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

IMF (Organigram) IMF - September 2002

IMF-Organization Area Departments Functional Departments Service Departments IMF - September 2002

IMF (Area Departments) African Asia and Pacific European I (Central and Western) European II (Eastern + former SU) Middle Eastern Western Hemisphere IMF - September 2002

IMF (Functional Departments) Fiscal Affairs IMF Institute International Capital Markets Legal Monetary and Exchange Affairs Policy Development and Review Research IMF - September 2002

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 IMF - September 2002

Legal Front Office Anti-Money Laundering Law Reform / Technical Assistance Country (A + B) Banking Administrative Law IMF - September 2002

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 IMF - September 2002

What Types of Missions Do We Do? Legal Drafting (80%) Tax Policy (15%) Tax Administration (4%) Budget Law (1%) IMF - September 2002

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) IMF - September 2002

What Tax Laws Do We Draft? Value Added Tax Sales Tax Income Tax Profit Tax / Corporate Income Tax Tax Administration Stamp Duty Customs IMF - September 2002

What Countries Do We Work With? Industrial or Advanced Economies OECD countries Emerging Market Economies South-East Asian ‘Tigers’, South America, EU “wanna be’s” Transition Economies Former Soviet Republics Developing Economies Africa, Cambodia, Vietnam, Laos IMF - September 2002

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 IMF - September 2002

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) IMF - September 2002

Some Drafting Examples Implementation of EU-Directives Drafting VAT + Regulations Drafting Tax Administration Code IMF - September 2002

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 IMF - September 2002

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 IMF - September 2002

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 IMF - September 2002