Richard Cornelisse

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HMRC Penalties: a discussion document

In EU development, Indirect Tax Strategic Plan on 08/02/2015 at 9:05 am

As HMRC reviews and improves how we serve our customers, we are also exploring the way that we currently apply penalties when people fail to meet their tax or entitlement obligations.

We know that the vast majority of customers meet their obligations in full and on time, and that penalties are only applied to a small minority of people and businesses.

We want to make sure our approach works as well as possible. This is why we want to consider whether we could better differentiate between deliberate and persistent non-compliers and those who might make an occasional error for whom alternative interventions are more appropriate.

A modern tax system

  1. We aim to be an effective, efficient and impartial tax and payments authority. We help the honest majority to get their tax right and make it hard for the dishonest minority to cheat the system.
  2. Part of helping the honest majority involves delivering on the Government’s commitment to make the UK tax system as user-friendly and efficient as possible, which also means making tax policy simpler and easier for people to understand.
  3. To do this, we are improving how we work, introducing new digital services that make it easier for customers to get things right first time. We will put customers at the heart of everything we do by moving away from services that are based around traditional tax regimes to services designed around our customers.

Digital services

Our digital plans will transform the way we operate and serve our customers. One example of how we plan to do this involves a personalised tax account for customers, so we can help make it simpler, quicker and easier for them to pay the right tax at the right time.

Our digital services for our customers will:

  • be easy to use, convenient and personalised for individuals, businesses and
  • agents
  • promote digital take-up and voluntary compliance by designing for customer needs
  • use data to help customers avoid errors through pre-population
  • provide assistance in using or accessing our services for those who need it
  • allow us to consult our customers on policy proposals and changes so that we can improve them.

Compliance

Improving our services means changing the way we think about compliance.

New technology will enable us to deal with the vast majority of compliant customers – and those who try and bend or break the rules – by using more accurate, up-to-date data that gives us a more ‘real time’ view of a customer’s tax and benefits affairs.

By introducing services that make it easy for customers to get things right, we will reduce the risk of errors – saving them and us time and money.

Our digital services will also give us access to more and better data about our customers, which will enhance further our compliance activities.

We will be able to look at a customer record across all our tax regimes and previous tax periods, providing us with an insight into whether that individual or business poses a tax risk.

This more targeted approach means we can then focus our compliance activity and expertise on those determined to bend or break the rules.

Penalties

Penalties are applied to encourage taxpayers to comply with their obligations, to act as a sanction for those who don’t and to reassure the compliant majority that they will not be disadvantaged by those who don’t play by the rules. We don’t use penalties as a way of raising revenue, or to offset our running costs. In essence, we want compliance, not penalties.

Aim of this discussion

It’s important that we design tax policy for a modern, digital world and make the most of the opportunities this technology provides. As we change the way in which we operate, we believe we will need to change the way in which we apply penalties.

This discussion document looks at how we might be able to do this. We want feedback from individuals and businesses so it can influence our thinking at this early stage.

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Publication date: 2 February 2015 Closing date for comments: 11 May 2015

SAOG – Senior Accounting Officer Guidance (UK)

In Audit Defense on 25/01/2015 at 10:59 pm
  • SAOG01000 Introduction
  • SAOG05000 How to use this guidance
  • SAOG10000 About Senior Accounting Officer provisions
  • SAOG11000 What is a qualifying company
  • SAOG12000 Who is a Senior Accounting Officer
  • SAOG13000 Notifying Senior Accounting Officer details to HMRC
  • SAOG14000 Senior Accounting Officer Main Duty
  • SAOG15000 Senior Accounting Officer must provide a certificate to HMRC
  • SAOG16000 Tax Compliance risk management process
  • SAOG18000 In what circumstances is a penalty chargeable
  • SAOG19000 What to do when you think a penalty may be chargeable
  • SAOG20000 Reasonable excuse
  • SAOG21000 Assessing the penalty
  • SAOG22000 Appeals
  • SAOG23000 Other matters
  • SAOG24000 Glossary

SAOG – Senior Accounting Officer Guidance (UK)

Indirect Tax Management

In Indirect Tax Automation, Indirect Tax Strategic Plan, Processes and Controls on 23/01/2015 at 11:40 pm

‘Why’, ‘What’, and ‘How’ of Managing an Effective Indirect Tax function

The global tax environment is in a state of fast change. A shift to indirect taxes represents the global trend. Driving Indirect Tax Management therefore becomes more and more important. The key to success in the management is the ability to translate indirect tax knowledge into a workable business process.

In general the advisory sector may bring you a wealth of knowledge but in practice the translation gap to a process within the actual execution of the theory makes a business vulnerable for an endless increase in consulting cost and an ineffective approach in timely dealing with current indirect tax exposures. This may easily result in a financial disaster.

Tax authorities are continuing to pick up on the common weaknesses identified in the Indirect Tax function. The restyling of the indirect tax function in a business may have to be considered by a business in order to deal with the increasing number of indirect tax challenges or to benefit from indirect tax opportunities.

