Background

Instructions to Applicants: Click on the "Apply now" button. Input your information in the appropriate Sections: personal information, language proficiency, education, resume and motivation. Upon completion of the first page, please hit "submit application" tab at the end of the page. Please ensure that CV or P11 and the Cover letter are combined in one file.

Personal CV or P11, indicating all past positions held and their main underlying functions, their durations (month/year), the qualifications, as well as the contact details (email and telephone number) of the Candidate, and at least three (3) the most recent professional references of previous supervisors. References may also include peers.

A cover letter (maximum length: 1 page) indicating why the candidate considers him-/herself to be suitable for the position.

Managers may ask (ad hoc) for any other materials relevant to pre-assessing the relevance of their experience, such as  reports, presentations, publications, campaigns or other materials.

Travel:  

UNDP will cover the cost of travel of the individual to the duty station, as well as their return to their home upon completion of their services. Travel costs are covered only in the event that the function will be undertaken physically in the duty station and excludes working from home arrangements.

Include any official travel expected to be associated with performing the functions 

Office/Unit/Project Description

The United Nations Capital Development Fund (UNCDF) makes public and private finance work for the poor in the world’s 47 least developed countries. With its capital mandate and instruments, UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.

a) Project rationale / background and objectives of the project

The Alliance has 75 members, including national governments from Africa, Asia-Pacific and Latin America, companies and international organizations which have committed to digitizing payments.

The Secretariat works with the Alliance members on their journey to digitize payments by:

• Providing advisory services based on member priorities.
• Sharing action-oriented research and fostering peer learning.
• Conducting advocacy at national, regional, and global level.

Billions of dollars in cash payments and transfers are made daily in emerging and developing economies, including payment of salaries, social welfare and relief, payments to suppliers, remittances. The problems with these cash payments include a lack of transparency, accountability, and security, as well as inefficiency. Individuals who receive cash payments are often part of the 1.7 billion excluded from the formal financial sector, the majority of whom are women. This means they are excluded from access to a range of appropriate and affordable financial services to help them save safely take advantage of economic opportunities and reduce their vulnerability to risk.

Shifting these payments from cash to digital has the potential to improve the lives of low-income people, particularly women, while giving governments, the development community, and the private sector a more transparent, time and cost efficient, and often-safer means of disbursing payments.

The Better Than Cash Alliance Team’s Core Values are the following:

• Achieving together
• Striving for excellence
• Service oriented
• Results oriented

As stated by the Alliance´s report titled Success Factors in Tax Digitalization, digitizing tax payments and related processes can raise additional government revenues annually, which may contribution towards addressing the growing funding gap threatening the advancement of the Sustainable Development Goals (SDGs). The economic downturn caused by the Covid19 pandemic has exacerbated SDGs challenges. The report also highlights that to date, “over 800 tax policy measures have been taken by more than 100 countries worldwide in response to COVID-19.” Digitalizing taxes can create stronger financial infrastructures, reduce tax fraud, increase resources to improve public services, and reduce the need for in-person tax transactions, which may reduce tax compliance cost for taxpayers and governments.

In Mexico, Small and Medium Enterprises (SMEs) are very difficult to tax because they are extremely diverse, cash-based, informally structured, lacking conventional accounting records, characterized by high volume, low value financial transactions, and with a strong preference to be invisible to tax authorities. Tax compliance refusal, as a barrier for digitalization was a finding in a study commissioned by Better Than Cash Alliance, titled Panorama del ecosistema de pagos digitales entre empresas de consumo masivo y pequeños comerciantes. The study mentions that Fast Moving Consumer Goods Companies (FMCGs) considered this barrier as the number one pain point for the digitalization of the retail sector, as small merchants’ fears being visible to the SAT. This barrier was also mentioned by stakeholders in 2020 during the Hight Level Meeting and kick-off of the Working Group to Foster Digital Payments of Small Merchants, a public-private partnership presided by the Secretariat of Finance and Public Credit (SHCP) in Mexico in collaboration with the Alliance. Tax compliance is also relevant for women socioeconomic advancement since according to INEGI (Instituto Nacional de Estadística y Geografia, National Institute of Statistics and Geography), the 2019 Economic Census, showed that approximately 36.6% of very small, small, and medium business (less that 100 employees) are owned by women.

