COMPLETION REPORT - FISCAL POLICY AND MANAGEMENT

DETAILS ORGANIZATION OF PROJECT AND CONTRIBUTIONS MADE BY USAID,IRS,URUGUAY AND OAS. PROJECT RATED HIGHLY SUCCESSFUL IN UPGRADING THE CAPACITY OF THE DIRECCION GENERAL IMPOSITIVA (DGI-GENERAL TAX OFFICE) TO EFFECTIVELY ADMINISTER TAX COLLECTION SYSTEMS. DGI HAS CAPABILITY TO CARRY OUT DELINQUENCY CHECK PROGRAMS,IDENTIFY NON-FILERS AND DETECT EVADERS. A MANAGEMENT INFO SYSTEM WAS DEVELOPED TO PROVIDE STATISTICS FOR ENFORCEMENT OF RENENUE COLLECTIONS, IMPROVED ADP SYSTEMS & PROCEDURES WERE DEVELOPED FOR THE VALUE-ADDED TAX (IVA) AND LAND PRODUCTIVITY TAX (IMPROME) THAT YIELDED 788 ADDITIONAL TAX RETURNS OVER THE PREVIOUS YEAR. IN REAL TERMS,TAX REVENUES WERE UP 14% FROM PREVIOUS YEAR; REVENUE FROM IMPROME INCREASED 72.6%,IVA-31.4%,BUSINESS TAX-40-1%,BANKING TRANSACTIONS TAX-11.3%. ALSO,DUE TO INSTITUTION OF HIGH INTEREST PENALTIES FOR DELINQUENT ACCOUNTS,LATE TAX PAYMENTS HAVE BEEN SUBSTANTIALLY REDUCED. IN TERMS OF FISCAL PERFORMANCE, GOU REVENUE COLLECTIONS,AS A % OF EXPENDITURES,SHOWED A SURPLUS OF 2.5% AS OF 8/30/77. SUCCESS ATTRIBUTED TO TAX ADMINISTRATION CHANGES WHICH ALLOW GOU TO IMPROVE REVENUES: 1.NEW SYSTEMS MONITORS ALL TAXPAYERS; 2.ADP QUALITY CONTROL IMPROVED; 3.REMOVAL OF TAX AMNESTIES; 4.ELIMINATION OF NEARLY ALL DEFERRED PAYMENT AGREEMENTS; 5.INSTITUTION OF HIGH INTEREST PENALTY RATES AND ADDITIONAL PENALTIES FOR LATE PAYMENTS; 6.METHODS TO ENSURE COMPLIANCE WITH TAX LAWS(CERTIFICATES OF SOLVENCY,BUSINESS PERMITS,TAXPAYER DELINQUENCY REGISTRY); 7.ESTABLISHMENT OF RIGID & TIMELY CONTROLS OVER MOST HIGHLY-TAXED SECTOR; 8.ACCELATION OF PAYMENT OF BUSINESS PROFITS TAX; 9.EARLIER TAXPAYER FILING REQUIREMENTS; 10.INCREASED AUDIT ACTIVITIES; 11.POLICY ESTABLISHED OF COLLECTING REVENUES FROM INDIVIDUALS RESPONSIBLE FOR A PARTICULAR BUSINESS IF BUSINESS ENTITY FAILS TO PAY TAXES.