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Mr. Eric Le Borgne and Ms. Katherine Baer

Abstract

Tax amnesties remain as popular as ever as a tool for raising revenue and increasing tax compliance. International experience, however, shows that the costs of tax amnesty programs often exceed the programs’ benefits. This paper weighs the advantages and disadvantages of tax amnesties, drawing on results from the theoretical literature, econometric evidence, and selected country and U.S. state case studies. The authors conclude that “successful” tax amnesties are the exception rather than the norm. Improvements in tax administration are the essential ingredient in addressing the main problems that tax amnesties seek to address. Indeed, the most successful amnesty programs rely on improving the tax administration’s enforcement capacity. ?Given the potential drawbacks of tax amnesties, a few alternative measures are discussed.

Eric Le Borgne

some cases, only the penalty and interest components of the liability—which often account for the bulk of the overall tax debt—may be forgiven, partially or fully. In other cases, the basic tax liability itself may be reduced. Alternatively, the tax authority may establish a repayment schedule under which interest and penalties stop accruing altogether, or interest may be assessed at something less than market rates. Such a rescheduling is still an amnesty, as the net present value of the debt is reduced. While infrequent, state tax amnesty programs tend to be

Mr. Eric Le Borgne
This paper revisits earlier studies on the determinants of tax amnesties. The novel findings are (i) amnesties are more likely to be declared during fiscal stress periods, and (ii) political factors significantly affect the introduction and timing of amnesties. In particular, the paper empirically disentangles opposite theoretical effects to show that governors perceive amnesties as another revenue source (rather than a tax increase alternative). Finally, supporting evidence shows that by breaking horizontal equity, amnesties might be perceived as unfair: a significant correlation exists between governors who lost their reelection bids and the introduction of a tax amnesty during their election years.
Mr. Eric Le Borgne

undeclared tax liabilities as established by law. 3 Forty-two states have offered tax amnesty programs. Those with multiple programs include Louisiana (four), Arizona (three), Connecticut (three), Florida (three), Massachusetts (three), Missouri (three), New Jersey (three), and New York (three). From 1980 to 2004, a total of 78 amnesty programs have been introduced by U.S. states. 4 This time-clustering phenomenon is also present across countries. See Franzoni (1995) or Torger and Schaltergger (2005) for a review of recent tax amnesties around the world

Mr. Eric Le Borgne
International Monetary Fund

fiscal deficit was equivalent to 3 percent of GDP. The slowdown in economic activity that started in the second half of 2000 continued in 2001, with output falling by 1.6 percent (year-on-year) in January. Inflation through February was in line with program projections. Tax revenues were slightly above programmed levels in the first two months of the year, owing to the higher than envisaged one-time payment required under the tax amnesty program. Other tax collections were somewhat below program. In recent discussions with staff, the authorities noted that congress

International Monetary Fund

(Repeated) Game Theoretic Approach, ” Journal of Economic Theory , Vol. 32 ( 1984 ). 10.1016/0022-0531(84)90071-1 Internal Revenue Service, U.S. Department of the Treasury , “Study of Tax Amnesty Programs,” ( August 1987 ). Jackson , Ira A. , “ Amnesty and Creative Tax Administration, ” National Tax Journal , Vol. XXXIV , No. 3 ( September 1986 ). Kahneman , Daniel , J. K. Knetsch , and Richard H. Thaler , “ Fairness and the Assumptions of Economics, ” Journal of Business , Vol. 59 , No . 4 , Part 2 ( October 1986

International Monetary Fund. Statistics Dept.

simultaneously on a quarterly basis with a maximum lag of 90 days, as prescribed by the SDDS. The compilers had made progress on the third benchmark action, “update the information used to compile estimates of external assets of the nonfinancial private sector” (June 2017). In early April, the federal tax administration (AFIP) released the results of the tax amnesty program ( sinceramiento fiscal ), which identified US$93.3 billion in undeclared foreign assets. The current estimated value of resident private sector deposits and real property held abroad is slightly higher

International Monetary Fund. Western Hemisphere Dept.

due to the completion of oil fields and the start of oil exports. Fiscal Reforms and Policy 6. The Guyanese authorities continue to implement a prudent fiscal policy and are strongly committed to maintaining fiscal discipline . Central government revenues improved in 2018 as tax collection increased substantially, supported by a tax amnesty program which relaxed the interest and penalties on payment of outstanding taxes. The introduction of electronic tax filing and the operations of the Large Taxpayers Unit also contributed to improved revenue and