ATO compliance program for 2014/15 - CCH Integrator · ATO Indirect Tax compliance program for 2014/15 ... (for both case and moderation purposes) ... • CRM maintenance activities

ATO compliance program for 2014/15

Sydney CBD - 19 June 2014

CCH Corporate Tax Managers Network

ATO Indirect Tax compliance program for 2014/15

Improving the integrity of business systems

through assurance tools

June 2014

Self Assurance - June 2014 3

GST – a macro view of compliance and revenue

Risk differentiation and the large market

Strategic shifts in our compliance approach

Compliance priorities

Self assurance of business systems

The use of assurance software

Participating in self assurance

Overview


GST collected LESS GST paid

GST on imported goods

Total GST collected

Australian Government

Distributes GST to States and Territories

Public transport Housing

Police Hospitals

Roads

Provides government and community

services

Charges 10% GST

Charges 10% GST

GST revenue

Manufacturer / Importer

Wholesaler

Retailer/ Service Provider

Consumer

Charges 10% GST

//upload.wikimedia.org/wikipedia/commons/2/25/Australia_map,_States-simple.svg


2010/11 GST Revenue by Voluntary and

Direct Compliance

As of August 2013 it is estimated 95% of 2010/11 accrual revenue has been accounted for.

This can be split between indirect and direct compliance:

- 90% revenue lodged correctly without direct compliance interventions (includes revenue protect and

flow on benefits from previous years)

- 5% Compliance through ATO interventions

- 5% Accrual Tax gap

We would expect the trend in the GST gap to be maintained over time.


GST Tax Gap 2001/02 to 2010/11

GST Gap excluding Debt

Year 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008-2010* 2010/11

Tax Gap $M 2,510 2,588 2,243 2,596 2,035 2,295 2,975 2,335 2,517

Tax Gap as a Percentage of

Revenue 8.9% 8.3% 6.6% 7.3% 5.4% 5.7% 7.0% 5.4% 5.4%

GST Gap with Debt

Year 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008-2010* 2010/11

Tax Gap $M 2,712 2,852 2,533 2,942 2,400 2,674 3,442 3,018 3,017

Tax Gap as a Percentage of

Revenue 9.6% 9.2% 7.5% 8.3% 6.4% 6.7% 8.1% 6.9% 6.5%

* Combined due to the relationship

between national accounts and

GST during the GFC.


VAT Gap


Large market revenue

The large market covers taxpayers, including grouped taxpayers, with a

turnover greater than $250 million.

There are 1266 large taxpayers.

Large market taxpayers paid approximately $21.5 billion in GST revenue in

2012-13. This represented approximately 46% of all ATO collected GST.

We raised approximately $320 million from compliance activities in the large

market in 2012-13.

Level 4 medium enterprise market covers taxpayers between $100 million

and $250 million in turnover.

There are approximately 14,500 level 4 taxpayers.

This upper end of the medium market paid approximately $4.5 billion in GST

revenue in 2012-13. This represented approximately 10% of all ATO

collected GST.

Indirect Tax – Large Market Compliance – RDF commitments summary (key strategies, structure, client base) C

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RELATIVE LIKELIHOOD OF NON COMPLIANCE

2013-14

(as at Mar 2014)

No Concerns Monitoring of returns and activities

Some Concerns Leveraged self-assessment approaches

Significant Concerns Leveraged active compliance

Supporting Compliance Maintaining Compliance Shifting Compliance

TAXPAYER

FOCUS

Clients not rated,

insolvent or

Out of Scope

Economic

Groups 20% of

population

LEVERAGE

FOCUS

Service focus Assurance focus Higher mutual certainty

Enforcement focus high active compliance

Economic

Groups 10% of

population

Economic

Groups 55% of

population

Economic

Groups <5% of

population

Economic

Groups 10% of

population

“Quadrant” 2

“Quadrant” 4

“Quadrant” 1

“Quadrant” 4

KEY TAXPAYERS Continuous monitoring - all products available

Key strategic and support • RDF letter (work in progress, risk identified, concerns)

• Annual Compliance Arrangements (SES lead)

• Profiling (for both case and moderation purposes)

• Case Refinement (internal review)

• RRE override qualification

• RRE post issue reviews

• Assurance products (correspondence, phone, field)

• Risk and Governance Workshops

• Risk Reviews

• Key Taxpayer Review

• Audits

Other leverage • Relationship Manager maintenance (contact either way)

• Senior Relationship Manager contact (e.g. RDF meeting, Workshop)

• Communications with industry bodies or other groups

• Media and industry publications

• Seminars and Web site information

• Private Binding Rulings

• Advisory Mail campaigns

LOWER RISK

TAXPAYERS Periodic monitoring - includes use of assurance products

Key strategic and support

• RDF letter (lower assurance – risk identified)

• Case Refinement (internal review – includes profiling)





• Risk Reviews (escalations from assurance/workshops)

Other leverage





• Relationship Manager maintenance (contact initiated by client)


MEDIUM RISK

TAXPAYERS Periodic review - includes use of both assurance and enforcement products


• RDF letter (work in progress or risk identified )

• Case Refinement (internal review - includes profiling)





• Risk Reviews

• Audits

Other leverage





• Relationship Manager maintenance (contact initiated by client)


HIGHER RISK

TAXPAYERS Continuous review - all products available


• Strategic Plan - SES lead for tailored compliance approach

• Case refinement (internal review)

• Reviews

• Audits

• Profiling (regular and detailed)

• CRM maintenance activities (proactive eg pre lodgment check)

• Override qualification



Risk Differentiation

RDF has allowed the ATO to match the intensity of our compliance

approach to the perceived level of risk.

