 was 23.6 percent. - Approximately 18,000 expected VAT returns were not filed in 2023, including 1,800 VAT returns from large taxpayers. - Causes of low filing compliance: - Lack of awareness of how to complete and file VAT returns. - Delays in registering taxpayers prior to the launch date. - Lack of timely filing enforcement by the OTA. - Monitoring weaknesses: - Inspectorate Sales Tax lacks a dedicated team accountable for monitoring filing compliance. - No standard operating procedures (SOPs) for actions to increase on-time filing and secure returns not filed. - IT compliance module that detects late filing and fully supports enforcement actions was only delivered in July 2023. - Compliance action recommendations: - Establish a small team dedicated to closely monitoring compliance with VAT registration, Filing, and payment requirements, by March 2024. - Team responsibilities: secure missing VAT returns, ensure timely follow-up and assessments for taxpayers who have failed to file, prioritize large taxpayers, provide education/assistance, generate estimated assessments if required, coordinate with Inspectorate Collections on suspense accounts and unidentified payments. - Consider technical assistance to prepare SOPs and training to build capacity. ### Payment posting and arrears management - Payment process issues: - Taxpayers pay VAT electronically through their banks, but posting into the new IT system has not been fully strengthened; some payments are placed in suspense accounts due to incorrect/no FIN, no tax period, or no tax type indicated. - Taxpayers currently cannot pay VAT online directly to the OTA. - Unposted liabilities and revenue accuracy: - VAT return data indicate SRD 2.7 billion was declared as payable; most of these declarations are yet to be posted to taxpayers’ accounts. - Not all 2023 VAT liabilities have been posted to taxpayers’ account ledgers. - Arrears reporting weaknesses: - OTA cannot consolidate stock of arrears across core taxes due to two independent IT systems. - Taxpayers who failed to file have not been assessed. - Limited capacity and systems to detect inaccurate reporting; audit program limited to VAT refund audits. - No SOPs guiding use of full enforcement suite; IT system does not fully support VAT arrears management. - Estimated arrears: - It is estimated that the amount of VAT arrears could be at least SRD 1.0 billion. - Recommendations: - Process all outstanding VAT returns received to date and post the respective liabilities to taxpayers’ accounts, by March 2024. - Identify and take steps to collect VAT arrears, by April 2024. - Ensure timely posting of all VAT returns before the end of the month following the due date for filing, ideally within 24 hours of filing. ### Audit - Current audit focus and outcomes: - Inspectorate of Sales Tax has prioritized auditing VAT refund claims due to the legislative 30-day refund processing requirement. - OTA reports 237 audits were completed, resulting in a reduction of refund claims from SRD 175 million to SRD 116 million — a reduction of SRD 60 million, or 33.9 percent. - Missing audit program components: - No documented annual VAT audit plan setting priorities/targets. - No audit risk selection criteria to prioritize audits. - Audit SOPs not fully developed. - VAT audit process management is largely manual; expected IT audit functionalities not yet in place. - Recommendation: - Develop a 2024 VAT audit plan and select audit cases based on limited risk criteria and findings discussed in Chapter IV, by June 2024. ### VAT refund processing, funding, and controls - Legal/process framework: - Filing of a credit VAT return triggers an immediate request for a refund; authority has 30 days from date of filing to pay the refund; interest is due on approved delayed refunds. - 2023 refund processing challenges: - Refund functionality in the new IT was not deployed at implementation; Inspectorate Sales Tax introduced a refund profiling mechanism with three segmentation thresholds to process certain claims without audit. - Monitoring of VAT refunds has been largely manual. - Non-registrant refunds: - No system to refund non-VAT registrants for VAT paid on imports; Collector of Customs refunds duties and taxes but not VAT and refers importer to OTA. - OTA’s initial view is that no refund is due for some cases; legislation does not specifically provide for this but a VAT Order pursuant to Article 17 could address it. - Refund values and status (end-2023): - VAT returns submitted in 2023 reflect total credits of SRD 989 million. - SRD 214 million (21.6 percent) was paid by the end of 2023. - As at the end of December 2023, the stock of refund value was about SRD 671.0 million (67.8 percent). - An estimated SRD 11.5 million is expected to be paid by the end of January 2024. - Refund gap and risks: - The refund gap is widening; if claims are not processed and paid promptly, the stock of refund claims will increase faster each month. - OTA has authority to use revenue collections to pay VAT refunds; Collector of Direct Taxes is responsible for payment of VAT refunds. - Interest on delayed refunds: - Interest is due on refunds paid after 30 days, but authorities have not computed, applied, or paid interest; IT functionality not deployed is cited but this is a breach of the law and should be rectified immediately. - Forecasting and funding recommendations: - Need to forecast monthly refund levels using 11 months of data, verification/audit information, and third-party data where possible. - Average monthly claim in 2023 was SRD 82.9 million (24.2 percent of gross monthly collection and 18.0 percent of payable reported on VAT declaration and collection on imports). - Not clear what refund amount is projected for 2024, notwithstanding a net collection of SRD 5,550 million projected for 2024. - Consider creating a special VAT Refund Bank Account (VRBA) funded by a percentage of monthly collections to prevent widening refund gap; manage VRBA by the Collector responsible for collecting VAT with monthly reporting. - As a starting point, consider depositing 15 percent of monthly collections to a VRBA. Using the projection of SRD 5,550.0 million, 15 percent amounts to SRD 832.4 million, or SRD 69.4 million monthly. - An approved refund should not