Tax amnesty is called the general remission of tax obligations and tax fraud from previous years in exchange for a small percentage of the declared capital.
In general, tax amnesty is carried out by governments from time to time with the aim of regularizing assets that are beyond the reach of public administrations, generally in other countries, and in income and assets from the submerged economy .
In this sense, the same type of two-source tax offense, legal or not, can be found, such as for example those income of legal origin but that have not been declared, either by omission, circumvention or premeditated fraud; or also of those assets from illegal and immoral activities such as drugs, weapons or prostitution.
Tax amnesties are practiced in those cases in which administrations are unable to determine the real volume of fraud and hunt down fraudsters, in addition to being carried out indistinctly in upward economic cycles, when there is less fear that public authorities will handle fraud fiscal; and in recession cycles, when the exchange of tax obligations for a symbolic amount helps to reduce the administration deficit and assets emerge on which tax charges can subsequently be submitted.
Advantages and disadvantages of tax amnesty
Tax amnesties, even if they may be immoral and dissuasive of tax obligations for those who meet them, can have positive and negative effects in the medium term.
- Assets that until then are not controlled by any competent public and fiscal body.
- It can reduce, if a rate for regularization is established, the public deficit relieving public accounts.
- Recover assets that until then were out of the country, repatriating the money.
- The tax amnesties leave doubts about the effectiveness of the fight against fraud, showing that it is possible to avoid taxes to the treasury.
- It generates controversy with the subjects that do pay their taxes, implying that it is not important, since the rest does not pay and is more benefited.
- It reduces the collection of the treasury, since it obtains fewer resources for the regularization of what it corresponds to by regularly paying taxes on these hidden assets and the penalties for having them hidden.