Transcript Auditing SMEs

Organisation for Economic Co-operation and Development
Risk Management and
Taxpayer Service
13. Mission, vision and goals of Taxpayer
Service, Assistance and Education
Kampala, 17 – 21 May 2010
Centre for Tax Policy and Administration
Why have taxpayer services?
Objective: to achieve the highest possible level of voluntary
compliance with the laws, at minimal cost.
Why “voluntary” compliance?
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Tax Administrations don’t have the resources to enforce
compliance from each & every taxpayer.
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Governments will not provide more resources, which are both
costly and intrusive.
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Voluntary compliance is the cheapest & most efficient means of
administering a tax system.
Tradeoffs in efficiency vs. effectiveness
Why have taxpayer services?
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There are many barriers to achieving voluntary
compliance:
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Taxpayers’ ignorance of the law
Tax laws are often complex
Tax laws & rules may put a high compliance burden
on taxpayers
Some taxpayers have poor/ no records
Some citizens and business are not prepared to
comply
Why have taxpayer services?
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Effective taxpayer services help achieve voluntary
compliance by:
Improving taxpayers’ understanding of the law
 Making it easier and less costly to comply
 Informing taxpayers on what they need to do to
properly comply
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Discouraging taxpayers from non-compliance
Why have taxpayer services?
Academic research:
 Increased awareness of the complexity of tax compliant and noncompliant behaviour.
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Shift from the “persuasion versus punishment” debate to
what is the right mix of the two.
SERVICE + ENFORCEMENT = COMPLIANCE
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Emphasis on a regulatory model: Attempting co-operation
remains the best first choice for achieving compliance in most
situations.
Factors influencing compliance behaviour
Business
Industry
Taxpayer
Economic
Sociological
Psychological
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The enforcement compliance model
Attitude to compliance
Have decided
not to comply
High
Compliance strategy
Use full force
of the law
Don’t want
to comply
Deter by
detection
Try to, but don’t
always succeed
Help to
comply
Willing to do
the right thing
Make it
easy
Create pressure down
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Low
The enforcement compliance
model - explained
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The challenge for all revenue bodies is to get the right mix
or balance of service and enforcement activities
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For taxpayers prepared to “willingly comply” this means
making it as easy as possible for them to comply.
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For taxpayers “not prepared to comply” at all, it means
applying the full force of the law.
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The end goal should be to have as many taxpayers
as possible in the “willing to comply” category.
Understanding taxpayer compliance
behaviour
WHAT is
occurring?
WHO is
doing it?
WHY are
they doing it?
Analysing compliance behaviour will assist the tax authority
in addressing the cause of the non-compliance
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Guidelines to achieve compliance
 Act with fairness and integrity
 Be flexible
 Make obligations clear
 Make it easy to comply
 Exercise sanctions when appropriate
 Be visible
 Provide incentives
 Promote good record-keeping
 Seek alliances
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Strategies for dealing with
non-compliance
 Customised letters
 Walk-in
 Income/sales reviews
 Comprehensive audits
 Serious evasion audits
 Prosecution
Enforcement communication targeted at
consumers
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Consumers also play a role in cash economy
Explain the risks of cash deals hiring contractors who
don’t issue receipts and don’t prepare contracts
Explain that if they participate in the underground
economy , they affect the governments ability to provide
services such as education, health care, pensions and
infrastructure
Today’s Taxpayer
 Is more informed
 Has often accessed publicly available information before contacting
the Tax Administration
 Uses multiple service channels
 Has Internet access
 Expects same type of service they receive from private sector
organizations
 Seeks information/services that cross program delivery and
department organizational boundaries
 Expects privacy and security
 Wants to be consulted
 Wants to know what to expect (Service Standards)
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Which services for which taxpayers?
Market segmentation:
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Delivering taxpayer services:
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The same services for everyone?
Or a more targeted / differentiated approach?
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Fundamental principle of marketing - know your clients!
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Segmentation:
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aims to improve the knowledge of clients’ behaviour/ preferences.
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breaks down client populations into smaller groups of clients with similar characteristics.
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is used to target specific approaches/ products.
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is being adopted by tax bodies world-wide for planning purposes.
Segmentation illustrated in a tax context
Large taxpayers
Few in number/ high in revenue
Small businesses/ self-employed
Relatively large in number/ little tax
Concentrated in few large industries Spread across many industries
Employ professional tax advisers
Self-preparers/ use low level advisors
Complex / international dealings
Relatively simple, domestic issues
Generally, good books and records/
external audits.