be paid if a taxpayer has not filed all previous VAT returns; consider changing the claim’s date to when all previous returns are filed or when the authority makes an assessment for unfiled returns (legislative changes or rules may be needed). ### The way forward — summary of essential features for an effective refund system - Core features required: - A process to authenticate VAT registrants. - A purpose-built automated risk assessment system to review VAT refund claims against identified risk criteria. - Special arrangements or schemes for regular exporters. - Provision for payments of interest on delayed refunds. - A funding mechanism to ensure approved refunds are paid on time (good practice: pay refunds from VAT collections, not general budget). - Operational imperatives: - Timely processing and payment of legitimate refunds while preventing fraudulent claims. - Build forecasting capacity and use verification/audit and third-party data to estimate monthly refund claims. - Improve IT functionality, SOPs, audit capability, posting of liabilities, and compliance enforcement to support a sustainable VAT system. *Compiled from the IMF | Technical Report content provided in the source PDF.* ### 74. The VAT return should be properly completed. Where a tax declaration is incomplete, the taxpayer ### tarea2024042 - 74. The VAT return should be properly completed. Where a tax declaration is incomplete, the taxpayer ### VAT refund processing and audit procedures - The VAT return should be properly completed. Where a tax declaration is incomplete, the taxpayer should be asked to refile a complete return, and for which the claim date, for the purpose of processing the refund, should be the date when the revised return is filed. (para 74) - Where there is a cause to audit a refund claim: - Consider suspending the claim date to the date on which the assessment notice was issued. (para 75) - The Inspector must notify the taxpayer, within 30 days after the refund claim was made, of his intention to audit. (para 75) - The audit must be completed within four months of the claim. (para 75) - The statutory deadline should be extended if taxpayers have failed to respond within a reasonable period to verification enquiries; this should be stated in the VAT Order as per Article 17 (8). (para 75) - Article 17 (8) provides that the “Minister may, by order, lay down detailed rules for the refund of tax, credit and interest to be reimbursed in accordance with this article”. Use this provision to effect suggestions made in this chapter; if not, amendments will be required within Article 17. (para 76) - Article 17 (3) already provides for the Inspector to suspend the payment of refund for a period not exceeding two months, and for which he must notify the taxpayer, in writing, of the reason. A similar provision could be made for a “cause to audit.” (para 76) - The Order for processing refunds should clearly set out when a person’s “right to a refund of tax arose.” The general view is the right to a legitimate refund is due when a credit return is filed, but exceptions (e.g., a credit declaration filed before the due date or an incomplete declaration) should be addressed pursuant to Article 17 (8). (para 77) - Consider developing criteria to identify low-risk taxpayers for a fast-track refund system. Example low-risk group: exporters who have (i) demonstrated over the last 12 months that average monthly Zero-rated (export) supplies are over 75 percent of total supplies, and (ii) have been audited and found to be compliant—filing accurate and timely tax returns, keeping proper books and record, and have good internal controls. (para 78) - Risk-classification approach recommended: three-lane—green for low risk, fast-track; orange for medium risk, quick desk review; red for high risk requiring audit. (para 78) - Verification of VAT refund claims should be part of a wider audit program: - Pre-refund audits limited to high-risk cases (e.g., the first refund claim by a new registrant). (para 79) - Lower-risk claims subjected to selective post-refund audits. (para 79) - Apply appropriate sanctions consistently to taxpayers who falsely claim refunds or do not comply with record-keeping requirements; refund-related fraud should be prosecuted through the criminal justice system. (para 80) - Additional technical support requested for: (i) developing risk criteria and VAT refund SOPs and (ii) building technical capacity. (para 81) ### Recommendations on refunds (explicit deadlines) - Establish a dedicated VAT Refund Bank Account and identify the funding source to pay VAT refund by March 2024. - Forecast the level of refunds needed for 2024 by March 2024. - Commence depositing, monthly, 15 percent of gross VAT collected, subject to the amount forecasted, by April 2024. - Implement VAT refund risk assessment criteria, by March 2024. - Develop a refund procedure for non-VAT registrants who are entitled to VAT refunds, by July 2024. - Develop and publish VAT rules in line with Article 17 (8), by July 2024. - Commence payment of interest on VAT over-due refunds, by June 2024. - If necessary, request technical assistance for developing risk criteria and standard operating procedures, by March 2024. ### Information Technology: status, gaps, and priorities - New IT system progress: Taxpayers can register and file tax declarations online. Authorities have acquired Multi Tax System (MTS) and Multi Collection System (MSC) linked through interface. MTS: registration, filing, assessment, determination of tax liability. MCS: collection, payment of refund and collection enforcement. (para 82) - Significant impacts from delays in a fully operational integrated IT system; several modules delivered late or not yet developed. Ideally all modules should have been in place prior to January 1, 2023. (para 83) - Summary of delivery status and operational impacts (Table 6 / Table 9 references): - Online VAT registration and assignment of FIN: October 2022 — Released in time to allow VAT registration to take place. - Online filing of VAT returns: January 1, 2023 — Delivered on time (first VAT returns due by February 16, 2023). - Processing and Assessment of VAT returns: June 2023 — Should have been in place by February 16, 2023. Impacted timely processing of VAT