FREE ELECTRONIC LIBRARY - Theses, dissertations, documentation

Pages:     | 1 |   ...   | 21 | 22 || 24 | 25 |   ...   | 28 |

«A report to the Assistant Treasurer Inspector-General of Taxation October 2013 Review into aspects of the Australian Taxation Office’s use of ...»

-- [ Page 23 ] --

7.44 Tax practitioners should also be consulted in relation to the entire RDF process as applied to them and, in particular, how the ATO should proceed once higher risk agents have been identified and whom the ATO intends to investigate further. One important consideration is that the tax practitioners should have a right of review and be afforded due process before the ATO risk rating is finalised.

7.45 It is important that the ATO does not approach the tax practitioners on the assumption that they are doing something wrong with respect to their clients who are perceived to be higher risk taxpayers. For example, there are various reasons why a practitioner may appear to have a large proportion of clients who are outside the small business benchmarks.

7.46 The ATO has advised that it does not disclose the risk rating of agents to their clients. This is crucial to the continued survival of the tax agent business and processes should be in place so that such confidentiality is always honoured. Where a taxpayer’s tax liabilities have been adjusted as a result of the tax practitioner not taking reasonable care, the ATO should refer the matter to the TPB.

Ibid pp 31 and 33. See table 7 (actual vs planned strike rate) and table 8 (actual vs planned average

–  –  –

RECOMMENDATION 7.1 The IGT recommends that, in consultation with tax practitioners, the ATO develop and publish a complete guide on the operation of RDF for tax practitioners. Matters to be covered

by the guide include:

–  –  –

Page | 140


8.1 Thus far, this report has covered specific issues in relation to the ATO’s risk assessment approaches for particular market segments. This chapter draws together key themes in the earlier chapters. The reason for doing so is to draw out general design elements that assist with future risk assessment architecture in the tax administration environment.

8.2 The key themes adopted based on stakeholder feedback and reflected in the

earlier chapters were:

• governance;

• effective use of inputs;

• transparency and communication; and

• proportionality of the compliance approach.


8.3 Good governance is a cornerstone of effective tax administration. The revenue authority must have confidence that its risk assessment approaches are being carried out as intended.

8.4 All risk assessment approaches should ensure that stakeholders and officers are aware of their roles and responsibilities. This may come in the form of job descriptions or duty statements. Key committees or decision-making bodies should have their authority and remit clearly articulated. Internal reporting structures need to be in place to ensure problems and issues are escalated to the appropriate committee or decision-maker for timely action. This may come in the form of charter documents.

8.5 Decision-making bodies need to ensure that they are following agreed, articulated processes and that decisions are made on a timely basis. Decisions should be appropriately documented with supporting evidence and reasoning.

8.6 Risk assessment approaches should also have a clear line of sight from the highest level, that is the Enterprise Risk Management Framework. The ATO has, at the strategic level, identified 22 key enterprise risk areas. Any risk assessment approach, or risk management campaign, should be able to indicate to which key enterprise risk area it relates. This may be evidenced by risk assessment and risk treatment documents on the Enterprise Risk Manager.

8.7 Documentation at the business line level may be required to indicate how the enterprise risk will be addressed at the strategic or tactical level.

8.8 Furthermore, risk assessment and risk treatment measures should have an evaluation strategy, which indicates how the ATO will measure the effectiveness of,

–  –  –

and improve, the risk assessment or risk treatment method. A continuous improvement outlook should also be a hallmark of the entire process.


8.9 A system is only as good as the inputs that go into it. Relevant and effective inputs are vital for risk identification and capture. It facilitates the direction of limited resources to areas that most warrant it.

8.10 It is important to clearly articulate the risk hypothesis to ensure risk inputs are relevant to the risk being identified. In the LBTC booklet, the risk event, for example, is the taxpayer having a tax position with which the ATO disagrees or the taxpayer through error or omission has misreported their obligations.369

8.11 In this case, there are two types of risk events and it is important to ensure that the ATO does not attribute one risk factor against the wrong risk event. For example, a taxpayer may undertake transactions in an uncertain area of the law. To infer that this indicates a higher likelihood of ‘non-compliance’ (that is error or omission) is not appropriate. It is important that risks be more specifically identified and the expected remediation or action required more carefully targeted.

