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New mobile tax compliance enforcement tool for countries with poor tax compliance

The Innovative Mobile Tax Compliance Enforcement Tool

In countries with a poor tax compliance rate, tax administrators can take advantage of a high correlation between car owners and registered noncompliant taxpayers with significant taxable income. By deploying our mobile, easy-to-use and ready-to-run Automatic Number Plate Recognition (ANPR) based TAX TRAP® tool, revenue authorities now have an efficient and effective method to identify and assess noncompliant taxpayers anywhere on the road. This corruption proof system can be applied on a large scale at minimal cost. It targets noncompliant taxpayers by cross-referencing in real time automobile owners against revenue

authority records. If the owner is noncompliant immediate enforcement actions can be taken such as imposing penalty fees or impounding the vehicle until the matter is resolved. The sensitivity of car owners about the vehicle will cause them to be tax compliant quickly. There may be no other more efficient tool for compliance enforcement having such a high impact on short notice. Revenue authorities will now be able to directly followup on up to thousands of noncompliant taxpayers every day. The investment costs of this enforcement tool amortize within a few weeks after deployment.

Current Situation: Poor Tax Compliance in many Countries

Picture: 100 times more effective than ordinary means of tax enforcement

Taxes are the main source of any country’s income. Thus, any solution to sustainably increase the revenue income on the basis of the tax law of the country would greatly contribute to the state’s financial power and development. In countries with poor tax compliance the combined filing and payment compliance rate of all registered taxpayers just alone rarely exceeds 60%. Unfortunately, even the wealthy upper and well-off middle classes in these countries often do not comply with tax laws which results in a high shortfall of revenue.

Many Obstacles for Tax Administration

Picture congested road in Lusaka Zambia
Congested roads provide perfect conditions for the TAX TRAP®

There are many reasons why revenue authorities face
challenges in their work, such as:

  • lack of obligation to register, including the address
    of residence;
  • unreliable delivery of assessment notices;
  • high mobility of taxpayers;
  • corruption issues; and
  • insufficient resources of revenue authorities for individual
    follow-ups. 
Even if taxpayers are filing compliantly there still may exist a poor payment compliance rate.
Logo: Don´t bother going after the taxpayers

Solution: Mobile TAX TRAP®

This solution benefits from the high correlation between registered taxpayers and registered car owners in countries with poor tax compliance rates. At the core of our solution is a camera system able to read car number plates while the cars are being driven. Once the number plate data is captured it is immediately cross-referenced against databases of noncompliant taxpayers, already uploaded to the TAX TRAP® system. Accordingly, noncompliant taxpayers can be identified immediately and stopped right on the spot by tax officers ideally working together with the traffic police and applying effective tax enforcement measures (e.g. reminders, penalty fees, temporary ban on driving, confiscation of car, arrest). This approach tackles compliance resistance effectively and has the capacity for a high impact within a short period of time. It is especially effective in developing countries. Our research shows that, statistically, in developing countries more than every third car belongs to noncompliant taxpayers. However, the TAX TRAP® may also be very helpful for emerging and developed countries depending on the individual country’s tax compliance situation.

Illustration of the correlations in developing countries between registered cars, registered taxpayers and non-compliant taxpayers

How the TAX TRAP® works with two officers in the field (see step 1 to 6):

Illustration how the tax trap works in the field

Advantages

Reliable technology

The selected ANPR technology is very mature, safe and highly reliable. It is waterproof, dustproof and heat resistant. Other law enforcement organizations have been using this technology successfully worldwide for over 20 years. The recognition rate is up to 98.5 % in an optimally adjusted system within a range of 5 to 30 meters and for speeds up to 160 km/h. This rate is sufficient for deploying it in the field for tax purposes. The technology also provides for simultaneous two lane surveillance with one TAX TRAP® unit.

Full tax type and compliance coverage

All aspects of filing and payment compliance but also – on a lower level – registration and reporting compliance of m any taxes, e.g. VAT, Income Tax, Real Estate Transfer Tax, Ground Tax and Road Tax can be tackled.