Enhance the indirect tax communication within the business functional hierarchy, increase business awareness of the current state of its indirect tax function and set the right priorities for in-house stakeholders/departments (AP, AR, Legal, Finance etc) to successfully move to a best-practice is our philosophy.

Our aim is to share our expertise with you through this website, to create and share current state benchmarking knowledge, to inspire and also challenge your department functions through offering modules that can be used to scope process gaps from an indirect tax perspective.

A mythological way to express our mission statement would be to compare the general Indirect Tax function with the fall or rise of the Phenix legend.

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EU Commission – improving VAT compliance – random awards for tax compliance

In EU development on 21/01/2015 at 7:44 am

The use of receipt-based tax lotteries to increase (VAT) tax compliance has been of growing interest amongst EU Member States. Some countries have introduced such lottery schemes, namely Malta in 1997, Slovakia in 2013 and Portugal in 2014. Others have been intrigued about the possibility of introducing a lottery.

The use of tax lotteries also has a history outside of Europe, notably in Taiwan since the 1950s. While there is growing interest in the use of tax lotteries throughout Europe, the understanding of best practises and success factors, is still limited. Therefore, this workshop brought together countries with experience and those interested in running tax lotteries.

TAXUD and the JRC in this context coordinated, establishing a platform for discussion amongst the Member States.

Tax receipts lotteries are designed to increase the issuance of receipts in business-to-consumer-transactions. This way, transactions are more likely to be part of the official (not the shadow) economy and VAT can be collected.

The idea of lottery schemes is to provide consumers with an incen-tive to ask for a receipt. The incentive is that the receipt is not just a piece of paper documenting the transaction made, but serves as a (potential) lottery ticket, giving consumers eligibility to participate in a tax lottery.

The lottery in turn gives the chance to win a prize if for a randomly drawn receipt. Hence, while obtaining the receipt is (for any legal transaction) of no extra cost to the consumer, it becomes valuable, as it serves as a lottery ticket.

For the tax authority the cost of paying prizes (and administering the lottery) is, in turn, outweighed by the extra revenue of an increased tax base, and by a citizen-policing effect of detecting VAT-dodging businesses.

While the general idea of a tax lottery is relatively straightforward, the specifics of how best to design and introduce the lottery are often less clear. Also the positive fiscal effect (the cost of the lottery being outweighed by the reduction of VAT evasion) is an empirical question.

Furthermore, the political economy (i.e., considerations of how to get such a scheme into the political process) of a tax lottery require consideration in advance. Additionally, the tax lottery can also serve other purposes, such as serving as a communication vehicle to the citizens to stress the importance of tax payments.

They may also trigger a public discussion about the two-way character of taxes (them being more than just a tribute, but something from which citizens expect something in return).

To discuss these points, European countries who had already a lottery scheme in place (Malta, Slovakia, Portugal) were invited to present their experiences, additional to presentations by a further invited specialist (Georgia), a researcher on this topic (with an implementation proposal for Greece) as well as the TAXUD and the JRC together with interested countries, to discuss the specificities.

Participants came together for a one-day workshop. Points of particular importance were to consider the moral issue of lotteries, to flank the lottery with an informational campaign, to use the lottery as a data collection tool, to keep transaction costs of participating in the lottery low, to consider all the actors involved, and to use the data generated in the process of the lottery.

It was also discussed that the fiscal success of the lottery can be significantly increased if focussing on particularly problem- atic sectors, where cash-in-hand practises are more prevalent, while putting less emphasis on large corporations and retail chains, for which the fiscal effect is minimal.

This report summarises the workshop, following a pyramidal approach. In the following section the motivation and elements of the workshop are summarised briefly.

More detail is included later, consisting of presentation protocols, the agenda, the participant list, an evaluation and reference to further information.

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Improving VAT compliance – random awards for tax compliance

VAT rates applied in the Member States of the European Union

In EU development on 18/01/2015 at 4:37 pm

Situation at 1st January 2015VAT Rates Applied in the Member States of the European Union

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Anticipate what SAP users would want

In Indirect Tax Automation, SAP add on, SAP add on for VAT, SAP for VAT, SAP implementation on 10/01/2015 at 4:52 pm

If full ‘VAT automation of Accounts Receivable (AR) and Accounts Payable (AP)’ and ‘being in control’ are objectives of your organization, it is important to know what exactly makes Standard SAP not functioning optimal from an indirect tax perspective. Only then it is possible to validate whether a company’s objectives can be achieved via upgrading Standard SAP functionality and/or implementing an external tax engine.

Below Booklet “Solving the real problem not a symptom” explains when Standard SAP requires additional VAT functionality, the root cause, the impact of patch up solutions that remediate a symptom and how the real problem is resolved.

It is shown in an easy to read format for both desktop or mobile devices. After ‘Click to read’, the menu bar contains a button for downloading in PDF.

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Direct Download Booklet in PDF

View Richard Cornelisse's profile on LinkedIn

OECD – Tax Administration 2013

In EU development on 10/01/2015 at 4:49 pm

Reference source of high level comparative information on aspects of tax administration system design and practice covering the world’s major revenue bodies.

