“We have to improve Hacienda’s service image and effectiveness and make taxpayer compliance a reality within a very short period”
–Juan Carlos Puig
Puig is resolved to make Hacienda a service-oriented organization. There will be a reinforcement of taxpayers’ rights, increased authority and visibility of the Taxpayers’ Ombudsman, improvements to the service provided to taxpayers’ complaints and tax education for the community. Compliance, however, will be priority No. 1, and will be strictly enforced. Therefore, this taxman is letting people know the ax will fall on those who don’t pay their taxes.
Hacienda to open a ‘window of opportunity’
A voluntary disclosure program (a.k.a. amnesty) will be implemented to provide taxpayers the opportunity to make a voluntary disclosure and pay their back taxes and accrued interest. Penalties will be waived as long as taxpayers are upfront, on a voluntary basis, about their status.
This “compromised offer” initiative allows delinquent taxpayers the opportunity for a fresh start. Hacienda collects the highest amount possible from delinquent taxpayers; they have the opportunity to pay and bring themselves back into compliance and commit to stay current for the next five years.
COMMENTARIO: Es una realidad que el gobierno necesita fondos. Si dan la oportunidad de poner al día sus planillas y pagar la contribuciones libre de penalidades, hay que tomarlo en cuenta.
‘The Treasury secretary is on the phone’
“We will take administrative [civil] actions for the timely collection of unpaid taxes, with an emphasis on withholding agents, the sales & use tax (IVU by its Spanish acronym) and income and excise taxes on motor vehicles. However, we also will pursue criminal prosecution for tax evaders, including withholding agents, nonfilers and under-reporters,” Puig said. Adding a personal touch, the secretary-designate plans to personally call on big debtors.
“I have the report on top of my desk on the taxpayers who have made withholding payments for professional services and/or nonresidents who haven’t paid Hacienda. Some have a debt to Hacienda of more than $1 million. There are businesses that owe more than $2 million and those will be the priority. I will personally call those big debtors, if necessary, to assure they pay. We will visit them and collect the money owed,” Puig stated.
“Although our resources are limited, we now are developing long-range initiatives and strategic plans, but we must implement short-term measures that create an impact with tangible results while the rest of the program is developed. We have to concentrate our resources on the large debtors, where there isn’t any controversy, instead of utilizing our limited resources to collect $10,000 in personal income tax that someone might owe,” he explained.
COMENTARIO: No se van a concentrar en los pequeños deudores, pero a la larga llegarán a ellos. El nivel corporativo es el que más debe y que no cumple.
Massive intervention of commercial establishments
In the short term, there will be unannounced visits to businesses to insure full compliance. There will be a prompt assessment and enforcement action to collect unpaid taxes. We will conduct compliance visits to insure withheld taxes are immediately deposited.
Withheld taxes include the IVU, excise taxes (as on vehicles) and income, such as on wage earners, contractors and nonresidents. The determination of liability and prompt assessment of withheld taxes will improve cash flow and future compliance.
COMENTARIO: Las visitas de sorpresa a su lugar de empresa será la orden del día.
To ensure compliance with and payment of the sales & use tax (IVU by its Spanish acronym) to Hacienda, Puig plans massive interventions of commercial establishments to identify those that aren’t registered with the Commercial Establishment Registry or don’t have their certificates in a public area. If not registered, it could be a $10,000 fine. If the certificate isn’t displayed in a public area, the fine could be $1,000. Noncollection of the IVU involves a $20,000 fine.
“Some businesses collect the IVU but they don’t pay it to Hacienda or they just simply don’t collect it. We will go out on the streets, be aggressive and force compliance with the law. We intend to increase IVU compliance through enforcement, inspection and oversight. If an Hacienda official walks into a commercial establishment and identifies him/herself as such, of course, they will charge the IVU but, if an Hacienda civil employee goes to an establishment and they don’t charge the IVU, it’s a $20,000 fine with potential criminal consequences. We will catch them,” Puig explained.
Two additional mechanisms under evaluation to improve IVU compliance and collection evasion are the creation of a lottery system and a fiscal print record that would record all sales of an establishment.
The lottery system will enlist thousands of new investigators in the fight against tax evasion: ordinary citizens. The sales-tax lottery would require receipts from business sales. This will help the authorities find businesses that don’t provide receipts and then don’t remit the collected tax to Hacienda. Failure to issue receipts is one of the principal forms of IVU tax evasion.
The IVU collection rate in Puerto Rico is estimated at approximately 65% while in other jurisdictions it averages more than 80%.
COMENTARIO: Con un 65% de cumplimiento, puede estar seguro que este será un área que van a darle mayor énfasis y más si está pensando el Gobernador subirlo a 10%.
Moratorium of tax credits
“Tax credits will be suspended until we can evaluate their effectiveness and efficiency in promoting the intended economic-development activities. So many tax credits have been approved that [Hacienda] doesn’t even know how many there are or how much forgone tax revenue they represent. That’s revenue already committed,” Puig said.
COMENTARIO: Esto será una medida temporera en lo que cuadran el presupuesto.
Money owed to suppliers
“To the extent that we have money available, payment to suppliers—estimated at around $723 million—will be made. As resources have become available, we have been making some indispensable payments, such as for school transportation. It is a priority [to pay the money owed to suppliers and contractors] because we believe it will help jump-start the economy. In a healthy economy, Hacienda’s revenue should increase,” Puig explained. The administration estimates the first checks could be going out to suppliers in about six to eight weeks.