IT integrable

This solution can be integrated into existing IT tax systems.

Easy handling

The TAX TRAP® is an easy and powerful technical solution that meets the handling expectations of users. Once set-up it is a mobile plug-and-play system. All that is needed is a mobile computer with the required software and camera. It can be deployed easily on the road anywhere in the world after short introductory training.

Highly mobile

The TAX TRAP® is highly mobile. It can be transported in a normal sized car and is supplied by an independent mobile energy system. The system can be deployed in the field within less than ten minutes. It is quickly set-up at any place and time, which makes its use unpredictable and unavoidable for noncompliant taxpayers.
Additionally, a positive side effect of the mobile use is that the work of the revenue authority is visible in public.

Corruption proof

The system offers excellent monitoring possibilities against corruption:
Once the TAX TRAP® captures the car of a noncompliant taxpayer, this result is recorded in the system. Not having taken enforcement action would be difficult to hide for any involved tax officers.

Tailored and effective targeting

Targeting wealthy individuals who usually own cars and are – more likely – solvent taxpayers means that the TAX TRAP® promises to have a much better cost-benefit ratio than other enforcement solutions. Moreover, the TAX TRAP® allows users to filter the taxpayer database for different criteria so that very specific taxpayers can be targeted. For example, criteria can be set for non-filers only or non-payers only who exceed a defined threshold of overdue taxes, VAT payers only or any other combination of criteria that is desired. This gives both revenue authorities as well as tax officers flexibility based on strategy and current conditions.
Tax enforcement officers spend less time and resources trying to find noncompliant taxpayers at their home or workplace. Enforcement can take place where the taxpayer and a valuable asset “car” are located. They are able to carry out a direct countrywide follow-up on thousands of noncompliant taxpayers every day with this powerful tool. There is no other tool available which provides for that.

Impact monitoring and analytics

TAX TRAP® contains a powerful report engine which provides comprehensive standardized and customized impact reporting for further detailed analytics.

High potential

The high and increasing volume of traffic and congestion in developed, emerging and developing countries provide for perfect surveillance conditions of noncompliant taxpayers worldwide.

Data security and protection

The system provides for the adjustment to data security and protection requirements of each jurisdiction.

Secure communication / radio

The standard TAX TRAP® package can be supplemented by an advanced and rugged digital encrypted operation radio system to protect the fiscal secrecy when tax officers have radio conversations on patrol.

Fast amortization

Taking into account the acquisition costs of one TAX TRAP® unit and the revenue forgone because of tax noncompliance, amortization will be achieved within a few weeks after deployment. TAX TRAP® also contributes to long-term sustainable tax compliance behavior.

Preconditions for Implementation

  • The revenue authority must have the possibility to crossreference the data of noncompliant taxpayers against their respective number plate and export this data from the tax data system. This is generally possible as many countries demand a Tax Clearance Certificate (TCC) from the revenue authority before a person can register for change of ownership of a car. Through this process the revenue authority receives information about the number plate of the car.
  • To easily assess if the TAX TRAP® is worth implementing to improve the country’s tax compliance situation the revenue authority only needs to calculate the rate of tax noncompliant car holders (compliance stress test).
  • Retro-reflecting number plates are necessary (generally a worldwide standard).
  • Legal possibility for tax officers to use the TAX TRAP® for tax purposes, to stop cars in public (best in collaboration with the traffic police) and to apply tax enforcement measures. Easily implementable by  parliament law.
Logo follow-up on thousands of noncompliant taxpayers per da
Picture: High taxpayer coverage and efficiency of the tax trap tax compliance tool
Picture: 4 pillars of tax compliance

