Drafting Tax Laws

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Drafting Tax Laws

• Prof. Dr. Geerten M.M. Michielse
• Technical Assistance Advisor, IMF
• Georgetown University Law Center
• Washington, DC

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IMF (Organigram)
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IMF-Organization

• Area Departments
• Functional Departments
• Service Departments

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IMF (Area Departments)

• African
• Asia and Pacific
• European I (Central and Western)
• European II (Eastern former SU)
• Middle Eastern
• Western Hemisphere

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IMF (Functional Departments)

• Fiscal Affairs
• IMF Institute
• International Capital Markets
• Legal
• Monetary and Exchange Affairs
• Policy Development and Review
• Research

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Fiscal Affairs Department

• Immediate Office
• Expenditure Policy
• Fiscal Operations (I II)
• Fiscal Policy and Surveillance
• Public Expenditure Management (I II)
• Revenue Administration (I II)
• Tax Policy

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Legal

• Front Office
• Anti-Money Laundering
• Law Reform / Technical Assistance
• Country (A B)
• Banking
• Administrative Law

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How Do We Get TA-Requests?

• PRGF (poverty reduction and growth facility) by
  Area Department
• Government Initiative (sometimes after Tax
  Policy advise) by Fiscal Affairs Department
• Surveillance

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What Types of Missions Do We Do?

• Legal Drafting (80)
• Tax Policy (15)
• Tax Administration (4)
• Budget Law (1)

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What Experts Do We Use?

• IMF staff (USA)
• Headquarter-based Expert (NLD)
• External Experts (mostly Universities)
• Australians
• USA, Canadian
• Europeans (BEL, DUI, FRA, POR, SWE)

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What Tax Laws Do We Draft?

• Value Added Tax
• Sales Tax
• Income Tax
• Profit Tax / Corporate Income Tax
• Tax Administration
• Stamp Duty
• Customs

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What Countries Do We Work With?

• Industrial or Advanced Economies
• OECD countries
• Emerging Market Economies
• South-East Asian Tigers, South America, EU
  wanna bes
• Transition Economies
• Former Soviet Republics
• Developing Economies
• Africa, Cambodia, Vietnam, Laos

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What Legal Systems Do We Encounter?

• Common Law Systems
• British and American
• Civil Law Systems
• European and South American
• Islamic Systems
• Middle Eastern, Indonesia, Malaysia
• Former Soviet Union Systems

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Are There Any Model Tax Laws Available?

• Basic World Tax Code (US-based)
• Taxastan Income Tax Code (former SU countries)
• Commonwealth of Symmetrical (common law-based)
• République Francophone (civil law-based)
• Fantasia VAT
• Utopia (implementation Merger Directive)

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Some Drafting Examples

• Implementation of EU-Directives
• Drafting VAT Regulations
• Drafting Tax Administration Code

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Typical Issues in Drafting Implementation
Provisions for EU-Directives

• Parent-Subsidiary Directive
• CZE/LTU credit for w/h against CIT
• EST distribution tax in lieu of CIT
• Merger Directive
• Valuation issues due to FTC systems
• HUN/LVA accounting rules

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Typical Issues in Drafting VAT in Developing
Countries

• Cash Refunds as result of Imputation Credit
• 6-months carry forward requirement
• Only cash refunds for export
• Threshold
• Equalization Tax for small businesses

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Typical Issues in Drafting a Tax Administration
Code

• Self-assessment of tax liability
• Payment procedures
• (absence of banking system)
• Collection Enforcement
• Penalty system
• usually too high for minor violations and too low
  for serious violations)
• Appeal procedures