The tax regime that applies to micro and small merchants in Mexico is the Régimen de Incorporación Fiscal (RIF) and it has made significant progress since 2014 in terms of number of enrollees (25% increase), use of Mis Cuentas (more than doubled), increase in collections (more than quadrupled), and increase in tax relief (increased by more than 50%). Mis Cuentas is a free digital accounting system that may be used by taxpayers provided by the Sistema de Administración Tributaria, SAT, the tax authority.

The RIF has the following general characteristics:

1. Applies only to small merchants with income not exceeding 2 million pesos (approx. 100,000 USD). 
2. Such income must come from: 
   • Sale of products, and/or 
   • Services offered for which a professional license is not required. 
3. Main benefits 
   • Don’t pay income tax the first year. The second year they pay 10%, the third year 20%, etc., until they must pay 100% income tax. 
   • Don´t pay value added tax nor sin tax on sales if annual gross income doesn’t exceed $300,000 pesos (approx. 15,000 USD). 
   • Don´t have to issue invoices for sales under $250 pesos (approx. 12.5 USD), unless it´s requested by the customer.  
4. Tax return periodicity is monthly with an annual final tax return.

The RIF, nonetheless, still has many remaining challenges:

• Negligible amount of tax revenue collected via RIF: 0.27% of total tax revenue in 2019 (Mex$ 8.6 billion from RIF versus Mex$ 3.2 trillion total tax revenue).
• Limited revenue potential of RIF.
• Even if RIF collections included all foregone revenue because of tax expenditures due to preferential tax rates (estímulos fiscales del RIF), the total would only be about 1% of total tax revenue in 2019.
• This figure would increase to just approximately 3% if everyone employed in the informal sector participated in RIF and everyone paid standard tax rates
• Very small share of total taxpayers from RIF: 7% (5.4 million out of 77.4 million)
• Low compliance due to:

• High compliance costs due to RIF complexity in tax assessment and payment.
• Uncertainty in access to non-tax benefits such as housing, credit, and health services.

• Balancing short-term revenue objectives with long-term tax base broadening.
• Balancing sensitivity to the limited fiscal capacity of low-income communities with the desire to encourage all citizens to pay at least minimal taxes as part of state-building.

Building on the Working Group and previous technical assistance programs with the tax authority, independent from the WG´s scope, the Alliance provided technical assistance for the formalization of small merchants to contribute to the small merchant digitalization goal.

It must be underlined that improvements in the RIF, that foster the formalization of SMEs owned by women, will have a positive impact in the socioeconomic and health wellbeing on women, given the benefits that working in the formal sector offer to women, i.e., health services and housing loans, among others.

The SAT stated to the Alliance its intention to make a RIF reform in 2021-2022 based on the proposals made through the Alliance technical assistance. In this sense, the technical assistance will respond to SAT´s request for guidance to define the proposed changes in the RIF that BTCA presented as result of the initial technical assistance given en 2019, in addition to giving the reform emphasis to low-income taxpayer centricity and tax digital payment.

The capacity building for the tax authority in Mexico is aligned with the Better Than Cash Alliance’s mission to catalyze a global movement from cash to digital payments to help achieve the Sustainable Development Goals. Specific benefits include efficiency, transparency, women’s economic participation, financial inclusion, responsible digital payments, and most importantly, help built economies that are digital and inclusive.

b) Context of the required services and linked to the project context 

Once the initial technical assistance was presented and the proposed fiscal reform discussed in 2019, the dialogue between SAT and the Alliance continued with regards to other countries experiences and means to increase digital tax payments to establish a simplified tax regime and facilitate tax compliance. The new tax policy agenda open the opportunity for the Alliance to be able to offer technical assistance, given the fact that the conditions were ripped to continue the dialogue in that direction. The SAT reiterated its interest in making the necessary changes to the RIF to increase the tax base and compliance rate. 

