1. What is the most significant change to your region/jurisdiction’s tax legislation or regulations in the past 12 months?
There have been some political changes in various countries in the region, which have resulted in a new view of tax policies moving towards higher taxation of high-income individuals/entities and the creation of subsidies to less favoured sectors of the population.
2. What has been the most significant impact of that change?
Public spending is being channelled to new government programmes, and there are fewer subsidies for medium to large taxpayers.
Tax collection derived from tax audits is also on the rise to support public spending that is not necessarily funded by existing levels of tax collection.
3. How do you anticipate that change impacting your work and the market moving forwards?
Since governments will require improved tax collection to fund their policies, tax audits are increasing both in number and depth.
For professional services providers, this leads to an increase in engagements to advise on handling tax audits and other administrative processes; i.e., tax refunds, the negotiation process, and, in some cases, eventually, litigation.
4. How has this changed the way you offer tax advice?
Tax authorities in the region are shifting more to a substance-over-form approach and are highlighting concepts like materiality and business reasons in their challenges to taxpayers’ positions, in addition to increasing the pursuit of tax fraud charges. As a result, tax advice needs to be centred on making sure the outcome is fully supported and documented so that a defence file including all relevant documents and information is readily available to demonstrate, for example, that business operations have substance, and deductions claimed have a direct link to the taxpayer's trade or business, and cannot be construed as tax fraud.
5. What potential other legislative/regulatory changes are on the horizon that you think will have a big impact on your region/jurisdiction?
There is always the possibility of taxing other forms of income; i.e., estate taxes. Also, tax authorities are always trying to shift some level of burden to tax advisers, so we can expect these trends to continue.
Furthermore, we can expect legislation to strengthen the tax authorities' powers further in terms of audits and voluntary disclosure or taxpayer self-correction requirements.
Finally, some countries are looking at tax fraud considerations.
6. What are the potential outcomes that might occur if those changes are implemented?
Taxpayers will continue searching for valid and tax-effective estate and patrimony arrangements.
Tax advisers will continue to evolve in terms of how they deliver responsible and sound advice and manage their own exposure to the increasing expectations placed on them by tax authorities.
Finally, taxpayers may either strengthen their in-house tax departments and/or be more likely to engage outside counsel/advisers earlier in a tax audit process or a more in-depth inquiry.
7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
Definitely. We expect clients to engage tax controversy specialists more and for these types of services to become both more relevant and to add much more value to the client.
8. Are there any regulatory/legislative changes you believe should be implemented in your region/jurisdiction?
We believe it is imperative to strengthen the courts’ independence from the executive branch and also for countries to promote the creation of tax ombudsperson offices throughout the region to support the taxpayers' pursuit of amicable and fair closure of tax matters with their tax authorities.
Also, further communication channels between the tax authorities and taxpayers should be promoted – for example, ruling processes, negotiation processes, and self-correction programmes – which should both boost fair tax collection and a better, more efficient relationship between taxpayers and their governments.
9. How do you believe those changes would help improve the tax landscape in your market?
It should foster a more responsible approach by taxpayers vis-à-vis their obligations and make the tax authorities more mindful of the appropriate use of their collection powers. This would focus efforts on solving real and valid tax discrepancies rather than overwhelming both the tax authorities and the courts with unnecessary tax controversy cases.
In theory, the fairer a tax system is, and the fairer the tax authorities treat taxpayers, the less inclined taxpayers will be to underpay tax or pursue aggressive tax planning.
Also, a more independent court system creates more certainty, both for taxpayers and tax administrations, that a valid position will be upheld, which results in a more efficient tax auditing system.
10. How are issues surrounding the taxation of the digital economy affecting your work?
It varies from country to country depending on the level of sophistication of the applicable tax legislation, but, in any event, it is changing the way taxpayers and authorities view concepts such as supporting documentation, materiality, source of income, and taxation rights.
It is fair to believe that this might be the single most influential element in the taxpayer-tax authority relationship in the near future.
11. How would you describe the tax authorities’ approach in your region/jurisdiction?
In general, the tax authorities' approach in the LATAM region is aggressive and focused on specific trending issues in terms of their audit programming criteria. A concerning trend is the huge assessments being issued to pressure the taxpayer to make a settlement.
Also, since most countries do not have a permanent civil service in many parts of their tax administrations, regular changes in personnel and policies are common, which results in the taxpayer having to adjust constantly to the current tax administration changes in focus/policies/operation.
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