Horizontal Monitoring

Theo PoolenDeputy Director-General

Dutch Tax and Customs Administration (DTCA)January 2009

Contents

• Developing the idea of horizontal monitoring

• Key elements of horizontal monitoring • Large businesses: compliance agreements and Tax Control Framework

• Small businesses: optimizing the tax value chain

Towards a new approach

• Changes in society and culture

• Input from business community- no trust business-tax administration- backlog

• International developments corporate governance

Horizontal monitoring key values

• mutual trust, understanding and transparency• ‘disclose’ current tax risks• providing certainty in advance• no surprises• less frequent and less detailed audits• a 'commercial' service level as to

– timeliness– single point of contact– understanding the business– quick response

Segments

1,500 LB

11,000 MSB’s

1,200,000 smallbusinesses

Compliance agreements

• Pilot 40 large businesses

• Commitment on the highest level (Board to Board)

• Agreement on manner and intensity of monitoring

• All taxes and tax collection

• Within boundaries law/policy/jurisprudence

• No additional rights / obligations

• Individual agreements; no blueprint

Core characteristics of a compliance agreement

• LB submits significant tax risks real time to the tax

administration

• LB submits facts and its view on tax consequences

• No obligation to submit internal/external tax advice

• Tax administration in return provides view on the tax

consequences expediently

• Tailormade approach

• Solution for pending tax issues in past years

Change in culture/behaviour

• Problem-solving attitude• Being able to build and maintain relations• Empathic and listening capacities• Decision making capacities• Knowledge on meta-communication• Mutual trust • Continuous dialogue, also on the process

and the behaviour of parties involved (including: agree to disagree)

Evaluation first part of pilot

Advantages (LB and TA):

- working on actual issues

- reduction of uncertainties

- expedient dealing with issues

Advantages TA:

- faster internal processes

- involvement of management

- improved communication with LB

Tax Control framework

• Importance of organizing trust - trustworthiness

• Letter of 9 June, 2006 State Secretary of Finance to the Dutch Parliament:

“I emphasize that compliance agreements will be concluded with companies that have an adequate tax control framework’’

Peeling the onion

Tax audit

Businessprocess

Internal control

Internal audit

External audit

Tax audit

SOX-audit

in control statement (SOX)

Audit annual accounts

SAS70 (TPM)

Other techniques

COSO

Tax Assurance

Our work changes

Business cycles Business cycles

transactions

BCF/TCF

Testing the TCF

Tax issues (‘risks’)

Tax returns

Discussion in advance

Audit tolerance

Work will primarily be aimed at the TCF

Horizontal monitoring small businesses

• Solving compliance issues in advance with trade and industry organizations

• Promoting the use of trusted administrative software

• Tax intermediaries

Horizontal monitoring tax intermediaries

• Building quality by aligning work processes

• Trusting the internal quality system

• Statement by individual clients

• Green lane for tax returns

• Monitoring on “meta” level

• Creating a learning circle

Optimizing the tax value chain

– Large Businesses: compliance agreements

– Small businesses: - trade and industry organizations- intermediairies

– Private Taxpayers: pre-filled tax return

– Customs: Authorised Economic Operator

Tax payer Tax intermediaries

Tax administration

horizontal monitoring

thank you for your attention