Developing a Cooperative Compliance Model for Developing Economies

Abstract

This chapter offers a perspective on how cooperative compliance can and should be implemented as part of the solution to enhance tax compliance in developing economies. It suggests that participative tax-policy making, compliance risk management, and efforts to simplify tax administration are solid prerequisites to the execution of a cooperative compliance program. These prerequisites should be instrumental in helping taxpayers perceive that their tax authority is willing to trust and collaborate with all compliant taxpayers. During the implementation of cooperative compliance, the tax authority should be cautious and prevent distrust from arising between taxpayers and tax officers throughout the process. Digitalization is playing a prominent role in preserving the continuity and advancement of the program. On the business side, digitalization may result in the need for a different form of transparency from business players. To ensure long-term sustainability, this study suggests that the term “cooperative compliance” should be perceived as more than simply a set of programs, and contextualized to the need and feasibility in relevant countries.