The Scope for Continuous Assurance In Tax Compliance

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The Scope for Continuous Assurance In Tax
Compliance

• Ray Butler, CISA
• ray.butler_at_hmce.gsi.gov.uk

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Agenda

• Potential
• Benefits / Pitfalls
• of continuous assurance for tax
• Exploring
• Theory / Issues
• NOT
• Policy Statement
• Description of anything in Real World

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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.

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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 ?

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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

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Limitations

• Limited To Recorded Transactions
• Cant Detect Unrecorded Income / Expenditure
• May Not Detect Posting to Wrong Accounts
• May Not Detect False Purchase Transactions
• May Not Give ANSWERS, Will Give QUESTIONS

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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

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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

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Risks involved - Taxpayers

• Privacy
• Over-Audit
• Trading Partner Resistance

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Risks involved Tax Authorities

• Over-reliance on recorded transactions
• Privacy / security vulnerability
• Legal Powers
• Privacy legislation
• Non-Repudiation / Authentication

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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

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Potential Vehicles for Data Transmission

• Common Elements
• Header Identification Control data
• Detail records
• Encryption / Signature
• Flat File
• Special XML schema
• XBRL GL etc

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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

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Any Questions........