8.12 This report recognises that the ATO uses a combination of quantitative and qualitative inputs. Quantitative data has the benefit of being perceived as objective fact.

Furthermore, quantitative data lends itself well to analysis by computerised methods rather than manual analysis. This means a great deal of analysis can be performed at a high volume at relatively low cost to the ATO.

8.13 The application of quantitative approaches in certain situations need little qualitative inputs where there is objective, verifiable and direct evidence of non-compliance, such as those used in data-matching of interest income disclosures in income tax assessments.

8.14 In the absence of quantitative inputs, the IGT recognises the need to employ qualitative inputs. The small business benchmarks provide a good example of where both these types of input need to be used to arrive at an appropriate outcome.

8.15 The benchmarks are derived from taxpayer income tax returns and activity statements from statistically valid populations of similar businesses. Whether a particular taxpayer’s cost of sales to turnover ratio is different to the benchmark range is also objectively verifiable. However, a departure from the benchmark hypothesises an increased risk of underreported income. Therefore, as set out in the IGT’s Review into the ATO’s Use of Benchmarking to Target the Cash Economy (Benchmarking Review), ATO officers also need to examine qualitative inputs, including a better understanding of the taxpayer’s business and the consideration of other qualitative risk factors, such as the nature of the business, cash controls and its business mix and record keeping management.

–  –  –

8.16 The ATO should ensure that qualitative information is considered in an objective and non-arbitrary manner. Adopting appropriate governance arrangements should assist in this regard. In the Large Business and International (LB&I) business line, the adoption of the risk template, which lists specific risk factors to consider, and the moderation panel, which subjects the risk factors to peer review and collective decision making, are helpful measures in ensuring the integrity of the use of qualitative inputs. The LB&I approach is designed to ensure that evidence is tested consistently across the risk population.

8.17 The ATO should also ensure that there are processes in place to refine the accuracy of their risk inputs. In the IGT’s Benchmarking Review, the ATO agreed to examine the results of the completed audits to identify any other risk factors which may assist in better targeting likely non-compliant taxpayers.

8.18 In the SME business line, risk managers have responsibility for the regular review of the risk rules under their ownership. This business line has also agreed to previous ANAO recommendations to review their risk rules.

8.19 In LB&I, it is noted that the risk filters are currently generating many false positives that are subsequently filtered out by risk managers. This represents an opportunity to review the risk filters with a view to ensuring they are generating more useful output and reducing the need for risk managers to do this filtering.

8.20 Risk managers play an important role in all business lines. They identify potential risks, develop rules to detect those risks, and develop risk treatment strategies. The ATO should ensure that risk managers have an adequate understanding of the business and economic environment pertaining to the risk over which they have responsibility. This ensures that risk managers can identify potential risks in a timely manner.

8.21 The ATO should also ensure that risk managers are adequately supported in their role. This includes ensuring they have the adequate skills to identify and analyse risk as well as develop guidance for active compliance officers on the indicators and evidence of non-compliance to test the risk hypothesis.

8.22 Risk managers should also be able to articulate what evidence active compliance officers can rely upon to confirm compliance and close the review or audit as soon as practicable. Risk managers should also have regular contact with compliance officers as an additional source of risk intelligence.

8.23 The ATO’s Compliance Effectiveness Methodology provides guidance to ATO officers who are developing risk treatment strategies. One aspect of this guidance is that processes should be in place to gather evidence to indicate whether the ATO’s intervention was effective in changing compliance behaviour.

8.24 From a risk assessment perspective, the IGT is of the view that the ATO should also consider how to measure the effectiveness of their risk assessment approaches in detecting non-compliance and not just the effectiveness of the compliance activities themselves.

–  –  –

8.25 One such way of evaluating the accuracy of risk assessment methods is through the examination of strike rates and audit yields. Both of these measures provide useful information in more accurately determining the probability and consequence aspects of a risk rating for a population.

Strike rates and audit yields

8.26 Strikes rates are essentially the ratio of cases where there is a positive adjustment in tax payable (that is a ‘strike’) as a proportion of all cases conducted. The remainder of cases are often referred to as ‘nil outcome’ cases.

