The majority of taxpayers in EU countries use tax professionals in some shape or form, & for this obvious reason the EU tax administration recognises that they play a very important role in their tax system. As well as helping to make the system run smoothly, they play a key role in influencing & shaping the tax compliance behaviour of their clients. There is more. This influence may be positive or negative, because of their professional knowledge of our tax system & its nuances. Through their representative bodies, tax professionals also have an important role in developing our tax system. They are influential in forming public opinion & general attitudes as to the fairness & equity of the tax system & our administration thereof. Because of their influential role & the completely unique position they have in influencing taxpayer behaviour, we recognise that they’re one of the primary ingredients in our pursuit of our main corporate goal: ‘To ensure that virtually everyone complies with their tax & customs responsibilities’. We therefore spend a lot of time engaging with them using a combination of methods & through many different forums in our efforts to achieve improved taxpayer compliance.
WHAT CAN BE TAX STRATEGY ?
Our strategy in relation to dealing with tax professionals can be laid out in our recent Operational Strategic Programme 2007-2010. Because of the fact that the phrase “tax professional” encompasses persons with a variety of roles & responsibilities, the tax administration must prepare a response to ensure that strategy works. I would like to give you some background on how the building relationships & partnerships strategy will come about. The relationship between taxpayers & tax administration, I must confirm that is very much an adversarial one characterised by mutual distrust & suspicion. Tax administration recognises that albanian tax professionals have a key role & that is why we have developed sophisticated consultative mechanisms to help administration engage with this wide community. Let me give you some relevant facts about the Albanian tax system.
ALBANIA’s TAX SYSTEM
Our tax system is concerned with direct & indirect taxes, customs & duties. Albania has taxes on incomes, as well as taxes on goods & services. Businesses (limited companies & individuals) pay tax on a self-assessment basis. There is more. There’re approximately 49,000 self employed individual persons & 13,000 limited companies on our register. The General Taxation Directorate is the sole central tax authority in the Republic of Albania. The General Directorate of Taxes (HQ) & its Branch Offices in the districts possess authority to implement & administer taxes. There is more. The General Directorate of Taxes is located in Tirana. The General Taxation Directorate establishes its Local Tax Offices in 36 districts & since 1998 is established in Tirana the Large Taxpayer Office. Local Tax Office Heads are appointed & discharged by the General Director of Taxes. There is more. The Local Tax Offices provide taxpayers with tax certificates, prepare draft program of tax revenues for the district, supervise & are accountable for accomplishment of the tax revenues & the program, process tax declarations, assess tax liabilities, preserve & organise documents, audit taxpayers & collect taxes as well as implement special executive decisions. General Taxation Directorate has recently undergone a major organisational restructuring. Essentially, this agency has rebuilt the organisation around different groups of taxpayers. There is more. These groups consist of taxpayers in each of four geographic regions & a national large taxpayer group. Apart from collection & debt management functions which remain centralised every other small taxpayer is managed from 2007 from tax offices of local power, as effect of fiscal decentralization in Albania.
WHO AND WHAT ARE ALBANIAN TAX PROFESSIONALS ?
In aLBANIA, a wide range of tax professionals such as accountants, lawyers, tax consultants, businesses & freight forwarders acting on behalf of their clients, the taxpayers, interacting with tax offices. There is more. These tax professionals perform a wide variety of functions. There is more. The variety of professionals providing a great deal of tax advice or engaging in compliance activities is generated on the activities of such professionals. By example, accountants, advising on business transactions & internal audit; lawyers such as solicitors & barristers advising on business transactions, conveyancing, estate administration & litigation; auctioneers & real estate agents advising on capital transactions, & customs agents advising on customs matters. Each of these activities in its own right involves some form of tax advice & each professional can be regarded as a “tax professional”, each of which, play a very important part in ensuring that our tax administration & systems work. Traditionally most VAT businesses & a little number of self-employed persons, i.e., businesses, professions, companies & their directors, use the accountant as tax professional, or “agent”, to engage with tax officials. There is more. This high level of representation, even for small business, is because we do not operate an imputed income system. All businesses have to prepare business accounts on an ‘accruals’ basis, & this generally requires the services of an accountant. In Ireland we refer to our mainstream tax professionals as “tax practitioners” or “agents” & there’re approximately 2,000 such “agents” registered ® in tax offices when they act as tax return preparers. As a result of this high level of agent representation, taxpayers in Albania tend not to be inhibited about challenging tax administration, & engage in more sophisticated business transactions & use tax professionals to this end. Another reason for taxpayer challenges is the recent phenomenon of taxation departments being created in legal firms. Also, many corporations are employing lawyers who specialise in mainstream taxation matters & now lawyers are not just engaged in the traditional legal bastions of capital taxation & inheritance tax matters. Primarily, as a result of our Tax Investigation Department a dedicated part of tax administration which pursues the proceeds of crime, our barrister profession, who traditionally did not advocate in taxation matters, are now representing more & more taxpayers in tax matters in the civil & criminal courts. This increasing competition from the legal profession has raised some issues as regards a level playing field between the different professions. Accountants see the prospect that lawyers might be easily able to claim legal professional privilege on behalf of clients against Revenue enquiries in certain circumstances as an unfair competitive advantage.
