Collecting Taxes During an Economic Crisis: Challenges and Policy Options
IMF Staff Position Notes, July 14, 2009
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Bibliographic details
- Authors: John D Brondolo
- Published: July 14, 2009
- Series: IMF Staff Position Notes
- DOI: https://doi.org/10.5089/9781462339440.004
Summary and context
- The global financial and economic crisis presents major challenges for tax agencies, including emerging compliance problems and greater demands for taxpayer support amid prospective budget cuts.
- The paper encourages tax agencies to develop a tax compliance strategy for the crisis structured around four pillars:
- (1) expanding assistance to taxpayers,
- (2) refocusing enforcement on emerging compliance risks,
- (3) enacting legislative reforms that facilitate tax administration, and
- (4) improving communication programs.
- The paper draws on practices from leading tax agencies and experiences from IMF technical assistance.
- The paper highlights emerging tax compliance issues in the financial sector.
Key findings
- Economic downturns increase demand for taxpayer support while creating emerging compliance problems for tax agencies.
- Budgetary pressures may constrain tax agency resources even as compliance and assistance needs rise.
- Emerging compliance issues are notable in the financial sector (details and examples are identified in the paper).
Policy recommendations and specific measures
- Expand assistance to taxpayers:
- Increase taxpayer services to help compliance under crisis conditions.
- Provide support mechanisms to address taxpayer distress and maintain filing and payment behavior.
- Refocus enforcement on emerging compliance risks:
- Target enforcement activity toward new and growing risks resulting from the crisis.
- Reallocate enforcement resources to areas with the highest expected compliance losses.
- Enact legislative reforms that facilitate tax administration:
- Advocate for legal changes that enable more effective crisis-time administration (specific measures detailed in the paper).
- Improve communication programs:
- Enhance outreach and communication to taxpayers to maintain compliance and manage expectations during the crisis.
Emerging tax compliance issues in the financial sector
- The paper highlights that the financial sector presents specific and evolving compliance challenges during the crisis; tax agencies should monitor and address these risks as part of their enforcement and assistance strategies.