The new mechanism will come into effect from July 17, said a source. The mechanism operates with a software, which automatically categorizes the taxpayers´ information under three different categories, he elaborated.[break]
Officials at the Department preferred not to disclose the parameters it has included in the ´risk engine´ based on which such categorization will be done. They said those have been developed specifically for the internal monitoring purpose.
Nonetheless, sources disclosed that the parameters, which determine the risk factors in tax compliance, will record typical behavior of the firms and individuals such as their activities, business patterns and switches, typically cited rate of business return, income and expenses and track records.
“Once we feed in the data, the system will simultaneously sort out whether the taxpayer is a hard nut to crack,” said the source. The system is based on the internationally accepted norms of taxpayers´ categorization, which is done in a straight pyramid style. Under this, the first category that lies at the bottom of the pyramid and covers wider mass is taxpayers with good compliance records.
Second in the pyramid are people who need to be repeatedly reminded about compliance. Third are taxpayers who need to be consistently subjected to ´audit to detect´, while at the top of the pyramid are people tagged as ´fraud´, who intentionally evade taxes.
As for those at the bottom who are easy compliers, IRD will focus on providing better services and send messages with due respect to them to motivate them to maintain good compliance records. “For the taxpayers sorted out under the third category, we will intensify audit and force them to correct their behavior,” said the source.
For frauds, IRD will follow intensive investigations, intensify raids, seize documents and block properties and transactions, and slap heavy fines. “Because they are straight frauds, we will take harsh steps against them to force them correct their behavior,” said the source.
IRD officials said that the new program will enable them to identify the target taxpayers and ways to deal with them. “Because the identification will be done through digitized system, there remains no room for unfair complaints. Also it will add extra edge to the investigation capacity of the revenue administration,” said the senior IRD official, requesting anonymity.
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