INFLUENCING COMPLIANCE BEHAVIOUR
One of the obvious benefits for tax administration from the engagements with tax professionals is the extent to which they can get them to influence good compliance behaviour. As already mentioned, tax offices regard tax professionals as being hugely influential in terms of promoting good compliance behaviour; indeed, because they may be the only point of contact that a taxpayer has in his/her interactions with tax administration. However, it’s important that tax professionals also see it as in their interest to do so. Not alone does ‘non-compliance’ cost money in lost taxes for tax administration, but it also puts the taxpayer, the client, at serious risk of severe consequences if caught. Being able to deal with taxpayers through their agents substantially reduces the cost of tax administration. Think of what life would be like for a tax administration if there weren’t any tax professionals. Some people who work for tax administrations might say that life would be much easier without them. Yes, there might not actually be so much tax planning, or challenges to taxation, & taxpayers might be more willing to accept tax administration’s view. This might make life easier for the tax officials. But given the complexity of tax system for enyone that it is no part of tax administration, despite all the efforts at simplification, think of what the disadvantages might be? Instead of funnelling the interaction with businesses & corporations through 2,000 tax professionals, it would be necessary to interact directly with an additional 49,000 business & over 13,000 corporate taxpayers. There is more. This would have enormous cost implications for tax administration, as more employees would be needed to service the substantial additional contacts & queries that would ensue. It would also be immeasurably harder for tax administration to ensure that all taxpayers understood their obligations & this would adversely affect voluntary compliance. For these reasons, tax structures attempt to make it as easy as possible for tax professionals to meet their client’s compliance obligations & we provide a variety of support services & measures to support & achieving client’s compliance.
SUPPORT AND SERVICE FOR TAX PROFESSIONALS
Tax professionals have a big interest in customer service efforts & are rightly critical when the tax services falls below standard. After all, the tax professional is in business to make a profit. Poor service on the tax offices costs money & the taxpayer doesn’t always understand either. Here are some examples of how tax administration can support & attempt to attempt to make life as easy as possible for tax professionals.
Simpler Organisational Structure In the albanian tax structure, all taxes pertaining to a taxpayer are handled by one office. Prior to that, a taxpayer (or tax professional) could have to deal with a number of offices depending on the tax. This tax structure makes it much easier for the tax professional to deal with their client’s compliance obligations. However there’re problems following the reallocation of all our taxpayer cases in the restructuring period. For some time, tax professionals are unsure which office dealt with their clients. As a result of good contacts with the various professional bodies & in a spirit of openness & co-operation, which is part of taxation strategy of building partnerships, is the possibility for tax officials to engage proactively & positively with a view to implementing practical measures to remedy difficulties.
Some of these initiatives help illustrate this:
? Contact Points There’re special contact points in each of the regions for tax professionals who are experiencing service difficulties in dealing with tax administration. These contact persons are empowered to sort out the difficulty.
? Contact Locator There is a tool known as ‘Contact Locator’ ,that in albania isn’t a function used, but in EU countries he can be often used to find out which office deals with a taxpayer.
Information Tools Tax strategy is to ensure clear & timely communication. Some of the many information tools are now ready for providing up to date informatio:
- Tax official website www.tatime.gov.al
- Tax Buletin
- Tax leaflets
- Seminars & workshops
? Technology By exploiting technology opportunities as much as possible such as electronic e-filing service, tax structures are now able to provide better service while at the same time reducing compliance & their administrative costs. There is more. This makes it easier & cheaper for tax professionals to file & pay.
? Fair procedure Through mechanisms such as tax procedures & Tax Audit Practice Guidelines & other papers & circulars that help the conduct of tax strutures in confront of taxpayers & tax proffesionals.
CONSULTATION
While, virtually everyone recognises that albanian tax administration has responsibility for the tax system & makes the final decisions, we know that we can do things more effectively, if there is a spirit of cooperation & mutual understanding with tax professionals. Both tax structures & tax professionals have a mutual self-interest in bringing common sense & clarity to what’s a complex area of business & personal life of taxpayers. There is more. The consultation is very important - our strategy is that we listen, we exchange views & ideas, & we generate ideas. On the other hand it’s important to get the professional’s practical business perspectives & learn from their experiences. So… Some times a more informative practical viewpoint, e.g. learning practical insights & difficulties in operating legislation, is a more valuable insight than discussions about proposals or the difficulties in implementation of current legislation in an internal vacuum.
