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.
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.
There are many reasons why revenue authorities face
challenges in their work, such as:
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.
How the TAX TRAP® works with two officers in the field (see step 1 to 6):
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.
This solution can be integrated into existing IT tax systems.
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.
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.
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.
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.
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.
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.
For more information (e.g. product leaflet) and quotation please contact:
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
INNOVATIVE TAX SOLUTIONS
Tax and Law-Office Dierkes