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ATAF Workshop: Tax Administration of Large Business Taxpayers

ATAF Workshop: Tax Administration of Large Business Taxpayers. Andrew Okello – IMF Fiscal Affairs Department. Identification and selection of large business and main criteria. Identifying large business. A critical task is to identify precisely which taxpayers are to be administered by the LBU

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ATAF Workshop: Tax Administration of Large Business Taxpayers

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

  2. Identification and selection of large business and main criteria

  3. Identifying large business • A critical task is to identify precisely which taxpayers are to be administered by the LBU • The LBU should be responsible for managing all major domestic taxes • Within this context, an analysis must be conducted to stratify the taxpayer population in order to identify the large taxpayers • Tax administrations use varying techniques to identify large taxpayers

  4. A review of some criteria Criteria • Tax paid or tax liability • Employee numbers • Capital base • Entity type • International transactions • Industry type Problems • Tax minimization/holidays • Non labor intensive sectors • Undervalues service sector • Small companies and big non-corporates • Many small players in open exporting economies • Large competitive markets

  5. Annual turnover • Turnover, the best measure of size • Simple concept • Easily understood • Easily measured • Basis for VAT • Correlation to actual/potential tax liability • Thresholds to delineate segments

  6. Using the turnover • All economic activity should be included in the turnover calculation whether it is subject to tax or not • The intention is to find the point in the taxpayer stratification that optimizes the revenue leverage compared with the number of taxpayers included in the net

  7. Other key criteria • Amount of annual income (HNWI) • Value of assets • Level of imports/experts • Type of economic activity • Treating formal groupings as a single entity • The small number of domestic excise taxpayers

  8. Other issues • If the LBU is allowed to grow too large in terms of taxpayer numbers, its effectiveness will be diluted because it will be unable to maintain the intensive and concentrated compliance activities required in this market segment • Potential new entries to the large taxpayer segment should be monitored and only transferred to the LBU when they exceeded the turnover limits for several consecutive years

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