Sanctions for tax evasion
On 15 August 2017 the Minister of Finance, Economic Planning and Development in his 2017/2018 Budget Statement announced new measures for both customs and domestic taxes. The domestic tax measures became effective on 1st July, 2017. Most of the measures were included in the 2017/18 Budget Statement and were implemented through the relevant Amendment Acts for 2017 that were published in the Official Gazette on 25 July 2017.
One of the major changes is to introduce harmonized tax-related penalties. A penalty is applied of 20% of the amount outstanding for late payment in the first month, plus interest on the amount outstanding equal to 5% plus the prevailing bank lending rate per annum for each month, or part of a month, the tax remains unpaid. A penalty of MWK 200,000 is charged for failing to comply with a notice, for giving incorrect information, for failing to keep records, books, or accounts, etc., plus MWK 50,000 per month, or part of a month, the failure continues. A penalty of MWK 300,000 applies for failing to furnish a return of income, a return of payments to shareholders, and certain other documents, plus MWK 50,000 per month, or part of a month, the failure continues.
A penalty applies amounting to 20% of the amount of tax unpaid as a result of an omission of income, an unlawful deduction/offset, an undue allowance claim, or the failure to deduct (remit) tax when required, plus interest on the amount unpaid equal to 5% plus the prevailing bank lending rate per annum for each month, or part of a month, the tax remains unpaid. A penalty is due amounting to MWK 200,000 or twice the amount of tax due or imprisonment for one year when the above violations are committed with the intent to defraud.
Some other important measures are also taken in the Act including removal of the restriction on the definition of interest income and the introduction of a 10% excise tax on television subscriptions. A new penalty of MWK 300,000 will be applicable for failure to submit VAT returns, plus MWK 50,000 per month, or part of a month, the failure continues.
According to an announcement from the Finance Ministry, a new tax amnesty called the Voluntary Assets and Income Declaration Scheme (VAIDS), entered into force on July 1, 2017 for both individuals and corporations. The amnesty aims to raise tax awareness and increase tax compliance. It gives a nine month timeline for taxpayers to regularize their tax position with the federal and state governments without being liable to any tax penalty or facing prosecution for default. The amnesty offers a waiver of penalties, no prosecution of tax offenses and no tax audit. The tax amnesty continues from July 1, 2017 to March 31, 2018.
Although most Canadians pay their tax and expect a responsive and fair tax system, some net high wealth individuals are continuing to find ways to avoid paying the tax they owe, placing an unfair burden on the country.
The Canadian Government and the Canada Revenue Agency (CRA) have taken action by devoting resources to the highest risk areas, both domestically and internationally. The Minister of National Revenue, Diane Lebouthillier, on 9th of June 2017, announced an online consultation to enable Canadians to comment on the CRA’s proposed changes to its Voluntary Disclosures Program (VDP).
The proposed changes to the VDP follow an extensive review of the program in recent months in response to recommendations by the Standing Finance Committee. The proposed changes to the Voluntary Disclosures Program would involve:
- narrowing the criteria of who is eligible;
- confirming that severe cases of non-compliance do not benefit from the same level of penalty and interest relief;
- ensuring that requests that reveal proceeds of crime are excluded from relief; and
- requiring payment of the estimated taxes owed as a condition to qualify for the program.
The VDP applies to disclosures relating to income tax, excise tax, excise duties under the Excise Act, 2001, source deductions, GST/HST and charges under the Air Travelers Security Charge Act and the Softwood Lumber Products Export Charge Act, 2006.
The CRA is inviting public comments on its proposed changes on or before 8th August 2017. The official announcement of the amendments to the voluntary disclosures program would be announced in the fall of 2017 and effective from 2018.
The Internal Revenue Service on 9 June 2017 announced that interest rates for tax underpayments and overpayments will remain the same for the calendar quarter beginning July 1, 2017.
The rates will be:
- four percent for overpayments (three percent in the case of a corporation);
- one and one-half percent for the portion of a corporate overpayment exceeding $10,000;
- four percent for underpayments; and
- six percent for large corporate underpayments.
Under the Internal Revenue Code, the rate of interest on tax underpayments and overpayments is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half of a percentage point.
The interest rates are computed from the federal short-term rate determined during April 2017 to take effect May 1, 2017, based on daily compounding. Revenue Ruling 2017-13, announcing the rates of interest, will appear in Internal Revenue Bulletin 2017-26, dated June 26, 2017.
The Malaysian Inland Revenue Board (MIRB) published a media statement on 16 May 2017 regarding clarification of imposing 100% penalty for failure to declare income and correct information which will be implemented with effect from 1 January 2018.
Under the Income Tax Act 1967, the Director General of Inland Revenue is given the power to impose a penalty for the offence of default in declaring income or in declaring correct income which is subject to tax. The proposal to increase the rate of penalty to 100% of the tax payable on the undeclared or under declared income beginning 1 January 2018 is a step towards elevating the level of voluntary compliance among tax payers by dealing with tax payers who are hardcore tax law defaulters.
Examples of cases that would be subject to the 100% penalty are repeated offences of undeclared or incorrectly declared income received by way of a return form; refusal to give full co-operation during an audit or investigation process; failure to give information or documents requested to assist in an audit or investigation process; carrying out an organised tax evasion scheme or failure to comply with the tax law even though the tax payer has been audited or investigated before.
In preparation, tax payers are encouraged to come forward and declare their income and correct information within the required time.
The diverted profits tax (DPT) is one of many new measures introduced to tackle multinational tax avoidance. The DPT aims to ensure multinationals do not avoid their Australian tax obligations by entering into schemes to divert their Australian profits to offshore related parties. It imposes a 40% tax rate on the diverted profits (which is payable within 21 days of an assessment being made).
The DPT applies only to significant global entities, income years that start on or after 1 July 2017 and can apply to schemes entered into before 1 July 2017 which produce a tax benefit in an income year commencing on or after this date. The DPT also encourages multinationals to provide sufficient information to tax authority to allow for timely resolution of tax disputes.
The Treasury and Resources Department offers and runs a tax disclosure opportunity from 3rd April 2017 up to the end of 2017. This describes Islanders will be able to tell the tax office if they’ve made a mistake or failed to declare accurate income on their tax return without having to pay any additional penalties. An online form will be open for people to correct any past mistakes with income tax or Goods and services tax (GST) returns. If the form is prepared, the tax owed will still need to be paid but the tax controller will not apply any penalties or interest, and his general position will not be prompt criminal proceedings. A 10% late payment surcharge may be charged if it is chargeable by law. The Minister of this department stated that this disclosure opportunity will allow both individuals and businesses to come forward and make a voluntary disclosure of any errors in their tax affairs. This contains someone who has intentionally omitted income from their tax returns, or who has made a claim for allowances they weren’t entitled to. The Minister will also be asking the States Assembly to announce stronger penalties in January 2018 for those who choose not to comply with their tax obligations.