1 C.I.A.T. Technical Conference Theme 2 KEY ASPECTS FOR IMPROVING CONTROL CAPACITY OF TAX ADMINISTRATION Mr Luigi Magistro Director of the Central Directorate for Tax Assessment Italian Revenue Agency Naples 21 October 2009

2 REVENUE AGENCY - STRUCTURE Director of the Revenue Agency Directorate For Tax Assessment Directorate for Internal Audit and Security Directorate for Human Resources Management Directorate for Taxpayers Services Directorate for Tax Regulation and Litigation

3 DIRECTORATE FOR TAX ASSESSMENT STRUCTURE DIRECTOR FOR TAX ASSESSMENT ANALYSIS & STRATEGY DIVISION INTERNATIONAL DIVISION EXCHANGE OF INFORMATION OFFICE OPERATIVE COOPERATION OFFICE INTERNATIONAL RULING OFFICE CONTROL MANAGEMENT DIVISION LARGE-SIZED TAXPAYERS DIVISION TECHNOLOGICAL SUPPORT OFFICE ANTI-FRAUD OFFICE SECRETARY OFFICE

4 ANTI-FRAUD CENTRAL OFFICE ACTIVIES  Risk analysis  Definition of strategies and methodologies  Operational tasks related with direct control of complex and extensive cases  Interaction with regional anti-fraud structures in order to ensure an overall coherence

5 ANTI-FRAUD OFFICES - LOCAL STRUCTURE Regional Directions Local Offices Regional Anti-fraud Office Regional Control Office

6 STRATEGIC FRAMEWORK SPECIFIC TAILOR-MADE CONTROL ACTIVITIES 5 TYPES OF TAXPAYER:  LARGE-SIZED  MEDIUM-SIZED  SMALL BUSINESS & PROFESSIONALS  NON-BUSINESS ENTITIES  INDIVIDUALS NOT CARRYING ON BUSINESS ACTIVITIES

7 LARGE TAXPAYERS DEFINITION s IDENTIFICATION OF LARGE TAXPAYERS DIMENSIONAL PARAMETERS ) (No less than € 100 million) Total turnover Professional fees

8 LARGE TAXPAYERS MANAGEMENT  CENTRAL LEVEL Large Taxpayers Division providing strategic and operational support and enhancing the coordination and monitoring  OPERATIONAL LEVEL Multi-functional special units in each Regional Directorate responsible for major tax administration functions

9 LARGE TAXPAYERS THE DIVISION LARGE TAX PAYERS DIVISION RISK ANALYSIS GOVERNANCE SPECIAL AUDITS

10 LARGE TAXPAYERS RISK ANALYSIS UNIT- ACTIVITIES 1.Segregation and update of the LT data-base 2.Identification of other relevant taxpayers 3.Development of risk analysis tools aimed at fighting tax evasion and tax avoidance 4.Analysis of tax evasion and tax avoidance risk 5.Evaluation and implementation of strategies and operational methodologies for audit activities

11 LARGE TAXPAYERS NEW APPROACH - KEY FEATURES  Comprehensive treatment and on-going management of LTs’ issues reallocating all activities concerning each LT to the same unit  Risk-based perspective involving peculiarities of the business sector and any other available data on the specific taxpayer affecting its level of compliance  Timely risk review process aimed at assessing whether a risk arises from any taxpayer’s action  Achievement of an increasing level of compliance and greater certainty in application of tax law

12 LARGE TAXPAYERS TUTORING ACTIVITY The TURORING ACTIVITY is a permanent monitoring and analysis of the behaviors of a large taxpayer through the adoption of different approaches depending on the outcome of the risk analysis and on the specific peculiarities of this taxpayer

13 LARGE SIZED TAXPAYERS RISK ANALYSIS FORM 1) Collection and summary of all relevant information to attribute risk a profile and prepare the “risk analysis form” 2) Execution of a tax audit: the higher the risk profile the more intrusive is the method of control 3) Updating of the risk analysis form with the outcomes of the audit to confirm risk profile or reconsider risk classification