refunds as there were no assessments in the system, and taxpayer account ledgers were not kept up to date. - Receipt and recording of VAT payments: February 1, 2023 — Delivered on-time (VAT registrants were expected to make payments at the same time they filed VAT returns in February). - Monitoring filing/payment compliance: July 2023 — Should have been in place by February 16, 2023. DoTC did not know which VAT registrants did not file VAT returns and make payments on time, delaying enforcement actions and impacting revenue performance. - Management of VAT arrears: July 2023 — Accumulation of VAT arrears could have started in February 2023. Delay impacted timely identifying, processing, and collecting arrears; new IT provides limited support for collection of arrears (e.g., only supports sending of reminder letters). - Management of VAT refunds: July 2023 — This was not ready for the processing of refund claims made in February 2023. Significant impact as most claims were manually processed. - Management information reports: Still ongoing — Not all expected reports were released, requiring OTA management to manually prepare reports. (para 83) - Interim solutions were required outside the system, causing: - Processing and assessing VAT returns outside the system; taxpayer accounting ledgers did not accurately reflect refunds and arrears. (para 84) - Manual production of management information reports. (para 84) - Absence of automated solutions to support audit and collection enforcement activities; inability to easily prioritize work (e.g., lack of audit risk selection criteria). (para 84) - Implementation issues: initial IT procurement did not include VAT as a priority; when VAT was prioritized no updated specification was produced, resulting in ad-hoc delivery discussions. (para 85) - Key missing functionalities: (i) online payment portal for taxpayers to make VAT payments; (ii) taxpayers cannot view taxpayer account details online; (iii) several management information reports missing. (para 86) - Integration risk: no approved strategy/plan to incorporate management of all core tax types under the new IT system. Legacy system handles CIT, PIT, Wage Tax; new system handles VAT. Current discussions target January 2025 to incorporate all core taxes; until integration there will not be a single, consolidated view of a taxpayer’s compliance history. Risk: VAT refunds may be paid even though the taxpayer has arrears on other tax types. (para 87) - Deployment target: All remaining modules of the new IT system should be deployed in 2024. Authorities and IT provider should revisit the piecemeal approach and ensure a single taxpayer accounting system that maintains detailed accounts for each taxpayer; automate most business processes. (para 88) - Consider redesigning to a single system, single taxpayer accounting ledgers showing details of all transactions and states. (para 89) ### IT recommendations (explicit deadlines) - Develop an implementation plan that would guide the development, testing, and deployment of the remaining VAT functionalities, by April 2024. - Finalize the development and deployment of all management information reports for all core tax administration functions, by April 2024. - Finalize development of all audit and collection enforcement functionalities, by April 2024. - Develop an option to allow taxpayers to submit VAT payments online, by December 2024. - Develop and deploy a facility that allows VAT taxpayers to view their transaction and account details online, by September 2024. - Develop a strategy and plan to integrate management of CIT, PIT, Wage Tax, and VAT under the new system, by August 2024. ### Analyzing VAT operational performance and data quality issues - The mission analyzed VAT declaration data to identify reporting issues; findings provide insights into the first year of filing for compliance program development. Data quality issues attributed to data entry errors and/or system designs. (para 90) - Filing timetable and missing declaration fields: - Taxpayers are expected to file VAT declarations by the 15th day following the tax period. (para 91) - For January – November 2023, two key data fields are not included on the VAT declaration form or in the tax system data table: total supplies and exempt supplies. Additional information such as VAT paid/collected on purchase/sales of capital items is not requested. (para 91) - Up to mid-November 2023, 2,881 taxpayers filed 24,093 tax declarations. (para 91) - Declaration outcomes (January–November 2023): - 16,555 (68.7 percent) were payable. (para 92) - 2,880 were credits (12.0 percent). (para 92) - 4,658 (19.3 percent) were nil. (para 92) - A review of nil declarations should be conducted to identify taxpayers and reasons for such filings. (para 92) - Common declaration completion errors observed: - Output VAT reported but no supplies. - Deferment on imports reported notwithstanding deferment is yet to be implemented. - Output VAT reported relating to zero-rated supplies. (para 93) - Mechanism recommended to verify completeness at time of filing and prompt taxpayers where incomplete. (para 93) - Overstated values observed (unit/multiplier errors): - Several declarations showed figures multiplied by 1,000; example: tax payable SRD 6.8 billion corrected to SRD 6.8. million. (para 94) - Overstated values related to all financial data on respective declarations. (para 94) - Analysis of returns (January to November 2023) initially showed total VAT credits SRD 2 billion and payables SRD 15 billion, with net VAT due SRD 13 billion. After authorities reviewed, cleaned, and assessed declarations offline, results showed VAT payable SRD 2.7 billion, credit/refund SRD 0.9 billion, and net position SRD1.7 billion, indicating the magnitude of the data issue. (para 94) - Errors not easily detected on low transaction declarations. (para 94) - Initial versus revised VAT information submitted (tax declarations filed up to mid-November 2023): - Taxpayers: Initial 2881 — Revised 2881 - No. Returns: Initial 24,093 — Revised 24,093 - SRD million: - Total Supplies: Initial 395,716.7 — Revised 145,648.0 - Supplies- Standard rate: Initial 204,402.3 — Revised 38,184.4 - Zero-rated Supplies: Initial 175,491.9 — Revised 91,780.4 - Supplies- positive rate: Initial 220,224.8 — Revised 15,683.2 - Output VAT: Initial 25,727.5 — Revised 5,047.8 - Input VAT: Initial 12,115.2 — Revised 3,202.5 - Net VAT: Initial 13,612.4 — Revised 1,845.3 - Supplies SRD million %: - Standard - 10%: 38,184.45 — 26.2 - Domestic 0%: 52,244.16 — 35.9 - Supplies - 5%: 15,612.85 — 10.7 - Supplies -25%: 50.59 — 0.0 - Self-Supplies: 19.71 — 0.0 - Exports - Goods: 37,811.82 — 26.0 - Exports - Services: 1,724.40 — 1.2 - Total: 145,647.98 — 100.0 (Table values as compiled by mission team from OTA) (paras 94, 96) - Credit/refund patterns and zero-rated supplies: - Credit declarations amounted to 17.4 percent of the returns filed, with credit/refund valuing 26.5 percent of domestic tax payable. (para 95) - When annualized (aggregating returns per taxpayer), there were 384 taxpayers (13.3 percent) with credits amounting to 23.0 percent domestic tax payable or SRD 552.5 million down from $666.5 million. This implies taxpayers filed both credit and payable returns. (para 95) - Zero-rated supplies (domestic and exports) represent 63.1 of total supplies. Domestic zero-rated supplies accounted for 35.9 percent of total supplies and 56.9 percent of total supplies at 0 percent. Export supplies accounted for 27.2 percent of total supplies. (para 96) - With September 2023 amendments to the VAT Act—shifting most zero-rated items to exempt—it is expected there should be a reduction in the ratio of domestic zero-rated supplies to total supplies. The value of taxable supplies made to VAT-free persons is unknown as the amount is not being captured; authorities should capture VAT-free sales information using tax declarations. (para 96) - Additional data integrity observations: - Inconsistencies in reporting output VAT and input VAT; taxpayers reporting high level of deferment which is yet to be implemented. (para 97) - Taxpayers reported 0.3 percent output VAT on zero-rated supplies, suggesting inaccuracy. (para 97) *IMF | Technical Report — content compiled from the specified chapter text.* ### 98. Output VAT on standard-rate supplies and domestic input VAT accounted for the largest share of ### tarea2024042 - 98. Output VAT on standard-rate supplies and domestic input VAT accounted for the largest share of ### VAT composition, claims, and filing trends - Output VAT on standard-rate supplies accounted for 80.4 percent of total output VAT. - Domestic input VAT accounted for 52.5 percent of total input VAT. - Approximately 0.4 percent of output VAT was reported on supplies at 25 percent—the government may want to look at this policy. - Sales Tax rebate claims: - Just under SRD 200 million claimed (6.2 percent of input VAT) for Sales Tax rebate applicable to goods on hand, January 2023, for resale on which Sales tax was incurred. - 423 VAT returns filed by 102 taxpayers claimed Sales Tax rebates. - Twenty-seven taxpayers “claimed” over SRD 1 million; six taxpayers have claims of over SRD 10 million each. - One taxpayer “claimed” for SRD 45.1 million. - Note: these high claims could be data issues and should be examined. - Net VAT reported averaged SRD 163.9 million monthly for the reviewed period. - This represents 73.5 percent of VAT payable against a credit of 26.5 percent. - Net VAT reported peaked in August and September, while the number of declarations declined. - The number of taxpayers filing VAT returns is trending in the wrong direction and is of concern; follow-up action is needed. ### Concentration by sector and taxpayer size - Large taxpayers accounted for over 90 percent of net VAT reported, suggesting under-reporting by medium and small taxpayers. - Sector contributions to net VAT reported: - Mining: 30.0 percent - Manufacturing: 20.6 percent - Wholesale and retail sectors: 19.4 percent - The construction sector recorded the largest credit/refund with 5 percent of net VAT. - Recommendation: conduct a registration audit starting with large taxpayers to ensure taxpayer business sector assignments reflect primary business operations. ### Key performance ratios and analytical approach - Four key ratios used: - Zero-rated Supplies to Total Supplies (ZRS/TS) - Net VAT to Total Supplies (NT/TS) - Total Output VAT to Total Supplies (TOT/TS) — effective rate - Total Input VAT to Total Output VAT (TIT/TOT) - Observations from sector-level ratios (Table 8): - Eight sectors had Zero-rated/Total Supplies ratios above 50 percent; household production and mining the largest. - Taxpayers in sectors with ratios above 70 percent are more likely to be in a refund position. - Recent amendments exempting most zero-rated items are expected to reduce these ratios for financial, agricultural, educational, gas and electricity sectors, and to a lesser extent wholesale and retail. - NT/TS should not exceed the standard rate, but can be higher for reasons such as other VAT rates higher than the standard rate or deferment reported as output VAT; service sectors often have ratios above 6 percent. - TOT/TS rates should be higher than NT/TS; one sector/profession where NT/TS is higher should be examined for abnormalities (incorrect sector assignment or incomplete returns). - TIT/TOT indicates input VAT reimbursed relative to output VAT; for non-zero-rated sectors it must be below 100 percent for VAT to remain productive. - Suriname’s overall TIT/TOT is 65.2 percent. - Five sectors have TIT/TOT above 100 percent, all showing negative net VAT and negative NT/TS. - Example subsector normative range: wholesale and retail grocery sector TIT/TOT ranges from 70.0 to 85.0 percent; Suriname averages 78.6 percent at the national level. - Causes of concerning VAT declarations include: - Incorrectly completed declarations - Taxpayers assigned to wrong sectors - Incomplete tax declarations - Under-reporting of sales or overstating input VAT - Misclassification of items - Comparative position (Table 9): - Suriname has much higher Zero-rated supplies / Total Supplies. - Suriname has the lowest ratio of taxable supplies (positive rates) relative to total supplies — omission of exempt supplies may be a factor. - Suriname is on par with regional counterparts for input-output ratio and Net VAT to Output tax. ### Recommendations (from VAT ratios and sector analysis) - Review returns to identify reporting errors and incomplete declarations, by