Click on picture to read the report.


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Conceptual thinking for SAP and VAT

In Indirect Tax Strategic Plan on 02/01/2015 at 10:22 am

Taxmarc_Rolbanners_Proef

Every feature developed by Taxmarc™ improves indirect tax performance of SAP in a specific area. For example the time stamped tax code solution prevents that a company ever runs out of tax codes. During our design phase the performance should not only exceed everybody’s expectation but should meet a company’s strict IT policy and procedures around software development & implementation as well.

Our functionality increases workforce efficiency, avoids rework, decreases risk exposures but as well increases visibility and awareness by which the tax function is able to set the right priorities.

As our solutions are in production for many years at listed multinationals we have a proven track record. Those companies are our client references. We are not just telling you what we offer but encourage you to validate.

However, the real strength is that we think ahead of our clients’ objectives for managing indirect tax. During solution design we anticipate that even additional functionality will become available by which all these objectives will be met when all our features work together. An example is our integrated Tax Control Framework and Data Analytics Module.

Our features do not only improve an individual SAP performance issue but synergies are reached when these individual building blocks work together. This could not have been achieved without the individual strength of performance of all our features.

A chain is as strong as its weakest link. We have made certain that all our links are made of the strongest material currently known to man. Only that is what we consider best practice and revolutionary: ‘Nothing more and nothing less’.

All our features developed should meet the following test criteria: excellent performance in individual problem solving, contributing added value to overall functionality when all features operate together, satisfying client needs even beyond indirect tax and meeting the strict IT policies of a company.

Taxmarc™ Booklet

View Booklet and download in PDF

2014 in review

In Indirect Tax Strategic Plan on 31/12/2014 at 10:07 am

The WordPress.com stats helper monkeys prepared a 2014 annual report for this blog.

Here’s an excerpt:

The concert hall at the Sydney Opera House holds 2,700 people. This blog was viewed about 17,000 times in 2014. If it were a concert at Sydney Opera House, it would take about 6 sold-out performances for that many people to see it.

Risk differentiation framework fact sheet | Australian Taxation Office

In Business Strategy, Indirect Tax Strategic Plan on 30/12/2014 at 2:38 pm

How do we manage tax risk?

We use the risk-differentiation framework (RDF) to help us assess your tax risk and determine the intensity of our response in a coherent, consistent and considered way. It complements the compliance model, which suggests an appropriate choice of remedy.

The RDF is based on the premise that our risk management approach to tax compliance should take account of our perception of both the:

  • estimated likelihood of you having a tax position that we disagree with, or you (through error or omission) have misreported your tax obligations (as evidenced by your behaviour, approach to business activities, governance, and compliance with tax laws)
  • consequences of that potential non-compliance (dollars, relative influence, impact on community confidence).

We apply the framework on an economic group basis (where possible) because we do not categorise each individual large business. We consider an economic group to include all Australian-based entities that fall under a direct or indirect majority controlling interest, whether in Australia or overseas.

We place economic groups into one of four broad risk categories for each relevant tax type (income tax, GST, excise). Your categorisation is based on an informed professional judgment, at a point in time, of the risk and the relationship we have with you – relative to the population. The model then suggests an initial engagement and treatment stance, based on the quadrant you have been placed in.

Over the coming year we will be working with taxpayers to move the RDF from a compliance focus to a service focus.

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Higher risk taxpayers

For higher risk taxpayers, we assign appropriate resources to allow for continuous review. Our activities may include comprehensive audit and other intensive risk analysis approaches. This will enable us to identify and understand risks as they arise and provide information about our possible concerns, allowing the taxpayer to make a more informed choice about their compliance approach.

While we take all relevant facts and circumstances of a case into account, if you are identified as a higher risk taxpayer we are more likely to use our formal powers of information gathering if you are not open and transparent with us.

Key taxpayers

If you are identified as a key taxpayer, we take a particularly close interest in your risk management and governance frameworks to mitigate tax compliance risks. We expect key taxpayers to fully disclose potentially contestable matters to us as they arise.

We will assign the necessary resources to ensure a good working relationship and increase our understanding of your business.

If a potentially contestable matter is identified, we will work with you to resolve the matter and evaluate your compliance with the law. We are less likely to use our formal powers of access and questioning for additional information, although we will escalate matters if we are unable to obtain the information and evidence needed to form a view in a timely manner.

Medium risk taxpayers

For taxpayers identified as medium risk, we will undertake targeted activities to deal with tax compliance concerns. These activities are more likely to be reviews and audits. We may contact you to seek assurance that a particular transaction has been treated correctly.

To achieve greater consistency in the way we address specific issues, we may use project-based approaches that group large businesses with similar tax risks. These risks are normally identified in our compliance program.

Lower risk taxpayers

The majority of large businesses have a lower risk categorisation. For these taxpayers, we monitor intelligence to confirm your lower risk categorisation. This can involve activities such as requesting targeted information about specific issues we have identified in the market, visiting you for information about business operations, and our normal internal review processes.

Risk differentiation framework fact sheet | Australian Taxation Office.

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