Some things in the world of tax seem to never change however. Particularly governments’ apparent fixation with tax amnesties. Brazil is the latest in a long list of jurisdictions that have announced an amnesty-related development of one sort or another recently. In Brazil’s case, it has decided to extend the deadline for its latest disclosure scheme by one month to September 29.

The success or otherwise of an amnesty is likely to depend hugely on its terms and conditions – too much stick and taxpayers might stay below the radar, too much carrot and the rule of law could be undermined. Still, I don’t remember seeing too many headlines recently proclaiming that a disclosure scheme has been a roaring success. Indeed, the word “flop” is more readily used to describe the outcome of a tax amnesty. And notable flops have been reported in South Africa and India in the past few weeks.

More of a problem seems to be the regularity with which tax amnesties are deployed. Numerous studies show that the more a government utilizes tax amnesties, the less likely those with undeclared income or assets will come forward as they hold out in hope of more favorable terms in subsequent schemes. This tends to undermine the tax compliance culture rather than enforce it, and it can be no coincidence that jurisdictions with high rates of non-compliance are in many cases frequent users of tax amnesties – Italy being a prime example.

So, can it be concluded that the repeated use of tax amnesties is illogical? Perhaps. But then the human mind does remain susceptible to flawed thinking.

For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look

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