Does tax amnesty have any benefit except for potentially uncovering undeclared wealth?

Question

Reading the Wikipedia article about the tax amnesty, my understanding is that the main benefit of a tax amnesty is to encourage individuals to declare their wealth:

Introduction of Amnesty scheme in any fiscal year is to help State treasury raising tax revenues, adding beneficiaries in tax base who have not declared their assets previously. The main purpose of inception of this scheme is to replicate the economy and encouraging individuals, Association of Persons and Corporations to declare their wealth as it may arises. Under this scheme the beneficiary just has to pay some tax on the total assets which are declared in Amnesty scheme. State introduce this scheme when they believe that individuals are hiding their wealth from the tax authorities.

According to this article, Romania was also planing for a tax amnesty, but some Government representatives do not agree:

the current Government argued that the draft law is similar to the bill promoted by the Ponta Government, and that the ordinance was poorly drafted and had negative impact on taxpayers. Applying a new tax amnesty would have negative effects on the confidence of people who pay their taxes on time

From a layman's perspective, if I declare all my income sources and I pay all my debts on time, I seem to be on the losers side when a tax amnesty kicks in. So, I am wondering if there are any benefits I am not seeing.

Question: Does tax amnesty have any benefit except for potentially uncovering undeclared wealth?

Answer 1

I'm wondering if there are any benefits

Declaring that previously undeclared wealth will lead to future taxes being paid that would not be paid if the wealth stayed undeclared. It also leads to arrear taxes being paid that would not be paid unless the tax office is able to uncover and prosecute the tax evasion.
I found some numbers: for the German 2004/2005 tax amnesty: the government expected some 5 billion € of arrears being paid, they actually got 1.2 billion € (but still...).

Note that unlike, say, black work (which is also income tax evasion) where you could just stop doing black work in future and no further damage would be done, undeclared wealth cannot simply appear in the tax declaration from one year to the next: you have to show where the money you declare came from. "Inventing" sources of money in order to have it (re)enter legal circulation is money laundering. So the attempt to sneak out of that undeclared wealth situation without criminal prosecution (i.e. stopping it similar to the not-any-more black worker) of the tax evader would pile another crime on top of the tax evasion. Declaring income/wealth without a source of course means that the tax office will know there was undeclared money and consequently prosecute.

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Side note: my equally lay understanding is that those amnesties come at a variety of conditions. The amnesty may "just" say that the beneficiary will not face criminal prosecution - but they may still need to pay full taxes plus interest/late tax payment fee. Conditions probably depend on how the government in question judges their position in terms pressure/being able to uncover the black money and prosecute successfully.

Answer 2

It establishes a pattern. If someone is many years in arrears of paying their taxes, they are likely to continue to do so, both from the standpoint that they haven't been punished for it, and from the standpoint of not suddenly calling attention to one's self. By wiping the slate clean of taxes you are unlikely to be able to collect anyway, you get people on the record and in the system, both to help start a new habit (of paying taxes) and getting a better idea of what they should be paying the next year.

Answer 3

A thief or a drug dealer can decide to "go straight" by no longer stealing or pushing dope. Once the statute of limitations runs out, he or she is clean. Notably, the criminal does not have to confess the crime, just stop it. (That will take quite some time, and former associates of the criminal might object, but it is the principle).

• The legal system approves of people not doing crimes.
• The legal system does not punish people for failing to turn themselves in.
• A tax fraud will find it difficult to stop the crime without confessing it -- the new tax return will not add up with the previous one.

So a tax amnesty is a way to deal with people who did a crime in the past and now want a way to get out avoid any new crimes, without self-incrimination and going to jail.