A Critical Analysis of Effectiveness of Tax Offences Control Mechanisms Under Rwandan Law

III.1.6 Tax amnesties

The practice of tax amnesty is not a new phenomenon; its history goes as far back as to ancient Rome. In the contemporary period, many developed as well as developing countries all over the world have increasingly conducted tax amnesties as part of their fiscal programs. Some countries have made repeated use of amnesties and sometimes the repetition of amnesty took place at an interval as short as every two years^82(*).

Tax amnesty is a limited-time opportunity for a specified group of taxpayers to pay a defined amount, in exchange for forgiveness of a tax liability (including interest and penalties) relating to a previous tax period or periods and without fear of criminal prosecution.

Tax amnesty is a good and positive move to allow taxpayers to come back into the tax system. A tax amnesty should give tax offenders the opportunity for voluntary disclosure and to lift the burden of waiting for tax administration discover them through audits and investigations accompanied by heavy penalties with interests and criminal prosecutions.

The purpose and objective of the tax amnesty will be to provide tax offenders with an incentive to stop evading tax permanently and improve the tax compliance culture.

Generally, Tax amnesty will be one opportunity for targeted taxpayers to come forward and disclose their past evasion. It will offer an attractive advantage for offenders to disclose evaded taxes and duties. The tax amnesty will also be backed up by intensive audit activity focused on those who within the taxpayers in question do not come forward under an amnesty offer.

In fact, it is important to ensure that a proportion of businesses using an amnesty are subjected to subsequent scrutiny to ensure that the amnesty is not used to deflect...attention away from serious non-compliance.^83(*)

III.1.7 Access to third party records and the power to issue summonses84(*)

The tax administration should have access to the records of anyone who has financial dealings with taxpayers and who can provide relevant information on taxpayers' income and the accuracy of their tax declarations and books and records

III.1.8 Indirect Methods of Assessment

The law should specifically authorize the tax administration to use alternative methods to establish or verify the amount due, whether the tax involved is income, VAT, or another tax. The taxation authority should be permitted to use these alternative forms whenever the taxpayer fails to provide the records otherwise required in a complete and accurate form.

III.1.9 Introducing invoicing/receipting requirements

Requirements for invoices and receipts should be emphasized with the goal of improving the quality of the audit trail and increasing transparency for consumers by enforcing prescribed documentation and record maintenance by businesses. Taxpayers should ensure that tax invoices:

· Show Taxpayer identification number

· Clearly identify each taxable supply

· Show the total amount of VAT payable

· The total amount payable.

* ⁸² Hari Sharan, Essays on Value added and Tax Amnesty programs, West Virginia University, 2005

* ⁸³ Designing a Tax System for Small Businesses: A guide for Practitioners, The World Bank group, October , 2007

* 84 Tax Law Design and Drafting (volume 1; International Monetary Fund: 1996; Victor Thuronyi, ed.)