8.27 For a given audit selection method, a pool of ‘positive’ cases is generated.

Where the subsequent compliance activity results in a strike, the case is considered a ‘true positive’ if the result is not reversed on objection, review or appeal. The taxpayer is non-compliant in this case and the risk method accurately detected it.

8.28 As mentioned earlier, where the audit case results in a nil outcome, the case can be said to be a ‘false positive’. The taxpayer is actually compliant, but the risk method inaccurately has detected the taxpayer as being non-compliant.

8.29 In limited situations, a nil outcome may be underlying non-compliance due to certain factors.370 Importantly, the tax administration is not assessing risk of over-compliance, being situations where taxpayers have under claimed deductions or not availed themselves of full entitlements.

8.30 It is also important that likely compliant or lower risk taxpayers are spared from unnecessary compliance costs. As such, risk assessment methods should also be accurately identifying likely compliant taxpayers. For example, in the Compliance

Program 2012–13, the ATO said of their small business benchmark approach:

We have developed benchmarks for over 900,000 small businesses in over 100 industries.

The program was promoted by extensive communication and consultation with tax practitioners, industry associations and taxpayers in those industries.

–  –  –

8.31 The above highlights that the benchmarks are used as much as a tool to identify likely compliance as it is to identify potential non-compliance. However, such likely compliance is an assumption, as the ATO cannot be certain that those businesses within the benchmarks are actually compliant unless they are audited.

8.32 In the case above, the benchmark approach has identified a pool of 800,000 cases as ‘negatives’. Whether these cases are truly compliant (‘true negatives’) or truly non-compliant (‘false negatives’) would require some degree of verification. That is, the ATO may need to audit some of these taxpayers to verify if they are indeed ‘likely to be competing on a level playing field with their peers’.

Australian Taxation Office, Strike rate – An analysis of Indirect Tax audits, April 2012, slide 19.

–  –  –

8.33 The evaluation of the accuracy of risk assessment tools can be better

understood by adding the potential true negatives and false negatives:

–  –  –

8.34 It may be apparent from the above table, that the ability for a risk assessment tool to accurately detect non-compliance is reliant on the underlying level of compliance or non-compliance in the risk population. That is, the combination of false negatives and true positives (FN + TP) represents all the non-compliant taxpayers for a given risk population.

8.35 If the population has a low proportion of non-compliance, it is inevitable that any risk assessment tool will have a low strike rate. Therefore, when assessing the accuracy of a risk assessment tool based on strike rate alone, one needs to be aware that

a reduced strike rate may be due to a combination of either:

• overall reductions in the level of non-compliance in the risk population (that is reductions in FN and TP); or

• the risk assessment tool is becoming less accurate at detecting non-compliance (that is reductions in TP only, but not FN).

Pages:     | 1 |   ...   | 21 | 22 || 24 | 25 |   ...   | 28 |

Similar works:

«United Nations Educational, Scientific and Cultural Organization UNESCO DAKAR ACTIONS A brief introduction to the priorities of UNESCO’s Regional Office in Dakar ©UNESCO/Lola Galla Africa: UNESCO’s Priority Priority Africa is UNESCO’s overall framework to guide the Organization’s work on the continent. Our vision is to promote the building of peace through inclusive and resilient societies, and to ensure institutional capacities for sustainable development and poverty eradication....»

«KA JINGPYNBNA-ÏAR SATLAK ÏA KI HOK LONGBRIEW MANBRIEW _ Ba la pynbna bad pynjari da ka Dorbar Bah ka Synjuk Ki Ri katkum ka Rai 217A (III) ha ka 10 Tarik Nohprah 1948, ha Paris, France. _ PHYLLAW PONGSHAI Kumba ka jingithuh ïa ka kyrdan long tynrai bad ïa ki hok marryngkat bad bashongkhien jong baroh ki dkhot longïing u bynriew dei ka tlong jong ka jinglaitluid, ka jingbishar hok, bad ka jingsuk shisnieh pyrthei, Kumba ka jingibeiñ bad jingbymsuidkhai ïa ki hok longbriew manbriew la...»

