The majority of taxpayers in EU countries use tax professionals in some shape or form, and 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 and shaping the tax compliance behaviour of their clients. This influence may be positive or negative, because of their professional knowledge of our tax system and 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 and general attitudes as to the fairness and equity of the tax system and our administration thereof.
Because of their influential role and the unique position they have in influencing taxpayer behaviour, we recognise that they are one of the primary ingredients in our pursuit of our main corporate goal: “To ensure that everyone complies with their tax and customs responsibilities”.
We therefore spend a lot of time engaging with them using a combination of methods and 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 and 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 and partnerships strategy will come about. The relationship between taxpayers and tax administration, I must confirm that is very much an adversarial one characterised by mutual distrust and suspicion. Tax administration recognises that albanian tax professionals have a key role and 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 and indirect taxes, customs and duties. Albania has taxes on incomes, as well as taxes on goods and services.
Businesses (limited companies and individuals) pay tax on a self-assessment basis. There are approximately 49,000 self employed individuals and 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) and its Branch Offices in the districts possess authority to implement and administer taxes. The General Directorate of Taxes is located in Tirana. The General Taxation Directorate establishes its Local Tax Offices in 36 districts and since 1998 is established in Tirana the Large Taxpayer Office. Local Tax Office Heads are appointed and discharged by the General Director of Taxes. The Local Tax Offices provide taxpayers with tax certificates, prepare draft program of tax revenues for the district, supervise and are accountable for accomplishment of the tax revenues and the program, process tax declarations, assess tax liabilities, preserve and organise documents, audit taxpayers and 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. These groups consist of taxpayers in each of four geographic regions and a national large taxpayer group. Apart from collection and 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 and freight forwarders acting on behalf of their clients, the taxpayers, interacting with tax offices. These tax professionals perform a wide variety of functions.
The variety of professionals providing a great deal of tax advice or engaging in compliance activities is generated on the activities of such professionals. For example, accountants, advising on business transactions and internal audit; lawyers such as solicitors and barristers advising on business transactions, conveyancing, estate administration and litigation; auctioneers and real estate agents advising on capital transactions, and customs agents advising on customs matters. Each of these activities in its own right involves some form of tax advice and each professional can be regarded as a “tax professional”, each of which, play a very important part in ensuring that our tax administration and systems work.
Traditionally most VAT businesses and a little number of self-employed persons, i.e., businesses, professions, companies and their directors, use the accountant as tax professional, or “agent”, to engage with tax officials. This high level of representation, even for small business, is because we don’t operate an imputed income system. All businesses have to prepare business accounts on an “accruals” basis, and this generally requires the services of an accountant.
In Ireland we refer to our mainstream tax professionals as “tax practitioners” or “agents” and there are 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, and engage in more sophisticated business transactions and 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 and now lawyers are not just engaged in the traditional legal bastions of capital taxation and 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 and more taxpayers in tax matters in the civil and 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 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 is 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 were no tax professionals. Some people who work for tax administrations might say that life would be much easier without them. Yes, there might not be so much tax planning, or challenges to taxation, and 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’s 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 and corporations through 2,000 tax professionals, it would be necessary to interact directly with an additional 49,000 business and over 13,000 corporate taxpayers. This would have huge cost implications for tax administration, as more employees would be needed to service the substantial additional contacts and queries that would ensue.
It would also be immeasurably harder for tax administration to ensure that all taxpayers understood their obligations and this would adversely affect voluntary compliance.
For these reasons, tax structures try to make it as easy as possible for tax professionals to meet their client’s compliance obligations and we provide a variety of support services and measures to support and achieving client’s compliance.
SUPPORT AND SERVICE FOR TAX PROFESSIONALS
Tax professionals have a big interest in customer service efforts and 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 and the taxpayer does not always understand either.
Here are some examples of how tax administration can support and try to try 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 are 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 and in a spirit of openness and co-operation, which is part of taxation strategy of building partnerships, is the possibility for tax officials to engage proactively and positively with a view to implementing practical measures to remedy difficulties.
Some of these initiatives help illustrate this:
o Contact Points
There are 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.
o Contact Locator
There is a tool known as ‘Contact Locator’ ,that in albania is not a function used, but in EU countries he can be used to find out which office deals with a taxpayer.
Tax strategy is to ensure clear and timely communication. Some of the many information tools are ready for providing up to date informatio:
– Tax official website http://www.tatime.gov.al
– Tax Buletin
– Tax leaflets
– Seminars and workshops
By exploiting technology opportunities as much as possible such as electronic e-filing service, tax structures are able to provide better service while at the same time reducing compliance and their administrative costs. This makes it easier and cheaper for tax professionals to file and pay.
o Fair procedure
Through mechanisms such as tax procedures and Tax Audit Practice Guidelines and other papers and circulars that help the conduct of tax strutures in confront of taxpayers and tax proffesionals.