Column Finance and the Social Security System 2012.09.12
The most difficult task in tax collection is to catch undetected non taxpayers and those unable or unwilling to pay tax. Once non taxpayers are detected, it is possible to identify where they live and the amount in arrears. However, as long as such people remain undetected, it is not possible to identify where they are hiding or the amount they are liable for. In order to find that out, the National Tax Agency and local governments carry out criminal investigations or searches, which are costly. Costs can be reduced by incentivizing non taxpayers and people unable or unwilling to pay tax to pay tax voluntarily, which is the most cost-effective method.
In a CIGS Column in February 2011, we discussed how U.S. states have irregularly implemented tax collection campaigns called "tax amnesty," which have produced good results. A tax amnesty is a system whereby non taxpayers and people unable or unwilling to pay tax pay the taxes in arrears within a specified period (ordinarily two to three months) and the state's tax agency gives a tax break to absolve them from all or part of the penalty, fine and delinquency charge for those unpaid taxes. Since U.S. citizens do not know when a tax amnesty program will start, they cannot evade taxes in anticipation of the program.
A tax amnesty is considered to be effective not only for securing tax revenues, but also for uncovering undetected non taxpayers. This report gives an overview of a tax amnesty program implemented by Washington State targeting businesses, and discusses the possibility of introducing tax amnesty in Japan......