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Look before you leap What LOCAL GOVERNMENTS need to KNOW about Tax code Simplification

Look before you leap What LOCAL GOVERNMENTS need to KNOW about Tax code Simplification. Voluntary Disclosure Systems. State and City Voluntary Disclosure Procedures Should be Uniform

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Look before you leap What LOCAL GOVERNMENTS need to KNOW about Tax code Simplification

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  1. Look before you leapWhat LOCAL GOVERNMENTS need to KNOW aboutTax code Simplification

  2. Voluntary Disclosure Systems • State and City Voluntary Disclosure Procedures Should be Uniform • Procedures, Requirements, and Allowances Should be Codified Within the Taxpayer’s Bill of Rights for both the State and MCTC • Application for Voluntary Disclosure to One Jurisdiction Should Result in Disclosure for All Jurisdictions

  3. Model City Tax Code Simplification By December 31, 2013: • Eliminate All “Green Page” Exceptions • Complete Reduction of Current Options • 27 Options Presently Identified for Removal • 14 Options Identified for Incorporation into the Standard Language • Renumber the Remainder in a Single Series • Classification Changes: Separate Food for Home Consumption; Split Residential & Commercial Rental; Replace Transporting for Hire with the State’s Pipeline & Transportation Statutes

  4. Retail Classification Standardization • Make All Immediately Feasible Changes to the State and MCTC Retail Classifications, Effective July 1, 2013 • Identify Differences Requiring Fiscal Impact Research & Gather Data Needed for Further Consideration • Be Prepared to Act on Any Remaining Differences If Congressional Action Allows Taxation of All Remote Sellers.

  5. Standardize City TPT Licensing By June 30, 2013; Effective January 1, 2014 • Reform Article III of the MCTC • Single License Fee Per Jurisdiction • Annual License Renewal • Quarterly Proration for First Year • Uniform Temporary License Provisions • Add Penalty Waiver Provisions • Retain Permanent License Option For Now

  6. Online Portal Project • Expedite Portal Creation to be Online ASAP • Revised Goal: Operational Target Date of January 1, 2014 for Self-Collecting Cities • Single Point to File Returns and Pay • Single Point of Licensing and Renewal • Detailed Reporting Capability for Revenues and Exemptions by Tax Classification • Automate Upload Capability for Taxpayers • Once Vetted, Add the State Return and Licensing to Create a Single Point of Administrative Contact

  7. State Administration • DOR will absorb all responsibility for the 18 cities that collect their own sales tax, passed by 6/30/2014, in place 1/1/2015 • Self-collecting cities cover 74% of the State’s population; 77% of city revenues • Unlike self-collecting cities, DOR cannot provide segregated, detailed information about city taxpayers and revenues • No guarantee that the legislature can or will fund DOR at an adequate level

  8. Single Point of Audit • Make DOR the sole auditing authority, eliminating all local audit programs • Adequate audit activity ensures a level playing field and keeps tax rates low • Local audit programs invest in taxpayer education; work closely with local business owners; address local issues • DOR’s focus is required to be on larger taxpayers and statewide issues • Multi-jurisdictional auditing (MJAC) is a proven system offering single audits available to all businesses in Arizona

  9. Eliminate Contracting Tax • Replace with a Retail tax on construction materials, paid at the point of purchase • We are NOT opposed to sensible changes to simplify Contracting, HOWEVER: • A massive tax break for the Contracting industry, dressed up as simplification • Dismantles 80 years of solid public policy developed to address reliance on growth. • Jeopardizes State and local budgets, primarily relying on data from a 1999 study, without current information indicating the true impact on revenues

  10. Eliminate Contracting Tax (cont’d) • Without additional data, the level of noncompliance is purely speculative. Lack of accurate information could significantly impact the State’s General Fund • Shifts revenues away from the local demands created by growth • Statewide, municipalities will lose up to $168M in local sales tax. • Cities, towns, and counties will not make up this loss through Retail taxes.

  11. Eliminate Contracting Tax (cont’d) • Construction is essentially a manufacturing and repairing process. Under this proposal, the product will be treated differently than all other manufactured products. • Giving preferential treatment to the Construction industry ultimately comes at the expense of all others • SOLUTION: Commission a study by third party to gather information and model impacts proposed by policy change.

  12. Conclusions • DOR is strapped for resources. Given the many strains on the General Fund, cost-free alternatives should be utilized. State Administration demands a significant funding increase to work. • Local auditing supplements State activity. Losing local audits leads to lower revenues, lower compliance, and rising taxes, without improving on the current multi-jurisdictional system. • Much more information and study is needed before fiscal stability is risked, simply to give one industry a big tax break.

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