BENEFITS TO TAX ADMINISTRATION
As well as the invaluable role, played by practitioners in promoting & fostering a pro-compliance culture in Albania, they have also been a significant catalyst & facilitator of some of the major changes in tax administration here. Tax administration has make changes to keep pace with one of the speediest growing economies in the mediterranean region over the last 5 years which has brought enormous challenges for us on many fronts, but particularly in terms of:
- Growing number of taxpayers - Taxpayers with increasingly complex & financial & investment profiles
All of the changes have occurred while resources have remained static. With the support (and sometimes the forbearance) of tax professionals, tax administration has managed to transform itself from an organisation that was focused on process & procedure, structurally frozen, averse to change & largely indifferent to its customers’ needs to one which is trying now to customer focused, more effective in its core businesses, structurally flexible, risk driven & looking forward with enthusiasm to the challenges ahead. I would like to illustrate this by mentioning just a few of these major changes & the role of tax professionals in facilitating them: The near future tax declaration-on-line filing service in Albania, it is aspected to be a phenomenal success. In industrialised countries of EU, even though e-filing isn’t mandatory, over 53% of self employed taxpayers filed on-line last year, in order to be increased to over 60%. This is because so many of the returns are filed by tax professionals who have been active partners in our e-filing success. As a result, there have been enormous benefits for both Revenue & practitioners in terms of service & cost. Tax professionals have been the most enthusiastic supporters of our on-line filing system & we’re continuing to work closely with them in developing it to ensure that it continues to meet their needs & concerns re service, security & confidentiality.
CHALLENGES AHEAD
There are some serious challenges ahead for the Tax Administration -Tax Professional relationship. Some of the main ones are that come to mind are:
Tax Planning & Avoidance It would be wrong to give the impression that tax structures accept everything that the tax professional engages in. One of the main areas of contention is ‘avoidance’ or aggressive tax planning. While professionals have a key role to play in relation to promoting compliance, there’re problems sometimes when tax planning steps over the line. Of course tax offices understands the motive for tax planning. Naturally, all taxpayers want to pay less tax & if there’re ways of avoiding tax, & some are willing to pay a lot of money for it… The problem is when such schemes have the potential to undermine the integrity & legitimacy of the tax system in the wider community. There is an ongoing debate with tax professionals as to where that line is - what’s acceptable & what’s unacceptable. The tax administration’s objective is to move tax professionals & their clients away from getting involved in unacceptable tax planning schemes. On the other hand, albanian tax administration are closely monitoring new developments in other countries to establish the best approach to take to change behaviour in this regard.
Integrated Revenue view of Taxpayer & Risk The tax administration approach to tackling risk, in tax structures, is to analyse risks for a taxpayer across all taxes. There is more. This makes it more hard for the general tax professional who may act in relation to some of the taxes only. It may present particular problems when preparing for a revenue audit when the full range of taxes & duties, from income tax to excise duties, could be reviewed.
More Professional Regulation It is not just tax administration that tax professionals have to deal with. They have to contend with more & more statutory reporting requirements from other bodies such as the Prosecutor, money laundering department, Customs, & many other public agencies regarding company law offences, to illustrate just a few regulatory bodies. There is more. The whole compliance environment is becoming more hard for the practitioner & this isn’t being made easier by duplication of requirements from the various public bodies. However, we’re working with other agencies to attempt & streamline matters where possible.
Finishing off Legacy Business In the last four years, tax investigation units have carried out a number of large investigation projects aimed at dealing with tax evaded on funds hidden by means of various means, such as money laundering in the registered ® businesses, under reporting or missing declarations of incomes etc . As mentioned earlier, there is a new investigation scheme underway into undeclared funds hidden. Because of the numbers of taxpayers involved, approximately 1, 000 over the last 2 years, tax professionals are complaining about the strain that all this extra work is placing on them which is in addition to their normal advisory & returns preparation work. The timing & management of some of these special investigations has been a bone of contention with them & this has caused some difficulties in their relationship with tax administration.
CONCLUSION
Tax professionals sometimes ask hard questions which tax officials may not have asked themselves and, which tax administration has to answer. This ultimately is of benefit to tax administration as it focuses them on dealing with & addressing hard issues, which may have been overlooked. As key stakeholders they want tax professionals to have a sense of ownership in the tax system. This partnership approach with them also helps to counter relationships of distrust & enables tax administration to create real relationships. There is more. To this end, the good relationship with tax professionals can assist in building public confidence in the tax administration. In terms of our objectives, we have benefited from our approach with them. However, tax officials should not get carried away. While they have a long engagement, the marriage has been more one of convenience than of love for each other. Paying tax will never be popular & there will no doubt be serious difficulties ahead. This relationship overall is on a sound footing & capable of withstanding whatever troubles lie ahead. In this conclusion I can pronounce the sentence that I am carrying in my mind always ‘Tax administration need tax professionals & they need tax administration’.
By Eduart Gjokutaj
if they can save you money… Often times they will not charge you for a review.
when the end results of the audit come back a month later. You must be clear about what’s being done by talking things over with the IRS examiner.
idea.