March 2024. - Taxpayers who make exempt supplies should report this on their VAT declarations, immediately. - Establish a mechanism to capture data on supplies made to VAT-free entities and reduce abuse, by December 2024. - Conduct registration audit, ensuring that taxpayers are assigned to the current business/sector, by December 2024. - Conduct analysis on subsectors after cleanup of the returns’ data, sectors, and segmentation of taxpayers, by December 2024. ### Customs preparedness and implementation of VAT - Implementation timing and completeness: - VAT implementation at Customs was on time but incomplete. - Implementation proceeded without full adherence to 2022 FAD mission and capacity development recommendations. - VAT was collected on time from imports but implementation involved improvisation and limited changes to inefficient customs systems and structures. - Training and information: - Training and information sessions were provided with CARTAC assistance; about 25 percent of customs staff were exposed to VAT principles. - Customs collaborated with a communication consultant to develop guides, flyers, and booklets. - Resourcing, systems, and configuration problems: - No dedicated customs implementation team was established due to severe staff shortages; senior officials contributed ad hoc. - Three servers were required: live, backup, and User Acceptance Testing (UAT). No UAT server was procured; backup server was used for UAT purposes. - Consequences: preparatory work in ASYCUDA World could not be completed; new tariff incorporating HS2017, VAT rates, exemption lists, zero-rated goods, and new customs procedure codes could not be uploaded in time. - Funding for servers was obtained from the Inter-American Development Bank in the first quarter of 2023. - Customs still operating with HS2012 tariff; work to configure HS2022 commenced in June 2023 and is ongoing. Upgrades will focus on ASYCUDA 4.3.3 and HS2022. - Tariff codes, exemption lists, and rates: - At implementation, VAT Law enacted but no HS codes in place to codify the exemption list; schedules of exempted and zero-rated goods not specifically determined at launch. - The Sales Tax administration mechanism was used as an interim measure. - Resulted in some cases where VAT was charged on goods where it should not have been, and none charged where it should have been. - Customs estimates a one percent overpayment (gain) in revenue to the Government; customs do not expect traders to seek reimbursement for overpayment. - Multiple VAT rates and unclear categorization: - Different VAT rates (standard 10 percent; 5 percent for oil and gas; 25 percent for certain high-duty goods) lacked HS code lists to identify applicable commodities. - Last-minute revisions of exemption policy and lack of consultation with customs created confusion. - Legacy Sales Tax rates and exemption list in ASYCUDA were used to implement VAT; 5 percent and 25 percent rates applied case-by-case without clear policy directives. - Importers often declared voluntarily given lack of clear guidance. - Transitional measures and coordination: - Recommended transitional measures, including extended bonded warehouse facility, were not adopted; their absence contributed to price cascading, demonstrations, and strikes. - Collaboration between CED and OTA during implementation was minimal. - Common unique Taxpayer Identification Number (FIN) not introduced for customs transactions. - Interface between ASYCUDA World and OTA’s new IT system is pending. - Customs continued to register entities using ASYCUDA number; old Tax registration number still appears on customs declarations. - No formal data sharing or cross-matching between customs and tax. - Recommended export control regime and modified export verification procedures were not implemented; no export verification protocol based on risk analysis and information sharing exists. - Limited exchange of information between customs and OTA creates a gap in taxpayer knowledge. ### Customs-related performance and risks - VAT collected at Customs for 2023 was SRD 911.2 million more than Sales Tax collected in 2022, representing a 48.9 percent increase. - December 2022 was the only period where VAT collected was less than Sales Tax (possibly due to huge imports in November 2023). - Accuracy in classification, valuation, and origin is essential for correct VAT collection at import: - Correct VAT calculation depends on: accurate HS classification; valuation following WTO Agreement on Customs Value (1994); correct application of rules of origin (e.g., CARICOM free trade agreements, EU EPA). - VAT is the last tax applied; inaccuracies in classification, valuation, or origin will lead to incorrect VAT collection. - Several importers have limited or no dealings with the OTA, making correct VAT collection at import particularly important. ### Customs recommendations - Update the tariff to HS2022, by December 2024. - Establish a working group with tax to share and explain information, by September 2024. - Ensure the necessary steps to strengthen customs management of VAT are implemented quickly and with discipline and accuracy. *Source: compiled by mission team from OTA data and mission analysis as presented in the source content.* ### 116. Undervaluation is a significant area of non-compliance that must be addressed. Customs believe ### Undervaluation is a significant area of non-compliance that must be addressed. Customs believe ### Valuation and motor vehicles - Undervaluation is viewed by customs as rife and routine for many importers; compliance constrained by limited resources, lack of information sharing, and an uncoordinated approach to compliance. - There is no valuation database; work on one for motor vehicles has begun, and training in valuation fraud is limited. - Table 10 — Customs Motor Vehicle Valuation (USD) Compliance Efforts (compiled by mission team from OTA data): - 2022 - Number of Valuation Investigations: 42 - Total of Original Declared Values: 1,217,891 - Total of Uplifted Values: 1,420,108 - Value Uplift: 202,217 - Average Value Uplift: 4,815 - Original Duties and Taxes: 420,386 - Uplifted Duties and Taxes: 489,846 - Amount of Duties and Taxes Uplifted: 69,460 - Average Duty and Taxes Uplift: 1,654 - 2023 - Number of Valuation