ANAO Report No 2014–15 Annual Compliance Arrangements with Large Corporate Taxpayers
74 involved assessing a taxpayer’s strategic and operational risk management and record keeping practices.
99
4.9 Conducting governance reviews is part of the compliance program for the large market in the Indirect Tax (ITX) BSL. In one instance, a taxpayer elected to have a governance review as part of establishing the ACA rather than providing the governance letter. These reviews aim to provide the ATO with reasonable assurance that the taxpayer has in place effective systems and processes that result in optimum voluntary compliance.
100
As part of this review, the ATO will assess the effectiveness of the taxpayer’s governance frameworks.
101
The ATO views a request by the taxpayer to have their governance reviewed as a demonstration of the taxpayer’s transparency and willingness
to work with the ATO, and also assists the ATO and the taxpayer to assess the appropriateness of entering into an ACA in a more timely manner.
4.10 The ATO advised that governance reviews form apart of the compliance program for ITX because GST is a transaction based tax and GST compliance is more reliant on effective systems. Compliance issues relating to income tax and FBT are more commonly the result of interpretation, that is, the taxpayer and the ATO interpreting the law differently.
As discussed later, ongoing assessment of a taxpayer’s governance is an element of an ACA covering GST, whereas the ATO relies on an annual letter from the taxpayer that they have sound governance and tax risk management practices in relation to ACAs for income tax and FBT.
4.11 Nonetheless, undertaking these governance assurance reviews may add to the perception of taxpayers that the costs of an ACA, particularly the entry costs, outweigh the benefits. As discussed in Chapter 2, a majority of taxpayers that had not entered into an ACA considered the startup costs were a barrier to entering into an ACA. However, the ATO advised that governance
99 Chapter 3 Good Tax Governance’
, Large business and tax compliance publication, https://www.ato.gov.au/uploadedFiles/Content/LB_I/downloads/BUS16985lrgbustaxcomp.pdf
[accessed 11 September 2014].
100
To achieve this, the ATO may review the taxpayer’s entity level governance and risk management framework the taxpayer’s history of voluntary compliance, including requests for private rulings and voluntary disclosures previous compliance activity findings conducted by the ATO; financial management, processing and reporting systems and any specific GST risks and issues of concern to either the taxpayer or the ATO.
101 Documents reviewed may include the taxpayers risk matrix management representation letters internal audit plan tax governance framework and integrated risk management plan.
ANAO Report No 2014–15 Annual Compliance Arrangements with Large Corporate Taxpayers
74 involved assessing a taxpayer’s strategic and operational risk management and record keeping practices.
99
4.9 Conducting governance reviews is part of the compliance program for the large market in the Indirect Tax (ITX) BSL. In one instance, a taxpayer elected to have a governance review as part of establishing the ACA rather than providing the governance letter. These reviews aim to provide the ATO with reasonable assurance that the taxpayer has in place effective systems and processes that result in optimum voluntary compliance.
100
As part of this review, the ATO will assess the effectiveness of the taxpayer’s governance frameworks.
101
The ATO views a request by the taxpayer to have their governance reviewed as a demonstration of the taxpayer’s transparency and willingness to work with the ATO, and also assists the ATO and the taxpayer to assess the appropriateness of entering into an ACA in a more timely manner.
4.10 The ATO advised that governance reviews form apart of the compliance program for ITX because GST is a transaction based tax and GST compliance is more reliant on effective systems. Compliance issues relating to income tax and FBT are more commonly the result of interpretation, that is, the taxpayer and the ATO interpreting the law differently. As discussed later, ongoing assessment of a taxpayer’s governance is an element of an ACA covering GST, whereas the ATO relies on an annual letter from the taxpayer that they have sound governance and tax risk management practices in relation to ACAs for income tax and FBT.
4.11 Nonetheless, undertaking these governance assurance reviews may add to the perception of taxpayers that the costs of an ACA, particularly the entry costs, outweigh the benefits. As discussed in Chapter 2, a majority of taxpayers that had not entered into an ACA considered the startup costs were a barrier to entering into an ACA. However, the ATO advised that governance
99 Chapter 3 Good Tax Governance’
, Large business and tax compliance publication, https://www.ato.gov.au/uploadedFiles/Content/LB_I/downloads/BUS16985lrgbustaxcomp.pdf
[accessed 11 September 2014].
100 To achieve this, the ATO may review the taxpayer’s entity level governance and risk management framework the taxpayer’s history of voluntary compliance, including requests for private rulings and voluntary disclosures previous compliance activity findings conducted by the ATO; financial management, processing and reporting systems and any specific GST risks and issues of concern to either the taxpayer or the ATO.
101 Documents reviewed may include the taxpayers risk matrix management representation letters internal audit plan tax governance framework and integrated risk management plan. Administration of Annual Compliance Arrangements
ANAO Report No 2014–15 Annual Compliance Arrangements with Large Corporate Taxpayers
75 reviews form apart of their compliance program and are tailored to reflect the level of understanding and confidence the ATO has of the taxpayer’s governance and tax risk management processes Notwithstanding this, there would be merit in the ATO examining the basis for conducting governance reviews, rather than accepting assurance letters, and adopting a more consistent approach across ACAs.
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