«Cataract extraction Patient Teaching guide January 2013 My surgery is on: (date) Registration at admission # _ at _ (time) Reminder for your preparation THE EVE OF THE OPERATION OPERATION – Take a shower, wash your hair (can be done on the morning of the operation, if you prefer). – Do not wear your contact lenses the day before and the day of surgery (if applicable). ON THE MORNING OF THE OPERATION, AT HOME OPERATION, Local anaesthesia – Take your usual medication; – Eat a light...»

«1G Toucan TLUD for Biochar Production by Hugh McLaughlin, PhD, PE, Alterna Biocarbon Inc., January 2010 Version Introduction to Biochar and TLUD pyrolysis Biochar is a new approach to improving soils based on the ancient practice known as “Terra Preta”, where soils in the Amazon were enhanced by the addition of charcoal.. Since any agricultural utilization of biochar starts with obtaining the biochar, and since biochar is not yet a widely available commercial product, one challenge is...»

«Canteen Report 2010/2011 Mission: Our mission is to nurture a culture of healthy eating and conscious food choices,  combining good taste with nutrition and care for each other and the planet.  The PA recognizes the important connection between a healthy diet and a child's ability  to learn effectively and achieve high standards at school. It also recognizes the role the ...»

«Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized ANUAL INFORME INFORME ANUAL Sede principal delC I A D Mundial, Washington, DC, Otylia Babiak, Banco Mundial Banco I ii | ÍNDICE Carta de Envío 1 Secretariado del CIADI 2 Capítulo 1: Introducción 5 Capítulo 2: Membresía 7 Capítulo 3: Listas de Árbitros y de Conciliadores 15 Capítulo 4: Operaciones del Centro 18 Capítulo 5: Actividades de Extensión 42 Capítulo 6:...»

«The BLS Bugle April 2013 BLS QUARTERLY Welcome to the new & improved Bugle newsletter! CONSORTIUMS May 10, 2013 The Communications Committee is proud to bring you lots of fun, interesting, and Hosted by Professional new information that will help you help the seniors we serve! Please submit any Development Committee questions, comments, and ideas for article submissions for future editions to Mease Manor, Dunedin BLSPRCommitee@gmail.com. The Bugle is intended to be an informative, educational,...»


«Avance de la segunda campaña de sondeos arqueológicos realizados en la ermita de San Sebastián (Cintruénigo), 2007 SALVADOR REMÍREZ VALLEJO INTRODUCCIÓN E l presente trabajo recoge los resultados de la ampliación de la cata nº 4 realizada en el yacimiento arqueológico de San Sebastián en Cintruénigo durante la última semana de septiembre y la primera de octubre de 2007, intervención planteada como continuación de la primera campaña de sondeos arqueológicos efectuados en 2005 en...»

«February 2015 | Vol. 4 / No. 4 PAY AND BENEFITS Disability insurance plans: trends in employee access and employer costs By Kristen Monaco Shortand long-term disability insurance programs replace some of the wages lost by people who cannot work because of a disabling injury or illness that is not work-related.1 Short-term disability insurance typically covers periods lasting less than 6 months, and long-term disability insurance lasts for the length of the disability or until retirement. Those...»

«Young Public School P&C Policies & Operating Manual Feb 2015 Document author Sally Martin, P&C President (2012/13 – 2013/14) Acknowledgement and contributions Donna Cummins, P&C Treasurer (2012/13 – 2013/14) Fiona Alison, Canteen Manager Toni Holmes, P&C Secretary (2013/14) Heather Williams, P&C Member Date: Feb 2015 Young Public School Canteen Procedure Manual 2015 | 1 Contents 1.0 Introduction 2.0 YPS Canteen Charter 3.0 Canteen Administration 4.0 Communication flow chart 5.0 Canteen...»

«International Journal of Research Article August Emerging Research in Management &Technology ISSN: 2278-9359 (Volume-4, Issue-8) A Study on Micro Life Insurance Products of LIC of India in Vellore Division, Tamil Nadu C. Manivannan, 2Dr. G. Karunanithi Doctoral Research Scholar, Department of Commerce, Annamalai University, Annamalai Nagar, India Assistant Professor and Research Supervisor, Commerce Wing, DDE, Annamalai University, Annamalai Nagar, India Abstract: M icro Insurance refers to the...»

<<  HOME   |    CONTACTS
2016 www.theses.xlibx.info - Theses, dissertations, documentation

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.