Director General of Internal Revenue Suggests a Need to Reflect on a More Adequate Collection of Income Tax

Taking into account the global economic crisis, Director General of the Internal Revenue Office, Juan Hernández Batista, suggested the need to consider a more appropriate collection of tax revenues from the income tax base and to seek a healthier balance between consumer taxes, income tax and property tax.

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He made this suggestion at the inauguration of the 43rd General Assembly of the Inter-American Center for Tax Administration where he also questioned the real impact of exemptions and tax cuts as mechanisms for encouraging investment or private spending.    
“In our quality as regulators and Tax Administrators, there are many lessons to be learned from the global economic crisis, but the major ones will be the challenges and responsibilities we must still face,” said Mr. Hernández.

Hernández believes that the world economy is heading for a deep restructuring that could lead to a redefinition of the role of the market and the strengthening of the regulatory role of the government. He said the presence of new moral parameters and ethics will be indispensable in this process in that those that have prevailed up until now are partly responsible for the current crisis.

“We need to create awareness that the first step in the effective treatment of a crisis is a timely diagnosis and a recognition that should not be identified with pessimism. Instead, recognizing its existence and acting responsibly reflects the true attitude of optimism as well as faith in the capacity to overcome difficulties no matter what they are,” said Hernández. He indicated that the attitude with which we confront the crisis, its treatment and the confidence we possess are the only things that will guarantee success. He likened it to the audacity of hope, paraphrasing President Obama’s reflections on how to restore the American dream.   

Speaking in front of delegates from more than 40 countries in the Inter-American Center for Tax Administration (CIAT) and representatives from numerous international agencies, Hernández Batista emphasized the responsibility of tax administrators to ensure the highest level of tax compliance by taxpayers, to obtain higher returns on existing taxes and to apply sanctions in cases that merit them.

In this regard, he expressed satisfaction with the G-20 declarations that addressed issues such as fiscal paradises, signaling the beginning of the end of secret banking. He said they are issues that will become major topics for discussion among tax administrators in countries around the world. In the end, Juan Hernández said the issue is about reconciling the need to stimulate the creation of savings and wealth with the transparency that should be demanded of any economic entity as well as the governments themselves.   

He understands that it is the only way the government can rely on the minimum resources necessary to cover their obligations and eliminate unfair competition between economic agents for tax reasons and the avoid further erosion of the situation among the sectors of society who earn low incomes.

At the end of his speech he reminded listeners that the 43rd General Assembly of CIAT in the Dominican Republic will be about a Modern Vision of Tax Administration, an issue that requires talking about Information Technology and Communication (ITCs) as a crucial element to facilitate voluntary compliance, reducing collection costs and reducing compliance costs for taxpayers. In addition, tax administrators and management can show citizens that their work is being done in an efficient and transparent way.

For the Director General of the Internal Revenue, ITCs are essential to achieve the work of a modern tax office and to make it capable of responding to the requirements of a society that demands ever more from its institutions.  

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