tax administration diagnostic assessment too l poa 6: accurate reporting in declarations

Tax Administration Diagnostic Assessment Tool

POA 6: ACCURATE REPORTING IN DECLARATIONS

Desired Outcome of POA 6

Taxpayers report complete and accurate information in their tax declarations.

• Tax systems rely heavily on taxpayers filing complete and accurate declarations.

• Tax administrations need to regularly monitor the revenue losses from evasion, avoidance and other cases of inaccurate reporting.

• For non-business taxpayers, withholding tax at source and systematic use of third party information ensures a high level of compliance.

• For business taxpayers, the tax administration needs to take a range of verification actions to improve compliance including audit, intelligence, third party information cross-matching.

• These measures need to be supplemented with proactive initiatives and cooperative compliance.

POA 6: Good Practice in Ensuring Accuracy of Reporting

Good Practice in Ensuring

Accuracy of Reporting

Well designed and managed tax audit

program – both corrective and

deterrent actions Well functioning taxpayer

assistance program (POA 3)

Pursuing high compliance risk cases effectively

(POA2)

Imposing appropriate

penalties/fines for misreporting

Intelligence gathering to

identify emerging compliance risks

Systemic cross-checking of third party information

Issuing binding rulings to provide

taxpayers with certainty on how to apply tax laws

Undertaking cooperative compliance

approaches to address risks of inaccurate

Monitoring the level of inaccurate

reporting through standard methods of

tax gap analysis

Performance Indicators: P6 - Ensuring Accuracy of Reporting

Dimensions

High Level Indicators

P6-16: Scope of verification actions to detect/deter inaccurate reporting

M2

Nature and scope of tax

audit program to detect and

deter inaccurate reporting

Extent of large-scale automated cross-checking

to verify information

reported in tax declarations

P6-17: Extent of proactive initiatives to encourage accurate

reportingM1

Nature and scope of

cooperative compliance and other proactive

initiatives undertaken to

encourage accurate reporting

P6-18: Monitoring the extent of inaccurate

reporting M1

Soundness of the method(s)

used to monitor the extent of inaccurate reporting

Scoring P6-16-1: Nature and Scope of Tax Audit Program

A

Audit program covers all core

taxes

Covers key taxpayer segments weighted towards

large tax payers and high risk

sectors

Selects audit cases centrally based on

assessed risks

Audit program uses a range of audit

types and methodologies

(direct and indirect methods)

Routinely evaluates the impact of audits on level of taxpayer

compliance


B

Audit program covers ALL core

taxes

Covers key taxpayer segments

weighted towards large taxpayers

Selects audit cases centrally based on

assessed risks

Audit program uses a range of audit

types and methodologies

(direct and indirect methods)


compliance


C

Audit program covers ALL core

taxes

Covers key taxpayer segments

Selects audit cases based on assessed

risks but in a decentralized

manner

Audit program uses a range of audit types but

not indirect methods)


compliance

Scoring P6-16-2: Extent of Large-scale Automated Cross-checking to Verify Information on Returns

A

For income taxes (PIT and CIT) there is

automated cross-checking with

information from bank/financial

institutions

Automated cross-checking with

salary information from employers

Automated cross checking with

VAT declarations

Automated cross-checking with more than two

government agencies – e.g., customs, public procurement,

registrar of companies, registrar of property, anti

money laundering agency, etc.


stock market and shareholders

registries

Automated cross- checking

with social security agency

Automated cross-checking

with online vendors


B

For income taxes (PIT and CIT) there is automated

cross-checking with information from

bank/financial institutions




VAT declarations







registries




with online vendors


C

For income taxes (PIT and CIT) there is automated

cross-checking with information from

bank/financial institutions




VAT declarations







registries




with online vendors

Scoring P6-17: Nature and Scope of Proactive Initiatives to Encourage Accurate Reporting

A

A system of public binding

rulings is in place

A system of private binding

rulings is in place

Cooperative compliance

arrangements or horizontal monitoring, e.g., advance pricing

agreements, are entered with qualified

taxpayers


B

A system of public binding

rulings is in place


rulings is in place


arrangements or horizontal monitoring, e.g., advance pricing

agreements, are entered with qualified

taxpayers


CA system of

public binding rulings is in

place


rulings is in place


arrangements or horizontal monitoring,

e.g., advance pricing

agreements, are entered with

qualified taxpayers

Scoring P6-18: Soundness of Methods Used for Monitoring the Extent of Inaccurate Reporting

A

Methodology for monitoring

inaccurate reporting

covers VAT and at least one

other core tax

Methodology is applied at least

every TWO years

Results independently

reviewed, subject to

credibility tests, and made

public

Results are used in designing tax administration

interventions to improve

accuracy of reporting


B



covers at least VAT

Methodology is applied at least

every FOUR years




public





C



covers at least VAT

Methodology is applied at least every FIVE years




public




Table 20 of the Field

Guide

Checklist of Questions and Evidence for POA 6

tax administration diagnostic assessment too l poa 6: accurate reporting in declarations

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