Tax Declaration Study - Worldwide tax transparency is becoming the norm

Results of Deloitte’s 2nd international comparative study regarding the process of filing a personal income tax return.

Brussels, 21st May 2013 –Deloitte’s “Comparative Study of the Process of filing an Income Tax Return 2013”, the second edition of the study, looks at how Belgian tax returns compare with other countries. Now expanded to include a further 12 countries, this survey provides a comprehensive overview of the process of submitting a personal income tax return in 34 countries.

Overall, Belgium ranks somewhere in the middle of the international group, albeit with a clear lead in the area of computerisation. But the complexity of its returns again places Belgium towards the rear. A summary of the most noteworthy findings.

Electronic returns on the rise worldwide - Belgium best in class in computerisation
Last year, Belgium continued to set the trend, with steady growth of automation and computerisation in the tax return process. Recently, FPS Finance announced that last year the Belgian tax authorities received almost 3.4 million tax returns via Tax-on-web, an increase of 11% compared with the 2010 income year. With the exception of Brazil, Italy, Mexico, the Netherlands, Austria and the United States, where in principle there is a requirement to lodge returns electronically, most countries also offer the option to submit a paper return. At the opposite end of the scale is Luxembourg, where paper returns are still the standard.

The tax administration knows more and more about you
Belgium continues to do outstandingly well in terms of the pre-completion of specific individual details on the electronic tax return form. Once again this year, there were new, pre-completed codes in Tax-on-web, covering areas such as family outgoings, spending on saving energy and redundancy payments. The study also showed that over half (52.94%) of the countries surveyed complete the return in advance, whereas last year it was only one-third of countries (36.36%).

Completing tax returns remains a very time-consuming task, not least because the form is systematically becoming longer. Belgians say they spend 2 to 5 hours on average doing this “chore”, which is better than the taxpayers in Australia, Russia and South Korea, who spend over 5 hours.

Although not all of the codes on the tax return form need to be filled in, the tax authorities provide Belgian taxpayers with an extremely wide-ranging form to complete. Approximately 80 new codes have been added since 2010, taking the Belgian tax return to over 500 fields. The Spanish form leads the way in this category with more than 700 fields.

The so-called billionaire’s tax: introduced and abolished
As of 2013, Belgium will be more effective at taxing investment income. The income tax return that has to be submitted next month will feature a one-off ”maverick” tax in that regard: anyone who received investment income in 2012 in excess of the threshold of €20,020 will in principle have to declare the details extra in their return, except where the 4% additional levy has already been paid.

From the 2013 income year onwards, investment income will again become subject to a libaratory withholding tax (a standard rate of 25%, subject to a number of exceptions) and hence this reporting obligation will lapse. This measure makes Belgium one of the most efficient countries of all in terms of collecting tax on investment income.

Higher likelihood than ever of a fine for people who submit their returns late!
This year, the Belgian tax administration promised to be less tolerant with taxpayers who file their returns late. The very recent circular dated 25th April 2013 states that in the future, the tax authorities will only allow late filing in clear cases of force majeure. Fines will be issued to taxpayers who fail to lodge their returns in due time on two successive occasions. The study also shows that the majority of the countries surveyed do not take the submission of late returns lightly.

Refund or surcharge?
In Belgium, the tax return process is completed with the issuance of a tax assessment notice stating any amount to be refunded or surcharge to be paid. Settlement of the balance is not made until the assessment notice has been received, whether the taxpayer is entitled to a refund or has to pay a surcharge. In only 47% of countries, the settlement of the balance coincides with receipt of the assessment notice, while in the other 53%, no formal assessment notice is required to complete the process.

Worldwide tax transparency is becoming the norm
Because an individual’s tax situation increasingly crosses national borders, almost all countries worldwide are moving towards tax transparency. 97% of the countries surveyed exchange information with other countries, or will be doing so shortly. Belgium has been playing an exemplary role in this regard for some time: the Belgian tax authorities have been exchanging data with other countries for several years now. It is the reverse situation in Brazil, which is the only country surveyed that is lagging behind.

Tax inspections
Belgium has adopted a fixed pattern of selecting cases for an in-depth inspection or tax audit. Only a few countries (24%) have opted for this approach, which, thanks to data mining, leads with greater frequency to the required result namely the collection of the correct amount of tax owed.

About the study
The comparative study into the process of lodging personal income tax returns was carried out by Deloitte for the first time in April 2012, covering 22 countries. In the second edition of the survey, tax consultants in 341 countries were questioned about the similarities and differences in the tax return process. The full results can be downloaded by clicking the download button at the top of this page.

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