After four months of consultation with the SAT, the Alliance defined three objectives for broad RIF reform proposal:

• Transform RIF into a “pro-poor” tax policy
• Increase the cost-effectiveness of RIF for SAT
• Enhance the value proposition of RIF for taxpayers
• Increase digital tax payments

How to transform RIF into a “pro-poor” tax policy

1. Introduce a high-income tax threshold (including social security fees), and tax business income above this threshold at a single low rate (e.g., pass-through companies in the US like sole proprietorships, partnerships, Chapter S corporations).
2. Introduce high VAT and excise tax thresholds and apply standard VAT and excise tax rates above this threshold.
3. Accommodate low computer and internet use by microenterprises (less than 20% for both) by making tax thresholds high enough to exclude most of these enterprises.

How to increase the cost-effectiveness of RIF for SAT

1. Go after the money – focus attention on potential substantial foregone revenue by introducing high income tax, VAT, and excise tax thresholds.
2. Eliminate perverse incentives not to transition to the standard tax regime and reduce taxpayer bunching at kink points by taxing business income at a single low rate, applying standard VAT/excise tax rates above respective thresholds, and eliminating the incremental phase-out of reduced payments for all RIF taxes.
3. Focus enforcement on highest compliance and revenue risks (e.g., risk-based audits).
4. Increase collaboration with third parties.

How to enhance the value proposition of RIF for taxpayers

1. Improve taxpayer service (e.g., have a dedicated call line and web page for RIF).
2. Simplify RIF regulations and procedures to reduce compliance costs (e.g., shorten forms and reduce reporting requirements).
3. For VAT, use e-invoicing to prepopulate VAT returns.
4. Allow tax payments via non-bank financial institutions and mobile phones.
5. Reduce frequency of tax payments or automate these payments if regular payments better match the business’s cash flow (e.g., quarterly/annual payments if feasible or more frequent payments, if necessary, via pre-authorized and pre-scheduled bank account deductions/credit card charges).

The proposed reformed stated what to do, but not how to do it. The proposal still requires an international comparative law study for the SAT to determine:

1. Threshold.- The threshold will have to take into consideration:

• Businesses above the threshold should be able to comply with the regular regime at a reasonable cost and effort, and there should be sufficient potential revenue to justify collection and enforcement costs.
• For businesses below the threshold, should consider exclusion/exemption, since even unregistered firms pay VAT on imports and taxed inputs.
• For income tax and social contributions, apply the same threshold and rates to business owners (self-employed, partnerships, S corporations) as for wage earners.
• For businesses below the threshold, might want to consider an account- based special regime to ease the transition to a standard regime, using either turnover or cash flow as the tax base (exempt from social contributions).

        2.   Single Tax Rate. - The special regime rate should be high enough not to discourage transition to the normal regime, but not so high      they encourage greater noncompliance.

         3. Reduced filing requirements. - The filing requirements should consider:

• Simplicity (regulations, forms, and processes), as it greatly facilitates compliance.
• Should not be asked for more information than is needed and not already available.

It is necessary to assist SAT to determine the how as described and provide the precise features of the new RIF that would be written in the legal reform document to be presented to stakeholders.

The objective is to have 4 or more detailed alternatives of fiscal schemes for micro, small and medium companies, so that effective tax practices may be considered by the Mexican tax authority to create a customized alternative that best suits the national context and requirements. There must be a special emphasis on micro and small companies with low-income taxpayer centricity, as well as tax digital payment.

The SAT is requesting a comparative law of tax regimes of at least 4 countries including developed countries (for example England, Japan, Italia, Korea, Australia, New Zealand, France, etc.) and emerging economies (for example Rwanda, Kenya, Uruguay, Colombia, Brazil, etc. with a successful fiscal scheme for micro, small and medium companies). The analysis of each country in the study must take into consideration the following topics and key variables:

1) FISCAL SCHEME

• Description, effective attribution, and pain points of Tax Scheme for micro, small and medium Businesses (current and previous fiscal schemes)
• Taxes and contributions for health, housing. If the scheme includes any of these, payer (employee and/or the patron), any tax applicable (income tax, value added tax, sin tax or special tax on services or products), integrated tax rate

• Minimum thresholds and ranges or income levels applicable

2) REGISTRATION OF TAXPAYER OPERATIONS (records kept by taxpayers, records reviewed during audit by tax authority).

3) Tax withholding on payments between citizens (P2P)

4) TAX RETURN FORMS: type of forms, description of pre-filled tax return forms based on taxpayer's transactional records, if available.

