Tax Administration Diagnostic Assessment Too l 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 reporting M1 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

Scoring P6-16-1: Nature and Scope of Tax Audit Program 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) Routinely evaluates the impact of audits on level of taxpayer compliance

Scoring P6-16-1: Nature and Scope of Tax Audit Program 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) Routinely evaluates the impact of audits on level of taxpayer 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. Automated cross- checking with stock market and shareholders registries Automated cross- checking with social security agency Automated cross-checking with online vendors

Scoring P6-16-2: Extent of Large-scale Automated Cross-checking to Verify Information on Returns B 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. Automated cross- checking with stock market and shareholders registries Automated cross- checking with social security agency Automated cross-checking with online vendors

Scoring P6-16-2: Extent of Large-scale Automated Cross-checking to Verify Information on Returns C 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. Automated cross- checking with stock market and shareholders registries Automated cross- checking with social security agency Automated cross-checking 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

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

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

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

Scoring P6-18: Soundness of Methods Used for Monitoring the Extent of Inaccurate Reporting B Methodology for monitoring inaccurate reporting covers at least VAT Methodology is applied at least every FOUR years Results independently reviewed, subject to credibility tests, and made public Results are used in designing tax administration interventions to improve accuracy of reporting

Scoring P6-18: Soundness of Methods Used for Monitoring the Extent of Inaccurate Reporting C Methodology for monitoring inaccurate reporting covers at least VAT Methodology is applied at least every FIVE years Results independently reviewed, subject to credibility tests, and made public Results are used in designing tax administration interventions to improve accuracy of reporting

Table 20 of the Field Guide Checklist of Questions and Evidence for POA 6