COMENTARIO: Esto es parte del programa económico de inyectar dinero a la economía. Esto junto al plan de Obama puede en un momento dado lograr que entre sobre 10,000 milliones a la economía.
Use of technology a priority
Puig plans to use technology to help Hacienda improve quality of service and compliance enforcement.
“To identify noncompliance, we plan to match different databases to identify potential cases to be investigated. For example, assets identification—such as bank accounts in Puerto Rico and offshore, real and personal property and capital gains—will be used to compare living standards with taxes reported,” he explained.
Actions could include levies on bank and receivable accounts, offset measures to government contractors and seizures of assets such as bank accounts, receivables, vehicles (planes and boats), real property, filing notices of liens and providing information to the credit bureaus.
The use of technology will help identify taxpayers who are conducting business and haven’t made any deposits during the current year.
COMENTARIO: Esto es un asunto de presentar la información financiera correcta tanto en el banco como en los libros de sus empresas. Pueden adjudicarle que están reportando menos ingresos en sus planillas para defraudar el fisco. Mucho ojo.
The ax is going to fall on government agencies and municipalities
Government agencies and municipalities won’t be exempt from Hacienda’s ax. Traditionally, government agencies and municipalities withhold taxes but don’t pay Hacienda on time to use the cash flow.
Puig explained that those agencies that aren’t in compliance will be identified and an “offset procedure” will be implemented. Hacienda will withhold the amount due prior to making additional disbursements to cover operational expenses.
“Agency heads and mayors will be informed that the ax is going to fall,” Puig said.
COMENTARIO: Será interesante ver si esto funciona. Al menos la contabilidad del gobierno se va a limpiar de mucha deuda con este concepto.
Action plan for individuals
Puig explained that for individuals, Hacienda must efficiently identify current-year assessments and prevent the liability from getting to a point where taxpayers won’t be able to pay.
“We must concentrate on the two most recent years. We will issue notices inviting taxpayers to either fully pay or create an installment agreement. Government employees will be offered a payroll-deduction agreement,” he explained.
COMENTARIO: Interesante estrategia que indudablemente contribuirá a conseguir aumentar los recaudos. La actividad económica del 2009 estará bajo mucho escrutinio.
Collection task force
Puig plans to identify resources within Hacienda to establish a collection task force to conduct visits, perform compliance checks and collect taxes due. In addition, available resources in other offices will be trained in collection and compliance procedures. He also plans to detail employees from other government agencies for Hacienda. “The mission is clear: Collect the taxes that are due now,” Puig said. In addition, he plans to expedite the processing of balance-due returns and the issuance of notices within 30 days of receipt.
“We also will establish a uniform collection-due process, streamline the installment agreement requiring limited information so we can reduce bureaucracy and analyze a potential reduction of interest and penalty waivers. We will establish clear guidelines to refer cases to the Tax Evasion Division,” he explained.
COMENTARIO: Habrá mucha intervención del personal de Hacienda en la calle solicitando el pago de las contribuciones.
Better coordination with federal agencies
“We will improve coordination with the Internal Revenue Service (IRS) to achieve more proactive participation of income-source determinations of Controlled Foreign Corporations (CFCs). Hacienda needs to get involved in this matter since the IRS is making determinations that potentially affect Hacienda .There seems to be little involvement in an area that could represent additional revenue for the Puerto Rico government,” Puig said. Puig also plans to coordinate participation in federal agency task forces.
“Hacienda doesn’t have a single agent in federal task-force operations. My objective is to secure Hacienda’s participation with all federal task forces. First, we have to attack illegal drug trafficking and money laundering. Our participation will help attack a huge social problem and, at the same time, get revenue from that enormous source of funds in the illegal underground economy,” Puig concluded.
Within the next six months, Puig plans to identify the human resources available to beef up the collections division, expedite lien-filing procedures to expeditiously protect government assets, increase personal property seizures, prevent the pyramiding of taxes due, motivate delinquent taxpayers to return to compliance, establish a call center to provide tax payer services and follow up on delinquent taxes.
COMENTARIO: La mayor preocupación es el asunto de Seguro Social Federal para servicios profesionales y la información en las planillas de Puerto Rico. Luce que implementarán procesos federales en el sistema de Puerto Rico.
The IRS man moves again to Puerta de Tierra
Those who think Juan Carlos Puig is just another new face at Hacienda and the government bureaucracy will swallow him up need only look at his record. He probably has more hands-on experience (close to 20 years) in public sector internal revenue, both federally and locally, than any of his predecessors in Hacienda’s top post.
From 1990 to 1993, Puig was senior tax adviser for collections at Hacienda. From October 1993 through December 1994, he was branch chief of the IRS’ automated collections system with the San Juan IRS. From December 1994 through January 1996, he directed administrative reform in Hacienda and, until November 1998, was deputy assistant secretary for the Internal Revenue. Between November 1998 and January 2007, he was local taxpayer advocate for the U.S. Internal Revenue Service in San Juan and, since January 2007, in South Florida. Puig has a B.A. with a concentration in economics from Universidad del Turabo.
COMENTARIO: Uno de los pocos secretarios del gabinete que no estudiaron en universidades fuera de Puerto Rico, pero que a su vez tiene un resume interesantísimo que lo cualifica sin duda alguna. No es CPA, pero es un hombre de contribuciones de la calle.
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