Interaction is underpinned by three key elements – service, assurance and

enforcement.

Service is aimed at providing certainty and clarity for taxpayers that are

considered compliant.

Assurance is based on specific engagements to confirm taxpayers are

meeting their compliance obligations in a non-audit environment – e.g.

governance workshops.

Enforcement activities such as reviews and comprehensive audits are only

undertaken when intense interaction is required.


The shift in our approach

As an organisation, the ATO is conscious of moving away from risk

aversion to risk management.

The balance between our service approach and compliance intervention is

too heavily weighted towards compliance intervention.

We need to better understand business and what is a fair and reasonable

effort at willing participation in the tax system.

There will be a significant focus on capturing data from natural business

systems to support service innovation and compliance intervention.

We will be moving to a digital by default engagement with business.



Real property disengaged property developers - Treatment strategies

to focus on two key behavioural problems of non lodgement after

significant ITC claims and phoenixing of companies.

GST real property: Incorrect reporting - Early engagement strategy to

enhance the coverage and voluntary compliance of property developers.

There is a need to better understand issues with foreign investment in the

property industry with a focus on service type interactions.

International /cross border – engagement with WP9 and the Global

Forum on VAT as well as our contribution to the OECD B2B and B2C

policy developments and guidelines – e.g. offshore supply of services.



Financial supplies – ongoing risks from mergers and acquisitions and

apportionment of expenses.

Fuel tax credit – The testing of eligibility and use of correct rates in making

claims.

Integrity of business systems - The integrity of business systems is the

most significant risk in the large market. That is because the multiplier effect

of incorrect transactions can lead to significant revenue risks where there are

governance, control or performance issues with business systems.


The ATO wants to change the compliance relationship with taxpayers by

recognising willing participation in the tax system.

Rather than seeking assurance about the integrity of business systems we

will be moving to develop relationships with taxpayers where we trust them

to provide assurance that they have made an adequate investment in their

business systems and processes to correctly report their BAS obligations

and entitlements.

Assurance and the relationship shift


Self assurance

We want to encourage taxpayers into a self assurance relationship through

appropriate investment in commercially available assurance software. Self

assurance requires ongoing commitment by business to:

use assurance tools to validate their transactional systems

review the output of risk tests

rectify procedural weaknesses, and

address any issues that may affect the correct reporting of their GST and FTC

obligations and entitlements.


Self assurance model

Recognition of taxpayers who use assurance software to:

– Integrate the financial data of the business

– Integrate the management data

– Identify errors, anomalies and issues in the data

– Address any issues prior to preparation of the BAS.

To implement the model we will work with tax practitioners and software

developers to develop requirements for assurance software including:

– The frequency of use

– Level of automation

– The treatment of data from separate accounting, POS,

manufacturing, or other business systems

– The management of GST classifications, e.g. GST input taxed.


By using self assurance software and processes, clients will be:

– Placed in a low risk classification

– Will not be subject of IBS compliance activity for an agreed period

– The ATO may enquire about particular issues that may emerge in

relation to the business and reserves the right to question matters of

fact or the interpretation of law.

Added benefits for Boards and management teams include:

– More rigorous financial controls

– The significance of transactional errors on GST throughputs

– Greater confidence all income sources are recorded

– Prevent duplication of purchases and payments

– Possible detections of internal fraud or other irregularities.

Incentive to use self assurance


How to be included in the self-assurance

model (probable requirements)

The software the client is using has been implemented and mapped to

source systems in a manner that meets ATO requirements

All aspects of the business are reported via the assurance software

The software will be used to review the integrity of data in the preparation of

each BAS

The software is kept up to date and any changes to either the software or

the business are incorporated

The business will notify the ATO of any significant change in circumstances

Make voluntary disclosures as soon as errors are identified

The CFO to provide an undertaking that the above requirements are being

met


Future areas of focus

The ATO’s business rules and e-Audit tests will be shared with software

developers and built into the self assurance models.

We will be developing the ATO’s e-Audit capability so our auditors can use

assurance software to interrogate the transactional accounts of taxpayers.

We will be identifying opportunities for the use of ECAP in situations where

it is appropriate to get an independent clarification of facts and issues.

The development of analytical models to predict business behaviours and

to objectively identify outlier incidents that warrant compliance enquiries.

The ATO will continue to use compliance effectiveness and tax gap

analysis to support the investment in compliance activities.

Self Assurance – June 2014 20

© COMMONWEALTH OF AUSTRALIA 2014

This presentation was current June 2014

Thank you

Thank you for attending

Any questions – email: [email protected]

mailto:[email protected]

Documents

ATO compliance program for 2014/15 - CCH Integrator · ATO Indirect Tax compliance program for 2014/15 ... (for both case and moderation purposes) ... • CRM maintenance activities