5) TAX PAYMENT: return/payment periodicity, payment process (location, channels).

6) TAX ASSISTANCE: support provided to taxpayers so that they understand and fulfill their obligations, follow-up or due diligence mechanisms are used, audit methods.

7) SCHEME DESIGN: policy principles behind the tax regime design, design process, barriers during its implementation, pro and cons, windows of opportunity identified, results, potential reforms considered.

8) DIGITAL PAYMENT METHODS OF TAXPAYERS IN THEIR DAILY ACTIVITIES AND BENEFITS FOR TAX COLLECTION-

• Digital payments mechanisms available (P2P, P2B or P2G), mechanics (QR codes, digital bank account, others), technology required (taxpayer, intermediary stakeholders, and tax authority), Software/hardware involved in the transaction.
• record keeping when transactions are made by mobile phone and by bank account.
• Taxpayers’ data protection when transactions are done via mobile phone.
• Infrastructure and tax operation related to digital payments, such as payments via mobile phone, and its collection management.

Institutional Arrangement

Under the direct supervision of Latin America Regional Lead, the consultant will coordinate and collaborate with other relevant parties as well as the Alliance Team in the Region while performing the work. The IPSA holder will participate in meetings and in writing as needed. Such participation will be coordinated by the Alliance Team. There will be a weekly follow-up meeting between the Contractor and the Alliance to cover specific issues fundamental for the development of the deliverables, the reporting can be conducted either virtual or by emails, depended of the Lead Manager request for the region.

Duties and Responsibilities

Scope of Work

The contractor must:

1.       Provide the technical assistance as expert on tax policy at global and national level through the international comparative law study.

2.       Have dialogue sessions between SAT and the Alliance on the expected deliverable.

3.       Deliver to SAT a first draft of the technical assistance for an initial discussion and question and answer session between the contractor and SAT, to be coordinated by the Alliance.

4.       Embed design thinking to cover taxpayers’ profile in the development of the tax filing simplification.

5.       Present the research´s results to the Alliance and SAT teams during a virtual session.

6.       Asist SAT when presenting its proposal to the Tax Policy Office at SHCP, and if needed, other stakeholders determined by the Alliance.

Furthermore, the Alliance team will interview several small merchant taxpayers to complement the information for the design thinking that will be integrated into the tax reform proposal.

In addition, it will be imperative for the RIF reform to incorporate UN Responsible Digital Payments Principles and design for user needs of the target taxpayers by incorporating taxpayers´ behavioral patterns, values, financial and digital literacy issues, among other relevant information to generate an interface design that promotes small merchant tax formalization. Also, design thinking will be especially relevant in the filling requirements and procedures, as it should maximize tax compliance, and therefore, merchant formalization.

C.     Expected Outputs and Deliverables

It must be highlighted, that the above deliverables must be backed with the documental and technical background information. Furthermore, the Alliance will give comments on every draft to the Consultant for him or her to consider them in the Comparative Law Study to be delivered. Such comments will also reflect those made by the SAT.

Competencies

UN CORE VALUES AND COMPETENCIES

Professionalism: Shows pride in work and achievements; demonstrates professional competence and mastery of subject matter; is conscientious and efficient in meeting commitments, observing deadlines and achieving results; is motivated by professional rather than personal concerns; shows persistence when faced with difficult problems or challenges; remains calm in stressful situations. Takes responsibility for incorporating gender perspectives and ensuring the equal participation of women and men in all areas of work.

Communication: Speaks and writes clearly and effectively; Listens to others, correctly interprets messages from others and responds appropriately; Asks questions to clarify and exhibits interest in having two-way communication; Tailors language, tone, style and format to match the audience; Demonstrates openness in sharing information and keeping people informed.

Client Orientation: Considers all those to whom services are provided to be "clients " and seeks to see things from clients' point of view; Establishes and maintains productive partnerships with clients by gaining their trust and respect; Identifies clients' needs and matches them to appropriate solutions; Monitors ongoing developments inside and outside the clients' environment to keep informed and anticipate problems; Keeps clients informed of progress or setbacks in projects; Meets timeline for delivery of products or services to client.

Required Skills and Experience