Investigations: 71 - Total of Original Declared Values: 1,105,886 - Total of Uplifted Values: 1,519,741 - Value Uplift: 413,855 - Average Value Uplift: 5,829 - Original Duties and Taxes: 719,437 - Uplifted Duties and Taxes: 815,544 - Amount of Duties and Taxes Uplifted: 96,107 - Average Duty and Taxes Uplift: 2,288 - Impact observed: - Values were uplifted by approximately 16.5 percent in 2022 and by 37.40 percent in 2023. - These efforts resulted in increased duties and taxes of approximately 16 percent in 2022 and approximately 13 percent in 2023. - Conclusion: the motor vehicle exercise illustrates the type of increase that can be expected from increased and purposeful efforts to address undervaluation. ### Post-Clearance Audit (PCA) - PCA is one of the most powerful tools to combat valuation fraud but is not used in Suriname; the customs PCA unit is currently unstaffed. - PCA uses desk audits and in-depth field audits to scrutinize traders’ records, identify errors, negligence, and fraud, and supports informed compliance and trade facilitation by allowing rapid release of cargo. - Recommendation in text: the customs PCA unit should be reconstituted and officers provided with necessary training, tools, and management direction. ### Financial Identification Number (FIN) and information sharing - Adopt the FIN to strengthen compliance and reporting: the FIN allows data cross-matching for risk management, comparing turnover to trade volume, detecting undeclared activities, identifying inconsistencies in quantities and values, and combating noncompliance, fraud, and smuggling. - Information exchange between tax and customs must be strengthened: create a working group or task force to explore data holdings and effective uses, and address terminology and data explanation challenges. - The IMF TAX Revenue and Customs Knowledge Exchange and Research (TRACKER) tool: - Described as an IT tool that facilitates exchange of information between revenue agencies and other government departments. - TRACKER is available free, and necessary technical assistance (TA) is provided at no cost to the beneficiary. - Recommendation: authorities should consider requesting TRACKER and associated TA from FAD. ### Exports, exemptions, and training - Exports: effective export controls must be implemented; VAT refund cycles require vigilance where refunds are made. Observed export controls focus on drug interdiction and document validation, with no meaningful verification of goods exported. - Customs responsible for VAT refund payments should not solely rely on customs documents but should include checking other shipping documents such as Bills of Lading and Air Waybills as part of verification. - Exemptions: Suriname is an exemption-rich environment; monitoring and verification of exemptions are necessary to prevent fraud and misuse and protect VAT collection. - Monitoring requires site visits and inspections; officers tasked must have authority, information, and logistics support. - Conditions applying to exemptions should be clear to beneficiaries and grantors should consider revenue forgone before approval. - Education and training: officers and brokers have had general information sessions on VAT but lack specialized briefings by work area and sector; targeted, specialized, and ongoing training is needed. ### Recommendations (section-specific, with dates preserved) - Adopt the FIN and use it in all declarations and transactions, by June 2024. - Strengthen controls on classification, valuation, and origin, by June 2024. - Strengthen risk management capacity, by June 2024. - Resource the PCA unit and give it resources, training, and direction, by September 2024. - Strengthen control of exports, by August 2024. - Provide training and briefings to officers and brokers on developments and issues with VAT, by, February 2024. - Strengthen verification and follow-up monitoring of exemptions, by July 2024. ### Overall strengthening of customs operations — findings - Customs administration requires strengthening; previous IMF and CARTAC TA reports remain valid and should be revisited to develop an improvement plan. - Better customs administration will help optimize the VAT yield by reducing revenue loss from errors and fraud and enhancing trade facilitation. - Management, strategic planning, operational management, and performance management must be addressed; customs should have a clear strategic plan with prioritized strategic objectives endorsed by the Ministry of Finance. - Performance management: - Currently customs only records and reports on revenue figures. - A broader set of targets and indicators should be adopted including trade facilitation, human resource management, enforcement targets, and revenue. - Headquarters (HQ) function: - No approved customs manuals specifying responsibilities, tasks, and powers for divisions and positions exist; absence of SOPs leads to inconsistent decision-making. - HQ should drive management meetings across reform areas; such meetings are infrequent. - Communication: - Lack of formal communication within customs; unit-to-unit communication is by word of mouth. - ASYCUDA World message facility is not utilized; there are no formal management or staff meetings. - Urgent need to introduce management and staff meetings, circulars, and use of ASYCUDA World messaging. - Resourcing and staffing: - Customs is under-resourced despite new container scanner and new customs building. - Table 11 (staffing in Customs) indicates about two-thirds of establishment in post and PCA has no resources; RMU staff of four with three deployed on scanning duties. - Recruitment process is slow; about one hundred vacant posts; recruitment of fifty officers begun in June 2022 remains incomplete and may not be operational until 2026 — process must be accelerated. - Risk management: - Use of information for risk management is not well developed; reluctance to grant facilitation for fear of revenue loss. - Investment needed in people, tools, and techniques in the RMU and granting appropriate authority to the unit. - Data and analytics: - Customs lacks capacity to extract, analyze, and derive meaning from data. - RMU has some training by UNCTAD and uses basic techniques such as Benford’s Law but lacks full skills and