Often, poor quality books but with
substantial cash dealings
Largely non-cash dealings
Substantial cash dealings
Strong political lobbying capacity
Weak lobbying capacity
Cover most major taxes
A few taxes/ small employers
Complex tax planning/ avoidance
Substantial undeclared cash income
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Examples: Use of segmentation for
planning service etc
Australia
Netherlands
USA
Very large business
Large business
Large businesses
Non-profit bodies
Large/medium businesses
Tax exempt bodies
Government bodies
Small/ medium
enterprises
Small/ medium
enterprises
Micro-businesses
Micro-businesses
Small businesses and selfemployed
Starting businesses
Individuals
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Individuals
Individuals
Which channels for which services?
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A channel is a means of delivering a service
Tax Administrations have “”channel” options for their service
delivery activities.
Channels vary in their cost and effectiveness, for example:
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Electronic filing is cheaper and more effective than paper.
Call centres are likely to be less costly than counter inquiries
Technology is providing new and cheaper channels
Tax Administrations need to think carefully about how they can
optimize their use of the different channels.
Why have taxpayer services?
Measuring satisfaction with taxpayer services
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Tax Administrations need to know:
- Are we delivering the right services?
- To the right taxpayers?
- Are our services having a positive or negative impact?
- What do we need to improve?
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The best way to find answers to these questions is to ask those
who need services to properly comply.
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Many Tax Administrations seek feedback from taxpayers on their
services, often using private research firms.
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Key Elements of Improvement Plan
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Segment your clients into homogenous groups
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Define current suite of services provided for each segment
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Conduct/ use research into the standards of service being achieved
(i.e. quality, accessibility, reach, & timeliness)
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Identify options for improving service delivery & voluntary compliance
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Define what standards you wish to achieve
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Identify best mix of options to achieve service standards
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Develop service initiatives
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Monitor and evaluate the impacts achieved
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Review and revise
Important to handle complexity in tax laws
Complexity
Indirect effects
Direct effects
Intentional
overcompliance
Compliance
cost
Reduced
commitment
to compliance
Unintentional
non-compliance
Intentional
non-compliance
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Correlation between the degree of complexity and the level of the
taxpayer’s conviction of having filed a correct tax return.
An increase in complexity decreases the perceived fairness of the tax
system and increases the compliance costs.
This leads to reduced willingness to comply with the tax system.
The purpose of service, assistance and
education
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Make it easy to comply – handle complexity
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Reduce unintentional errors
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Reduce costs for the tax administration
Reduce compliance costs for the taxpayers
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Improve voluntary compliance
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Increase trust in the tax system
Service and communication
Taxpayer initiative
Tax administration initiative
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Compliance Strategy
Put the taxpayer in the centre, not the channels. Provide
different channels according to the needs of the taxpayers
Our task is not to inform the taxpayer, it is to
make the taxpayer informed
Important factors:
• Can the problem be solved at the
first contact?
• Look at the cost for solving the
problem, not just the cost for each
contact
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Call centre
Brochures
Tax offices
Taxpayer
Web
e-services
Service offices
Email
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Letters
Proactive and useful communciation
Taxpayers that contact the
tax administration
Failure demand
Value demand
Failure demand is created by the
organisation not working properly.
(often 40-50 % of all contacts)
Value demand is the demand the
administration wants. It reduces the
number of errors and increase compliance.
Were is my refund?
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Taxpayers that
dont contact the
tax administration
Proactive approach
Simplify
Proactive education
Answer questions
Correcting errors
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It´s not easy to understand us
(figures from Sweden)
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Tax officers are using an easy
written language that I can
understand
26%
Tax officers speak a language that I
can easily understand
37%
Service is not only a question of what we are
doing, it is also a question of how we are doing it
Trust in the tax agency is affected by how we do things
Good behaviour by Tax Agency increase trust
Bad behaviour by Tax Agency decrease trust
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How should the authority act?
Attitudes
An authority should treat citizens fairly and
respectfully, listening to them and communicating
explanations for different actions
Reciprocity
If those being regulated are treated as
trustworthy, they will repay this respect with
voluntary compliance with fair rules
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Our strategy
Each encounter with a taxpayer
provides an opportunity for the
agency to increase the trust of the
public
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The contact
The moment of truth
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Summary
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Focus on the result of the contact and not on the
channels per se, but offer a range of different channels
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Provide proactive information, reduce failure demand
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Build community confidence
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• In every contact
• Attitude is important