ATAF Workshop: Tax Administration of Large Business Taxpayers

1. ATAF Workshop: Tax Administration of Large Business Taxpayers Andrew Okello – IMF Fiscal Affairs Department

2. General overview of the international practices for management of large business

3. How the structure of tax administration has evolved

4. Taxpayers are not homogeneous • Over the part 20 years, several tax administrations have reorganized their operations around a segment of the taxpayer population • Based on the view that strategies that consider the risks for tax revenue, which vary by type of taxpayer, are the most effective means to improve tax compliance

5. 1% 5 % 10–20 % 20–30 % 80 -90 % 60–70 % Distribution of taxpayers and revenue Number of... Tax revenue from... Large enterprises Medium-size enterprises Small enterprises

6. Why the move towards taxpayer segmentation? • Developing compliance strategies that take into account “risk management” concepts • Providing services to taxpayers according to their needs (better focus on “client” needs) • Allocating enforcement and audit resources to areas of greatest risks

7. Introducing an organization based on types of taxpayers, early examples • In the early 1990s, the Netherlands reorganized its tax and customs administration along 4 departments: large companies; medium-size and small businesses; other taxpayers; and customs • In 1994, the ATO reorganized its structure by taxpayer segments—large, medium-size, and small businesses, and non-business individuals • Also in 1994, the New Zealand IRD organized itself around major segments: large, and small businesses, and individuals • Beginning in October 2000, the US IRS replaced its three-tiered geographical organizational structure with one focused on servicing taxpayers with similar needs—individuals, small businesses, large corporations, and tax exempt organizations

8. A unified office for managing large LBT • The Netherlands and New Zealand models influenced the trend that is commonly implemented in Africa • They unified large taxpayers operations that cover all the main national taxes, including income taxes and the VAT

9. LBU in Africa Large taxpayers units established in all countries, as a first step in adopting a taxpayer segmentation approach

10. Expected benefits of an LBUfor the taxpayer • Reduce taxpayer compliance burden and costs • Enhance predictability and consistency of tax regime • Utilization of risk-based approach - good compliance is recognized • Single view/management of a taxpayer’s account - One-stop shop for all taxpayer dealings • Single point of responsibility for related group of companies headed by large taxpayer • Provide better services to large taxpayers • Industry specialization of LBU staff, including expertise in international taxation issues

11. LBU experience in Africa • Early initiatives not entirely successful • Late 1990s – Ghana, Kenya, Uganda • Reinvigorated initiatives better – Kenya, Uganda • More recent initiatives – effectiveness varies: • From strong (South Africa) to weak (Sierra Leone) • Anglophone countries without an LBU: • All the SACU countries except South Africa (LBU in Swaziland for income taxes only) • Zimbabwe – FAD proposed in 2009, may be in early stages of implementation • Seychelles – large taxpayer program proposed instead given scale of operations