14 LARGE TAXPAYERS RISK ANALYSIS FORM The RISK ANALYSIS FORM is composed of several sections containing information organized by content:  general information  economic profile of the LT and of its field of activity  fiscal profile of the LT  analysis of fiscal results and accounting data  main risks detected and individual risk level assigned  assessment/audit activities executed

15 LARGE TAXPAYERS FALCO ( taxpayer personal folder on-line) INTERNAL DATA  Presence of audits in progress  Company accounts and financial statements  Fiscal information on the taxpayers  Historical trends  Access to other data bases:  Chamber of Commerce  National Insurance Contributions  Gross wages and salaries

16 LARGE TAXPAYERS FALCO ( taxpayer personal folder on-line) EXTERNAL DATA Software application based on semantic logic performing automatically the search and filtering functions of news and data from web regarding corporate activities of large tax-payers

17 LARGE TAXPAYERS COPERNICO  Obtain large amount of data regarding selected taxpayers  Select taxpayers with specific features (e.g. tax credits exceeding identified thresholds)  Analytically review changes in chosen variables over the years  Extract relevant information in order to perform specific analysis in the differences between accounting and fiscal data

18 LARGE TAXPAYERS COPERNICO DATA AVAILABLE  Large amount of data on taxpayers over 25,8 million Euro  Data available for the last four years  Information based on the following sources:  Publicly accessible data (general information)  Tax returns;  Accounting;  Banks and insurances

19 SMALL BUSINESSES & PROFESSIONALS - DEFINITION s IDENTIFICATION OF SMALL TAXPAYERS DIMENSIONAL PARAMETERS ) (No less than € 5,164,569) Total turnover Professional fees

20 SMALL BUSINESSES & PROFESSIONALS- SECTOR STUDIES A SECTOR STUDY is a tool to determine with the utmost probability the revenue attributable to a specific taxpayer by identifying its own potential capacity to produce income and the internal and external factors affecting such capacity and relating to its specific sector

21 SMALL BUSINESSES & PROFESSIONALS- SECTOR STUDIES DEFINING, SENDING AND ACQUIRING THE QUESTIONNAIRES APPROVAL AND PUBLICATION OF THE SECTOR STUDY REALIZATION OF THE SECTOR STUDY MONITORING EVOLUTION OF THE DATA BASE UPDATING

22 SMALL BUSINESSES & PROFESSIONALS- SECTOR STUDIES SECTOR STUDIES DATA-BASE IS CONTINUALLY UPDATED AND PROVIDES:  an in-depth analysis supporting the assessment activity of the Revenue Agency  an analysis of competitive auditing and territorial benchmarking  statistics and analysis in specific fields  simulations to be included in a preliminary arrangement with taxpayers

23 ADMINISTRATIVE ASSISTANCE INTERNATIONAL DIVISION STRUCTURE DIRECTORATE FOR TAX ASSESSMENT ANALYSIS & STRATEGY DIVISION INTERNATIONAL DIVISION EXCHANGE OF INFORMATION OFFICE OPERATIVE COOPERATION OFFICE INTERNATIONAL RULING OFFICE CONTROL MANAGEMENT DIVISION LARGE-SIZED TAXPAYERS DIVISION TECHNOLOGICAL SUPPORT OFFICE ANTI-FRAUD OFFICE SECRETARY OFFICE

24 ADMINISTRATIVE ASSISTANCE TRAINING  Implementing a comprehensive program on administrative assistance addressed to regional and local officers involving juridical and practical issues  Developing a network of reference points at every geographical level having the juridical knowledge and operational skills necessary to interact with the International Division

25 CONCLUSIONS CONTROL CAPACITY OF A TAX ADMINISTRATION DEPENDS ON DIFFERENT FACTORS  AN OPERATING MODEL SHAPED ACCORDING TO ITS MISSION  A STRUCTURE ENDOWED WITH PROPER, EFFICIENT AND EFFECTIVE TOOLS  GIVING TAXPAYERS THE “FEELING” TO INTERACT WITH A MODERN, EFFICIENT AND INTERNATIONALLY ENGAGED TAX ADMINISTRATION