tools. - Recommendation: approach CARTAC for TA in data analytics. - Integrity: - Management recognizes integrity issues adversely affect revenue efforts. - Need for a holistic integrity approach: review legal framework for conflict-of-interest declarations; legal mechanism to report, investigate, and address bribery and corruption. - Salary scales need review to be commensurate with work as indicated in the WCO Arusha Declaration. - Optimize ASYCUDA World modules to reduce human intervention; work with Chamber of Commerce and Brokers Associations to educate on corruption’s negative effects. - Preparing for oil and gas sector expansion: - Customs must prepare now for major changes; significant new areas of work will appear requiring increased operations, management of warehouses and shore bases, and understanding of the “cost bank.” - WTO TFA and WCO: - Suriname is a WCO member and signatory to the WTO TFA. - Customs should implement concepts, principles, and practices promoted in these organizations and systematically implement WTO TFA provisions. - Previous attempts to implement risk management and PCA were not fully brought to fruition; customs should redouble efforts. ### Staffing snapshot (as presented in source) - Year:20202 02120222023 - Total in post:222219207204 - Including: - Seaport34333130 - Air Cargo16171615 - Air Passengers16171615 - Guyana Border16151614 - French Border7777 - PCA0000 - RMU6655 - Enforcement15161515 - Recruits00110 - PCU3333 - Suspended from duty (disciplinary)2688 - Dismissed0002 ### Overall recommendations (timed) - Act on the recommendations made in previous FAD and CARTAC reports, by December 2024. - Develop a strategic plan and operational plan – and put it into use, by October 2024. - Recruit and train fifty new officers, by December 2024. - Develop and implement a comprehensive integrity-strengthening program, by December 2024. *Source: tarea2024042 — IMF | Technical Report* ### 138. An important modernization initiative is the procurement of a new tax administration information ### An important modernization initiative is the procurement of a new tax administration information system. ### Modernization initiative and institutional reform - The system was acquired to aid the implementation of VAT. Other taxes will be integrated later. - If the system is fully utilized, several business processes will be automated and free up staff from manual and labor-intensive work, representing an opportunity for the DoTC to increase productivity. - Ongoing reforms seek to transform the DoTC into a Semi-Autonomous Revenue Administration (SARA). - Following modern practices, a SARA will unify departments for both direct and indirect taxes, and a dedicated large taxpayer unit. - With IDB support, the Surinamese government has secured a new facility in Paramaribo to serve as the DoTC's headquarters. ### Capacity development partnerships and programs - Suriname will benefit from the new FAD Global Public Funding Partnership (GPFP), which will provide four years of technical assistance in strengthening revenue administration. - CARTAC will continue to provide support for CD requests not being delivered by the GPFP program. - To enhance sustainability of CD implementation, the IMF needs to ground capacity CD into a Results-Based Management (RBM) framework. - IMF and CARTAC are funded by donors with a focus on monitoring outcomes and assessing results, not just delivery. - RBM is a tool for planning, monitoring, implementing, and evaluating CD, fostering prioritization and partnerships among the IMF, authorities, and development partners. - All CD support from the IMF and CARTAC must be integrated into the RBM. - A strong partnership with authorities is vital across all stages, from request for CD to project design, implementation, and evaluation. - Appendix III provides an example of the framework. ### Technical assistance—identified priority areas (CARTAC/FAD) - Strengthen audit function including developing a national audit plan and build technical capacity. - Strengthen refund management. - Strengthen arrears management and enforced collection processes. - Develop standard operating procedures. - Develop a VAT compliance risk-management program, including segmentation of taxpayers. ### Status of FAD 2022 Mission Recommendations (selected entries and timelines) - Re-establish the SC or until a SC is reconstituted, consider using the Director of Taxes as the chairperson — Sept. 2022. - Make the VIT full-time and with assigned responsibilities. — Sept. 2022. - VAT implementation project documents drafted – for submission to SC — Sept. 2022. - Provide adequate dedicated staff and other resources to support the implementation of VAT, pulling support staff, from LTU, audit and experienced staff from Sales tax department. — Sept. 2022. - Request technical assistance. — Sept. 2022. - Determine the organization/unit that will initially assume the management of the VAT operations, once launched—consider using the LTU. — Sept. 2022. - Training trainers conducted. — (no date shown). - Finalize the VAT Regulations/Orders, including detailing the list of zero-rated/exempted goods and with tariff codes — Oct. 2022. - Deploy VAT registration module — Oct. 2022. - Develop and publish a VAT communication outreach program — Oct 2022. - List of potential VAT registrants in place (150) — Oct. 2022. - Commence registration of taxpayers, focusing resources to ensure timely registration of priority taxpayer segments, particularly large business — Oct. 2022. - Plan and execute an effective and timely advisory visit program — Oct. 2022. - Post VAT Implementation items: - The Directorate of Taxes should implement the use of a single TIN (FIN) within six months of the launch of VAT — Jun. 2023. - Taxpayer advisory program should continue up to three months after the launch — Mar. 2023. - A basic audit program should begin within the first 90 days of the VAT launch — Apr. 2023. - Deploy other key IT modules (arrears, audit, refund, etc.) within six months of the launch of VAT — Jun. 2023. - Customs-related items (selection): - Customs should be fully involved in the planning and implementation of the VAT — Sept. 2022. - Establish an internal VAT Implementation Team — Sept. 2022. - Extend the bonded warehouse facility