VOLUNTARY TAX COMPLIANCE
Implementation of voluntary tax compliance programmes and AML/CFT
requirements by States and Territories evaluated by MONEYVAL
(8 December 2014)
tax compliance (VTC) programme refers to any programme that is designed
to facilitate legalisation of a taxpayer’s situation vis-à-vis funds or
other assets that were previously unreported or incorrectly reported.
Countries may introduce VTC programmes for a variety of purposes
including: raising tax revenue; increasing tax honesty and compliance;
and/or facilitating asset repatriation for the purpose of economic
policies, especially when the country is in an economic crisis. Such
programmes come in a variety of forms and may involve voluntary
disclosure mechanisms, tax amnesty incentives and/or asset repatriation.
In many cases, VTC programmes are introduced by a highly political
decision reacting to the immediate economic or fiscal situation of the
country. In such circumstances, the programme may be introduced at short
notice (e.g. in response to a serious financial crisis).
in 2007, MONEYVAL has taken action in situations where a VTC programme
adopted by a MONEYVAL member raised serious concerns as regards the
effective application of AML/CFT measures, through the application of
Compliance Enhancing Procedures.
The Financial Action Task Force
(FATF) has recognised the potential for VTC programmes to be abused by
criminals for the purpose of moving funds. The level of potential money
laundering (ML) and terrorist financing (FT) risk varies greatly,
depending on the characteristics of the particular VTC programme being
implemented. In general, a programme that is being used solely for the
purpose of allowing taxpayers to voluntarily correct tax reporting
information would not seem to carry a significant ML/FT risk. However,
the ML /FT risk is greater when the programme fully or partially
incorporates elements of tax amnesty or asset repatriation. An issue of
particular concern is that some VTC programmes, explicitly or in
practice, exempt full or partial application of AML/CFT measures. For
example, some programmes exempt financial institutions from the
requirements to conduct full customer due diligence (CDD) on taxpayers
and verify that the funds or other assets being declared or repatriated
come from a legitimate source, or may grant the taxpayer immunity from
investigation or prosecution for money laundering in relation to
declared or repatriated funds or other assets.
In June 2010, the
FATF has agreed four basic principles which underscore the importance of
ensuring that countries address and mitigate the ML/FT risks of VTC
programmes, and are able to effectively investigate and prosecute their
Principle 1: Effective Application of AML/CFT
The effective application of AML/CFT
preventative measures is a prerequisite for addressing and mitigating
the money laundering and terrorist financing risks associated with
implementing any type of voluntary tax compliance programme.
Principle 2: Prohibition of Exemptions from AML/CFT Requirements
The FATF Recommendations do not allow for full or partial exemptions
from AML/CFT requirements in the context of implementing a voluntary tax
compliance programme. Therefore, when implementing a voluntary tax
compliance programme, national authorities should ensure that its terms
do not allow, in law or in practice, for full or partial exemptions from
AML/CFT requirements as set out in the FATF Recommendations. Voluntary
tax compliance programmes which do so are in breach of the FATF
Principle 3: Domestic Co-ordination and
When implementing a voluntary tax compliance
programme, it should be ensured that all relevant domestic competent
authorities be able to co-ordinate and co-operate, and exchange
information, as appropriate, with a view to detecting, investigating and
prosecuting any ML/FT abuse of the programme.
4: International Co-operation
The widest possible range of
mutual legal assistance and exchange of information in ML/FT
investigations, prosecutions and related proceedings relating to the
abuse of voluntary tax compliance programmes, including asset recovery
investigations and proceedings, should be provided.
The FATF also
published in October 2012 a revised paper on
Best practices in managing the AML/CFT policy
implications in VTC programmes.
The current rules of procedure enable the Committee to take action
in a flexible manner and at any time in respect of situations of concern
which may arise in the context of implementation of VTC programmes.
However, considering the developments at the global level and the
principles and related guidance adopted, MONEVAL has adopted in December
2013 a specific procedure applicable to such situations.