Transcript Auditing SMEs

Organisation for Economic Co-operation and Development
Large Taxpayer Units
5. Importance of Large Business
Taxpayers
Nairobi, 14 – 18 February 2011
Centre for Tax Policy and Administration
Importance of Large Business
Common characteristics:
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Concentration of tax revenue: In all countries, a relatively small number of
very large taxpayers are responsible for the bulk of tax revenue collections.
Size and roles: This concentration of tax revenue results from the sheer size
of these taxpayers and the range of taxes they are responsible for, including
as intermediaries.
Importance of Large Business
Common characteristics:
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Complexity: Many large taxpayers’ tax affairs are very complex for a variety
of reasons:
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Multiple operating entities
Diverse business interests
Large volume of business transactions
International dealings (many with related parties)
Unique industry characteristics
Widely spread in geographical terms
Complex financing & tax planning arrangements.
Application of self–assessment principles: Returns accepted as filed with
post-assessment verification processes.
Overview of OECD Country & International Practice
Common characteristics:
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Major tax compliance risks: Combination of
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Large revenue potential
Complexity of business and tax affairs
Complex laws, and
Policies and strategies to minimize tax liabilities
mean that these taxpayers present significant tax compliance risks that can have
major consequences for tax collections if not addressed.
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Detected non-compliance: The vast bulk of adjustments resulting from tax
audits concern large taxpayers.
Importance of Large Business
Organizational trends:
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Most OECD and many other countries have dedicated organizational units (i.e.
Large Taxpayer Units (LTUs) to manage these taxpayers’ affairs.
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LTU’s are typically multi-functional, cover a range of taxes, responsible for a
designated group of taxpayers, and located in major cities near to taxpayers/
advisers.
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The IMF recommends LTU’s that are multi-functional and cover all the major
taxes for developing economies.
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The compliance operations of LTUs in many countries are structured on an
industry basis.
The proportion of large taxpayers administered by LTUs vary significantly from
country to country.
Importance of Large Business
Organizational trends:
FUNCTIONS
MAJOR TAXES
ADVICE ON LAW INTERPRETATION
COMPANY PROFITS TAX
INFORMATION PROVISION
RANGE OF
FUNCTIONS
THAT MAY BE
RESPONSIBILITY
OF LARGE
TAXPAYER
UNITS
AUDIT/ VERIFICATION
PERSONAL TAX
WITHHOLDINGS
SOCIAL CONTRIBUTIONS
ENFORCED FILING &
DEBT PAYMENT
INFORMATION PROCESSING &
ACCOUNT MAINTENANCE
VALUE ADDED TAX
EXCISES
THESE ARE SOMETIMES
ORGANIZED BY MAJOR
INDUSTRY SEGMENTS
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RANGE OF
TAXES THAT
MAY BE
ADMINISTERED
BY LARGE
TAXPAYER
UNITS
Large Business- Countries Known To Have LTUs
Region
Countries
Africa
Algeria, Benin, Burkina Faso, Cameroon, Cote D’Ivoire, Gabon, Guinea, Kenya,
Madagascar, Mali, Morocco, Niger, South Africa, Tanzania, Togo, Uganda.
Europe
Albania, Bulgaria, Denmark, Finland, France, Hungary, Ireland, Italy,
Netherlands, Norway, Romania, Slovakia, Spain, Sweden, UK.
FSU
Azerbaijan, Estonia, Georgia, Latvia, Lithuania, Russia, Ukraine.
America
USA, Argentina, Bolivia, Canada, Chile, Columbia, Ecuador, El Salvador, Haiti,
Mexico, Nicaragua, Paraguay, Peru, Venezuela.
Mid.East
Iran, Pakistan, Saudi Arabia, Yemen
Asia/
Pacific
Australia, Bangladesh, Cambodia, China, India, Japan, Korea, Laos, Mongolia,
Philippines, Sri Lanka, New Zealand.
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Conclusions on Importance of Large Business
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LTUs are not an isolated trend, but rather part of a more systemic
development in international tax administration practice- a customer-centric
approach to managing taxpayers’ compliance.
Large taxpayers are very different from other taxpayers and present
substantial risks to effective tax administration.
Managing these risks requires strategies appropriate to the unique
characteristics and compliance behaviour of these taxpayers.
Many tax bodies have introduced special organizational & management
arrangements to improve the administration of large taxpayers.