Global Tax Dispute Resolution & Controversy Services

Transcription

1 Global Tax Dispute Resolution & Controversy Services Tax Dispute and Controversy Update Exploring the trend of Risk Assessment and its current use in Canada and the United Kingdom Wednesday 20 May :00 AM EST

2 Notice The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. 2

3 Welcome Exploring the trend of Risk Assessment and its current use in Canada and the United Kingdom Speaker: Sharon Katz-Pearlman Global Head, Tax Dispute Resolution & Controversy KPMG International

4 Polling Question #1 1 In how many jurisdictions do you file income tax returns a) 1-4 b) 5-20 c) d) Over 50 4

5 Polling Question #2 2 Where are you currently under exam a) Canada b) UK c) Both d) Neither e) Other jurisdiction(s) 5

6 United Kingdom Speakers: Kevin Elliott & Chris Davidson Directors Tax Management Consulting KPMG in the UK

7 What are HMRC s objectives To reduce the UK tax gap of 34 billion (large business = 9.3 billion or 27% of the tax gap) Resources allocation Effective allocation of resources to promote compliance, and to prevent and respond to non-compliance Non-compliance can be in the form of: arrangements to minimise tax legislative interpretation inadequate system and processes leading to errors 7

8 What is HMRC s strategy for achieving those objectives Large Business directorate deals with 2,100 businesses with 200+ million turnover Mainly organized on an industry sector basis, e.g. Banking, Insurance, Oil & Gas Customer Relationship Manager for each business Risk assessment determines which businesses HMRC allocates more resources to Risk assessment should identify significant issues for risk working (audit) 8

9 How does HMRC undertake risk assessment of large businesses Strategic level Business level Entity level = Large Business Risk Task Force = Regular Business Risk Review = Detailed review of tax filings (if not low-risk) HMRC Large Business has a Inherent risks: Complexity, tactical delivery plan which sets Boundary, Change priorities for compliance work with large businesses recent focus on indirect and employment taxes Behavioral risk: Governance, Tax strategy, Delivery Low risk status High Risk Corporate Program ( 100 million tax at risk) 9

10 Taxpayer obligations & approach for mitigating potential for disputes Obligations complete and correct tax returns Senior Accounting Officer regulations Banking code of conduct Ability to demonstrate that inherent risks are managed through adequate behavioral management COSO framework tone from top tax strategy through to tax risk registers Low risk-status onus is on the business to drive the agenda with HMRC 10

11 Is HMRC s approach with large business working Approximately 40% of large businesses currently have low risk status Since HMRC has recovered 23 billion in additional compliance yield from large businesses In the year to 31 March 2014 compliance yield was over 8 billion 45 large businesses have been through HRCP with 1,200 disputes resolved and 10.5 billion of compliance yield 11

12 The future Continue a risk based approach Changing tone Base Erosion and Profit Shifting Spending Review

13 Polling Question #3 3 Do you think that a risk based approach will make or is making a true difference in the way the revenue authority approaches investigations 1. Yes 2. No 3. Not sure 13

14 Canada Speaker: Paul Lynch Partner, Tax National Leader, Tax Litigation & Dispute Resolution KPMG in Canada

15 What are Canada Revenue Agency s (CRA) compliance objectives To protect the integrity and fairness of Canada s self-assessment tax system by identifying, addressing and deterring those who do not accurately report their activities or taxable income To review tax matters and ensure offshore and aggressive tax planning issues and risks are identified and addressed using integrated large business audit teams Use over 2,000 dedicated audit resources to review and audit the tax affairs of Canada s largest corporate entities 15

16 Polling Question #4 4 Do you think a risk assessment approach will lead to: a) More adjustments b) Less adjustments 16

17 International and Large Business program results This program generates a fiscal impact of over CAN$6 billion annually Fiscal impact consists of tax assessed, tax refunds reduced, interest and penalties, and present value of future federal tax assessable arising from compliance actions, but excludes the impact of appeals, reversals and uncollectable amounts Target change rate for international and large business audits: 75% 17

18 How does CRA undertake risk assessments of large businesses Information technology innovation (adopting new and innovative analytics approaches) is at the core of CRA s risk-based compliance strategies, enabling CRA to direct enforcement resources to the higher-risk accounts CRA is introducing and implementing a new integrated risk assessment system to better identify and prioritize large business files for audit The new risk assessment system is an enhancement of the existing National Risk Assessment Model 18

19 How does CRA undertake risk assessments of large business National Risk Assessment Model (NRAM) Tier I risk assessment Decision made to undertake an audit/macro risk identification Standard Audit Risk Assessment Template (SARAT) Tier II risk assessment Assess and document risks develop an audit plan/micro risk identification 19

20 Evolution of Tier I risk assessment CRA s Old Approach NRAM Approach Next generation NRAM Size Individual legal entities > CAN$250 million revenue Groups with > CAN$250 million revenue Individual legal entities > CAN$250 million revenue Certainty Audit Protocol Real-time audit assistance Rulings or real-time assistance Audit cycle Perpetual None to regular visits None to regular depending on ranking Tax Governance & Taxpayer Behavior Not relevant Can be very relevant Unclear how this could feed into data analytics model 20

21 NRAM Risk Factors Audit history Unusual or complex transactions Corporate governance (oversight) Major acquisitions or disposals Corporate structure (controls) Industry issues Openness and transparency International transactions Participation in aggressive tax planning 21

22 NRAM Risk Assessment ILBD Global Tier 1 Risk Assessment Overall Rating: TSO: FPE 1: Taxpayer name: FPE 2: Type of entity: Corporation FPE 3: Identification #: L B Case #: Primary NAICS code: Audit planned for CRA Fiscal Year: 2012/13 Behavioral Impact Large Files Income Tax Large Files GST/HST International Aggressive Tax Planning Risk Rating Complexity Estimated Hours Transferability No No No No Capacity Yes 22

23 Risk Assessment Distribution CRA Large File Population Risk Assessment 37% High risk 25% Low risk 38% Medium risk Percentage of large file population 23

24 CRA meetings to discuss their new approach sample questions Do you have a formal framework for identifying and assessing tax risks associated with normal ongoing operations If so, provide information on how risk is identified, managed, reported, monitored and mitigated. What tax matters do the directors and senior management normally get involved in Are they proactive or reactive What tax intermediaries are used and what is their involvement in tax risk management Do you have a tax strategy that is consistent with your overall business strategy What are your top five priorities with respect to tax 24

25 Higher risk industries CRA has four coordinating offices for the following industry segments: Financial Institutions Pharmaceuticals Oil and Gas Automobile and Manufacturing 25

26 Next-generation NRAM Why To enhance the risk assessment and workload selection processes nationally, to further enhance CRA compliance efforts on higher risk taxpayers, to leverage technical capacity through workload portability, to achieve audit currency for compliant taxpayers, and to enhance CRA quality and integrity Applied to individual legal entities (approximately 29,000) Use of new and innovative data analytics Difficult to see how items not submitted as part of regular reporting process can be factored into this process (i.e. tax governance) Easy to see how compliance data will be used = extremely important to take the compliance work very seriously in all respects 26

27 Polling Question #5 5 Would you like someone from the Global Tax Dispute Resolution & Controversy Services network to contact you after this webcast a) Yes b) No 27

28 Q&A

29 Thank You If you are interested in speaking with a KPMG professional, please feel free to contact us at: go-fmglobaltaxdisput@kpmg.com

30 kpmg.com/socialmedia kpmg.com/app 2015 KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we Endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.