Appendix A Sample Late Payment Interest Provision
Drafting note: The title “Director-General” is used for the purposes of the sample provisions in both Appendix A and Appendix B but this title should be substituted with the actual designation used in a particular country such as “Commissioner” if that is the title that applies.
Appendix B Sample Administrative Penalties Provisions
The authors acknowledge the benefit of comments received from Wouter Bossu of the IMF’s Legal Department and from Juan Toro, Katherine Baer, Margaret Cotton, Lucilla McGlaughlin, Patrick De Mets and Miguel Pecho of the IMF’s Fiscal Affairs Department.
Some countries instead choose to impose additional fines or charges—sometimes referred to as “default surcharges”—in lieu of interest to compensate for the time value of money.
Tax penalties are by no means the only way to achieve tax compliance. There are other compliance strategies that are not based on deterrence. For instance, in some countries, a good compliance track record is a prerequisite for the taxpayer to avail itself of favorable treatment (for instance, compliant taxpayers may be allowed to defer payment of VAT/GST on importation of goods to their periodic tax return to alleviate cash flow costs). More recently, several countries have further finetuned their compliance strategies by drawing on research in the field of behavioral economics. For a more comprehensive discussion on tax compliance strategies, see International Monetary Fund (IMF), 2015, “Current Challenges in Revenue Mobilization: Improving Tax Compliance”, IMF Policy Paper (Washington: International Monetary Fund).
See, for example, Making Tax Digital: interest harmonization and sanctions for late payment, UK HMRC, December 1, 2017.
The priority of monetary tax penalties and of tax debts more generally in a bankruptcy or liquidation case is a separate issue, which does not fall within the scope of this note.
See IMF and Organization for Economic Co-operation and Development (OECD), 2017, “Tax Certainty” IMF/OECD Report and, 2018, “Update on Tax Certainty” IMF/OECD Report for the G20 Finance Ministers.