Appenzell Innerrhoden tax audit explained


Electronic tax returns, agricultural taxes or compulsory registration for the unemployed: this is what the Innerrhoden tax audit is all about

The planned tax audit in Appenzell Innerrhoden has it all. It deals with federal legislation and cantonal adjustments. The Great Council will discuss this on October 24. Those are the main points.

In the future, some tax returns in Innerrhoden should be possible entirely electronically.

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The last revision of the Innerrhoden tax law entered into force on 1 January 2021. At the ballot box in the summer of 2020, the voters decided, among other things, to lower taxes for companies. Now the next changes await, because federal law must be adopted. On this occasion, the professional commission wishes to meet additional needs. She proposes several adjustments, including a legal basis for fully electronic submission of tax returns.

The Inner Rhodens should vote at the Landsgemeinde before the Great Council must discuss and approve the partial revision on 24 October.

What are the main changes?

In addition to the adoption of a federal law, an exemption limit is introduced for associations, foundations and other legal entities, as well as the obligation to report benefit statements from the social security funds, and the supplementary wealth tax is abolished. The professional commission also wants to create a cantonal basis for more digitalisation. The biggest change will probably be that taxpayers will soon be able to submit their tax returns entirely electronically. In addition, minor corrections are made to the law.

When can the tax return be submitted electronically?

Previously, the tax return could already be completed on the computer, but had to be printed out and signed by hand. Due to a new regulation at the federal level, the cantons must enable fully electronic submissions by January 1, 2024 at the latest. The professional commission currently assumes that this schedule is realistic only for income and wealth tax returns.

The corresponding law must meet federal requirements, specifically it must be guaranteed that the transmitted data originates from the correct person and has not been altered during transmission. Subsequent changes should only be possible if this can be established. According to federal law, an electronic confirmation will apply in lieu of a physical signature.

In addition, according to the draft law, the ethics committee should be entitled to define the details more closely, for example which types of tax can be submitted electronically. The Standing Commission must observe financial restrictions.

The electronic transfer should also work on both sides: the tax authorities should also be able to send documents to taxpayers electronically. Recipients must give their consent in advance.

What does this revision mean for the further digitization of the canton administration?

If taxpayers submit their tax returns digitally in the future, regulation of how data is recorded and stored electronically will be required. According to the ethics committee at the embassy, ​​modern administration increasingly requires paperless working methods. The ethics commission wants to define by law under which circumstances exclusively electronic data corresponds to data in paper form. The law also regulates the organization, the destruction of the original documents, the storage period and the deletion of the data. The rules for data protection must be observed.

What is the supplementary wealth tax and why should it be abolished?

Basically, wealth taxes are calculated on the basis of the net worth. However, anyone who owns agricultural businesses or land pays tax on the lower earned value, provided the property is used for agricultural purposes. If the property is sold or rebuilt, the additional property tax is charged. Only three other cantons have this tax today. St.Gallen abolished it at the beginning of 2021, Thurgau already in 2014. The professional ethics committee also proposes to abolish the tax without compensation.

Among other things, the supplementary wealth tax is difficult to calculate: it is the average between the income and the tax value over the past 20 years. In addition, the investigation is complex, the effort is not always in proportion to the tax revenue. The Ethics Commission also cannot see why the farmers have the privilege of lower income taxation, but why it is subsequently abolished. Tax losses are not to be expected, as the provision has not been used in recent years.

What will change for associations and foundations?

In future, associations, foundations and other legal entities should not pay tax if they earn less than 20,000 francs in profit. This applies if the profit is exclusively and irrevocably dedicated to the club’s purposes. This is what the professional commission proposes, such an exemption limit has been in effect at the federal level since 2017. About six companies have benefited from such an exemption limit in recent years. Therefore, the professional commission expects tax losses of several thousand francs.

What do the changes mean in the obligation to register for social security funds?

Since July 2021, social security agencies have had to provide data on unemployment benefits to other authorities such as tax offices. In order for this to also be possible in Innerrhoden, the professional commission wants to make a corresponding regulation. This should make it easier for the tax office to check the tax returns. Electronic data transmission would also be possible if Innerrhoden’s IT equipment allows it.

What federal changes are being passed?

As a result of adjustments to the Tax Harmonization Act, the canton must adopt three changes. He has no creative freedom. For example, transition benefits for older unemployed people should be tax-free. In addition, companies should no longer be allowed to declare criminal penalties as commercially justified expenses. Federal law provides some exceptions. The company law reform, which the Danish Parliament adopted in June 2020, will also be incorporated into the cantonal law.

What effect does the audit have on tax revenue?

According to the announcement from the professional commission, the proposal will have little impact on the tax revenue of the state, the districts and the municipalities.

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