Testimonials

"In the Netherlands delinquent taxpayers are not allowed to depart from a Dutch airport to international destinations until all taxes are paid. This approach has been proved to be very effective. This goes in line with the decision of the German government which decided to introduce the possibility for a temporary withdrawal of the driving license as a penalty for tax fraud. The TAX TRAP® applies the same principle by threatening to restrict the taxpayers mobility if they are not tax compliant."
Portrait Thorsten Dierkes
Thorsten Dierkes
Revenue Advisor
"In an attempt to increase tax compliance, about 5,000 non-filing taxpayers were individually reminded by mail to file their overdue tax returns. "The result was that not even one single individual of those contacted taxpayers had filed outstanding returns in response to this action initiated by us. Further follow-up was not made due to the lack of resources and especially of an effective enforcement tool such as the TAX TRAP®. Tax evaders would fear the TAX TRAP® because it is targeting their cars and thus, their status symbol. Going after their cars, their prestige and personal freedom can be used as leverage to cause them to become tax compliant."
Senior Manager of an African revenue authority

Partner

Vollkörperfoto Thorsten Dierkes mit Hintergrund
Logo fairness of taxation

Thorsten Dierkes

Revenue Advisor ■ Former Revenue Officer 
Attorney-at-Law ■ Certified Tax Lawyer ■ Certified Tax Advisor

Competent partners: For two years Thorsten Dierkes worked in Zambia as a resident GIZ advisor to the Zambia Revenue Authority (ZRA). His work was focused on broadening the tax base (through capacity development) through the further development and inclusion of the SME sector into the tax system. In this function, he also worked closely together with organizations such as ATAF, IMF, ITC, Norwegian Tax Administration, OECD and US-Treasury. Following his return to Germany, the TAX TRAP® was developed by a group of experienced tax administrators and tax specialists from multiple countries and is supported by a longstanding supplier in cutting-edge ANPR solutions with its own software developers which guarantees flexible customization and scalability.
As a former tax administrator and public prosecutor Mr. Dierkes learned about the sensitivity of car holders regarding imposed restrictions on the use of their cars. Based on his experience, car owners tend to pay overdue motor vehicle tax or penalty fees immediately in order to avoid suffering from ban on driving or confiscation of the car.

Professional Qualifications

  • Notarial examination in 2017 
  • Certified Tax Lawyer since 2006
  • Certified Tax Advisor since 2003
  • Attorney-at-Law since 2000
  • University Degree in law (Diplom–Jurist) 1997
  • Revenue Inspectors Diploma (Diplom-Finanzwirt) 1993

Work experience

  • 2019: Legal and Tax Office Dierkes
  • 2017: Attorney-at-Law and Certified Tax Advisor at the biggest Lawyers Office in Oldenburg / Germany
  • 2014: Attorney-at-Law and Certified Tax Advisor at  PricewaterhouseCoopers, Düsseldorf 
  • 2012: Long Term Advisor to Zambia Revenue Authority (ZRA) in Lusaka / Zambia for Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
  • 2007: Attorney-at-Law and Certified Tax Advisor at  PricewaterhouseCoopers, Düsseldorf
  • 2000: Attorney-at-Law and Certified Tax Advisor at BDO Deutsche Warentreuhand, Bremen
  • 1990: Revenue inspector and department manager in the tax department of Lower Saxony (Germany)

Projects

  • Development of Tax Compliance Tool “TaxFinance”
  • Development of Tax Compliance Tool “TAX TRAP”
  • Modernization of the Zambian Revenue Authority (ZRA) with regard to working processes and tax legislation
  • Founder and coordinator of the pro-bono Lawyers network JUFUM (www.jufum.org) with more than 1,300 members

languages

  • German
  • English
  • Spanish

Contact us

For more information (e.g. product leaflet) and quotation please contact:

Picture: We help countries increase tax compliance and revenue.

Contact information

Mr. Thorsten Dierkes
Revenue Advisor | Former Revenue Officer
Attorney-at-Law | Certified Tax Lawyer | Certified Tax Advisor
Telefone: +49 441 4854613 Fax: +49 441 4854619
Skype: dierkest
Email: taxtrap@dierkes-recht.de

INNOVATIVE TAX SOLUTIONS
Tax and Law-Office Dierkes
Ina-Seidel-Str. 28
26133 Oldenburg
Germany

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