The Scope for Continuous Assurance In Tax Compliance Ray Butler, CISA ray.butler@hmce.gsi.gov.uk Click for Full Paper

The Scope for Continuous Assurance In Tax Compliance Agenda Potential Benefits / Pitfalls of continuous assurance for tax Exploring Theory / Issues NOT : Policy Statement Description of anything in “Real World” The Scope for Continuous Assurance In Tax Compliance

The Goals of a Tax Authority Optimising Compliance Provide Services to assist compliance Ensuring fairness, equity and equality in the levying and collection of taxes. The Scope for Continuous Assurance In Tax Compliance

The Scope for Continuous Assurance In Tax Compliance Tax Assurance Scope Macro Level Returns on time / Liabilities Paid Micro Level - Transactions All Accurately Included ? Reported at Correct Time ? Belong to this business ? Correct Deductibility / Liability ? The Scope for Continuous Assurance In Tax Compliance

Continuous assurance in Tax Checking Transactions for VAT Capturing Liability “on the Fly” Checking Customs Declarations From Manifests / Commercial Documentation Monitoring Duty-free Transactions Monitoring Payroll Transactions The Scope for Continuous Assurance In Tax Compliance

The Scope for Continuous Assurance In Tax Compliance Limitations Limited To Recorded Transactions Can’t Detect Unrecorded Income / Expenditure May Not Detect Posting to Wrong Accounts May Not Detect False Purchase Transactions May Not Give ANSWERS, Will Give QUESTIONS The Scope for Continuous Assurance In Tax Compliance

Benefits of Continuous Tax Assurance - Taxpayers Reduction in the Cost of Compliance With Tax Requirements. Facilitating Compliance Self-assessment Assurance on Mainstream Business Activities Peace of Mind Cash Flow Control The Scope for Continuous Assurance In Tax Compliance

Benefits of Continuous Tax Assurance - Tax Authorities Reduction in Cost of Assurance Services Improvement in Level of Assurance Reduction in Errors – Improvement in Tax Yield Improved / Quicker Trend Analysis Cross-matching Transactions Improved Monitoring of Case-specific Conditions Running Liability Calculation The Scope for Continuous Assurance In Tax Compliance

Risks involved - Taxpayers Privacy Over-Audit Trading Partner Resistance The Scope for Continuous Assurance In Tax Compliance

Risks involved – Tax Authorities Over-reliance on recorded transactions Privacy / security vulnerability Legal Powers Privacy legislation Non-Repudiation / Authentication The Scope for Continuous Assurance In Tax Compliance

How can Continuous Assurance for Taxes be Delivered ? Built Into Applications By Commercial Continuous Auditing Providers By Application Service Providers as part of their services By Revenue Authorities as part of their service to Business Continuous or semi continuous assurance On-demand data downloads The Scope for Continuous Assurance In Tax Compliance

Potential Vehicles for Data Transmission Common Elements Header – Identification & Control data Detail records Encryption / Signature Flat File Special XML schema XBRL GL etc The Scope for Continuous Assurance In Tax Compliance

Conclusions & Way Forward Issues to be addressed Acknowledge Limitations Resolve Legal Powers issues Resolve Privacy issues If Revenue Authorities provide CA Will this poison the well for commercial providers ? More than just a national issue… In five years…… The Scope for Continuous Assurance In Tax Compliance

The Scope for Continuous Assurance In Tax Compliance Any Questions........ The Scope for Continuous Assurance In Tax Compliance