to other importers—to assist with the transition of exiting goods from Sale Tax to VAT — Oct. 2022. - Establish an export control regime to verify exports — Nov. 2022. - Procure and install a new training server (done 2023 Oct) — Nov. 2022. - Upgrade the ASYCUDA World System to version 4.2.2 — Nov. 2022. - The new tariff incorporating HS2017, the VAT rate, the lists of exempt and zero-rated goods and all the newly created customs procedure codes uploaded into the ASYCUDA World System — Dec. 2022. ### Modules and functionalities of the new tax system (status as of December 32, 2022 – as indicated by the supplier) - Key delivered/partial/no delivered/not contracted/to be clarified statuses preserved as presented. - Representative module statuses (system support MTS / MCS / Other / In system / Delivered): - 1. REGISTRATION - 1.1. General Taxpayer Registration — Y Y - 1.2. Tax Types Registration Management — Y Y - 1.3. Tax Periods Management — Y Y - 1.4. Registration of Taxpayer per Tax Type — Y Y - 1.5. Registration Compliance Monitoring — ? - 1.6. Enforced Registration — ? - 1.7. Generate Management Information report — Y Y Y - 2. FILING MANAGEMENT - 2.1. Taxpayer - Tax Type – Tax Period Management — Y Y - 2.2. Filing Compliance Monitoring — Y Y - 2.3. Generate Management Information report — Y Y Y - 3. ASSESSMENT - 3.1. Self-Assessment (Returns and Declarations) — Y Y - 3.2. Assessment by duty — Y Y - 3.3. Additional Assessment — Y Y - 3.4. Automatic Assessment — Y Y - 3.5. Best Judgement Assessment — Y Y - 3.6. Generate Management Information report — Y Y Y - 4. AUDIT MANAGEMENT - 4.1. Audit Planning — N N - 4.2. Taxpayer selection — Y Y - 4.3. Audit — Y Y - 4.4. Audit Assessment — Y Y - 4.5. Generate Management Information report — N N N - 5. PAYMENT PROCESSING - 5.1. Payment Processing — Y Y - 5.2. Identification of suspended payments — Y Y - 5.3. Generate Management Information report — Y Y - 6. REFUND MANAGEMENT - 6.1. Refund request processing — Y Y Y - 6.2. Refunding (re-payment) — Y? - 6.3. Generate Management Information report — Y Y - 7. TAXPAYER ACCOUNT MANAGEMENT - 7.1. Liability (Debit) posting — Y Y - 7.2. Payment (Credit) posting — Y Y - 7.3. Reconciliation (Offsetting) — Y Y - 7.4. Payment Compliance Monitoring (Indirect taxes) — Y Y Y - 7.5. Payment Compliance Monitoring (Direct Taxes) — N N N Will be delivered soon - 7.6. Payment non-compliance penalizing (Indirect taxes) — N N No determined penalty policy - 7.7. Payment non-compliance penalizing (Direct taxes) — N N No determined penalty policy - 8. REVENUE MANAGEMENT - 8.1. Revenue reconciliation with banks — N N - 8.2. Revenue reconciliation with treasury — Y Y - 8.3. Revenue distribution — Y Y - 8.4. Generate Management Information report — Y Y Y - 9. ENFORCEMENT - 9.1. Payment Compliance Monitoring — Y Y Y - 9.2. Debt Management — Y Y - 9.3. Enforced Collection — Y Y - 9.4. Generate Management Information report — N N - 10. OBJECTIONS AND APPEALS - 10.1. Objection — Y Y - 10.2. Appeals — N N There is no appeal body - 10.3. Generate Management Information report — N N - 11. COMPLIANCE MANAGEMENT - 11.1. Taxpayer Compliance Risk Analysis — N N - 11.2. Compliance Strategy Management — ? - 11.3. Registration Compliance Monitoring — ? - 11.4. Filing Compliance Monitoring — Y Y - 11.5. Accuracy of Reporting Compliance Monitoring — ? - 11.6. Payments Compliance Monitoring — Y Y - 11.7. Generate Management Information report — Y Y - 12. SUPPORTING PROCESSES - 12.1. Internal Control — Y Y - 12.2. Statistic, Analysis and Planning — ? - 12.3. User Management — Y Y Y Y - 12.4. Workflow Management — Y Y Y Y - 12.5. Case Management — Y Y Y Y - 12.6. Document Management — Y Y Y - 12.7. E-Tax Service — Y Y - 12.8. Taxpayers Risk Management — N N - 12.9. Knowledge Management — N N N - 12.10. Data exchange — N N N - 12.11. Security Management (including audit trail) — Y Y Y ### RBM framework sample — Improve processing of VAT refunds (Annex III) - Context and challenge: - Timely processing of VAT refunds presented a major challenge in 2023. - The stock of refunds at the end of 2023 is too high. - On December 31, 2023, the stock of refund value was about SRD 671.0 million. - Poor VAT filing compliance is impacting the accurate measurement of the stock of refunds — a considerable number of VAT registrants have not submitted VAT returns. - VAT refund processing issues listed: - VAT returns received in 2023 have not been processed on a timely basis (processing was delayed partly due to concern regarding the information reported by taxpayers). - The tax administration did not have a risk-based mechanism to determine cases presenting high risk and therefore warrant an audit — instead each refund case must be audited by the tax administration. - The VAT Act requires that VAT refund processing must be completed in 30 days. However, that is not always possible when the risk requires an audit to be conducted. - The VAT Act requires taxpayers be paid interest when the case cannot be completed in 30 days. - The tax administration has the authority to use revenue collections to pay VAT refunds. Moving forward the tax administration should estimate the amount to be refunded and funding should be put aside in a special account to pay refunds. - Project Objective: STRENGTHENED CORE TAX ADMINISTRATION FUNCTIONS - Outcome 1: (Management of VAT refunds) - Verifiable Indicator(s): A larger proportion of taxpayers meet their payment obligations as required by law. - Management of refunds improved (TADAT 2015 POA8-24/TADAT 2019 POA8-28). - Indicator Baseline Value: The capability of the VAT refund and processing system is insufficient. - Indicator Target Value: The adequacy of VAT refund process is improved to meet a B score in the TADAT framework (indicator P8-28). - Milestones and target completion dates (with donor support required): - A dedicated compliance team is established and in operation to follow up on missing VAT returns. — March 1, 2024 — Yes - A process is in place to secure that VAT returns received are processed within one week of receipt. — March 1, 2024 — Yes - A process is in place to pay interest on late processing of VAT refund claims. — July 1, 2024 — Yes *IMF | Technical Report* --- _Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024042.pdf_