Centre for Tax Policy and Administration

Organisation for Economic Co-operation and Development

Large Taxpayer Units

18. Organizational Structures and Work Arrangements including Staffing and Skills and expertise required for Large Business Units

Nairobi, 14 – 18 February 2011

Organization of Large Business Units

Large Business Units are headed by senior executives and management teams including special advisors

Special advisors and members of management teams are each responsible for specific areas such as compliance research, international, etc.

Compliance operations of large taxpayers divisions or units are structured on an industry segment basis reflecting the main business activities of the economy

2

Major Industry Segments and Special Units in Large Business

Finance/Banking/Insurance Communication Technology Natural Resources/Oil & Gas Retail/Pharmaceutical/Medical Heavy Manufacturing/Transportation Building and Construction Shipping

3

Reasons for industry-focused units

Specialisation Building knowledge on industry specific issues Improving commercial awareness Understanding of industry practises and issues Delivering a better and more focused taxpayer

service Designing, developing and implementing

compliance programs including educational activities to help taxpayers understand industry specific tax responsibilities

Conducting research

4

Special units in addition to industry units

Performing risk analysis and intelligence gathering

Providing technical advice (by industry or by issue such as transfer pricing, anti-tax avoidance)

5

Organizational arrangements for international taxwork

Most Tax Administrations have a dedicated unit (at headquarters or elsewhere) responsible for international administrative policy

In most countries this includes the responsibility for the implementation of international tax policy and the advance assessment on feasibility and enforceability of new rules and regulations.

Usually countries have a dedicated unit responsible for the competent authority function to coordinate the exchange of information and assistance with recovery of tax debts.

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Organizational features of international tax work

Dedicated units responsible for international administrative policy are also responsible for the performance of the role Tax Administrations have in the process of treaty negotiation in 50 percent of the surveyed countries.

More than fifty percent of Tax Administrations have dedicated units for sharing information / knowledge management in the area of international taxation.

One third of Tax Administrations in surveyed countries have a dedicated unit responsible for providing information / account management for potential foreign investors and or similar activities.

A large majority of the Tax Administrations have centralized the managing of the tax affairs of large multinational taxpayers in a dedicated organizational unit existing of one or more offices.

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Work-force resources, skills, and competencies required

The degree and scope of the resources used in the large business unit vary strongly from one country to another. Identifying factors include:

The number of large taxpayers The criteria used to identify large taxpayers The complexity and nature of the large taxpayers The scope of functions performed within the large business

unit The type of taxes administered The level of audit and taxpayer service activity performed The range of technology used.

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Number of LBU staff as percentage of total staff

The number of employees working in the large business unit as a percentage of total staff ranges from 0.75 percent to 6.6 percent

The total number of staff is influenced by many other factors (value of this indicator therefore limited):

Number and type of taxes administered Other tasks of the Tax Administration Complexity of legislation Type of economy Seize of the country Population (number/type/education/age etc) Development stage Use of IT Tax morale

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Numbers of staff in LBU

Country Number of staff LBU

% of total staff

Australia 891 4.0

Canada 1,366 3.4

France 800 1.0

Ireland 237 4.0

Netherlands 750 2.5

Norway 55 0.8

UK 1,694 4.5

US 6,243 6.6

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Tax Administration staff usage for international tax work

  With a very few exceptions Tax Administrations

have concentrated all activities around their involvement in the processes of international tax policy and legislation and tax treaty work and exchange at Head Quarters

The numbers of staff involved are quite limited varying from 1- 6. There is hardly any involvement of operational staff at (local) offices in this process.

 

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Improving the training of tax officials on international tax issues including the secondment of officials from one

administration to another

Recommendations to improve expertise in and training on international taxation:

Knowledge sharing Co-operation with universities and other

educational institutions Induction training programs other

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Knowledge sharing

Create and strengthen the role of knowledge and co-ordination groups of experts in international taxation, including the use of modern communication technology such as intranet

Build and strengthen networks of contact persons throughout the organization to ensure inputs from the organization as a whole and to provide support to staff tasked with activities that cannot be centralized

Ensure access to dedicated international documentation systems

Initiate pilots to conduct joint audits

13

Co-operation with universities and other educational institutions

Building and strengthening relationships with universities, business schools to encourage these institutions to include sufficient elements of international taxation in their study programmes

The same approach should be adopted for regulatory bodies such as accounting and legal organizations accountants

14

Induction training programmes

Include aspects of international taxation in induction training programmes for all officials who will likely be involved in international tax work

Consider including officials who may infrequently be involved in aspects of international taxation work to ensure they have an awareness of international taxation issues

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Other recommendations on training

Concentration of international tax work in dedicated units at headquarters and in centralized dedicated organizational units for the managing of the tax affairs of large multinational taxpayers. These units need to have a sufficient size to be effective and sustainable

Facilitate staff learning foreign languages (English) and to participate in training programs (in foreign languages) offered by external institutions

Improving participation in international organizations by ensuring that the right people participate and attend meetings and by monitoring the participation through clear mandates and evaluation

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Centre for Tax Policy and Administration

Organisation for Economic Co-operation and Development

Large Taxpayer Units

18. Organizational Structures and Work Arrangements of Large Business Units

The Netherlands

Nairobi, 14 – 18 February 2011

18

Facts and Figures

• Income taxpayers 10.223.000

• via paper 17%

• via floppy disk 9%

• via internet 74%

• Corporate taxpayers 750.000

• VAT taxpayers 1. 316.000

• Wage taxpayers 595.000

• Motor vehicles 10.944.000

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Taxes and Charges collected by DTCA (2007):

• Income / Wage tax

40• Corporate tax

19• VAT / excise duties

52• Import duties

2• Environmental tax

4• Motor vehicle tax

3• Other taxes

15• Social Securities

32• Total

162• Budget TCA

2.5

(€ bn)

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Structure of the Ministry of Finance

MinisterMinister State SecretaryState Secretary

Secretary-GeneralSecretary-General

Directorate-Generalfor Tax and CustomsPolicy and Legislation

Directorate-Generalfor Tax and CustomsPolicy and Legislation

Directorate-Generalof the Budget

Directorate-Generalof the Budget

Directorate-Generalfor the Tax and Customs

Administration

Directorate-Generalfor the Tax and Customs

Administration

General TreasuryGeneral Treasury

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Directorate -General for the Tax and Customs Administration

(DGBel)

Management TeamManagement Team

Innovation andDevelopment

Innovation andDevelopment

Enforcement policy

Enforcement policy

Private taxpayers andprocedural law

Private taxpayers andprocedural law

Business taxpayersBusiness taxpayers

Customs andenvironment

Customs andenvironment

CassationCassation

InternationalAffairs

InternationalAffairs

OperationalManagement

OperationalManagement

PersonnelPersonnel

Legal AffairsLegal Affairs

Support and facilitiesSupport and facilities

Managementteamsupport

Managementteamsupport

Internal Accountancyunit

Internal Accountancyunit

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CustomsCustoms

Privatel TaxpayersPrivatel Taxpayers Small/ medium

companies (North)

Small/ medium companies (North) Small/medium

companies (South)

Small/medium companies (South) Large & multinational

companies

Large & multinationalcompanies

Tax and Customs Administration

Special directoratesSpecial directorates

• Computer/network service’/ Software development

• Fiscal/Economic Information and Investigation/

• Training, knowledge and Communication • Facilities Services

• Process and Product development

Operational divisions

80 district offices

•REGISTRATIO

N

•AUDITING

•COLLECTION

•INVESTIGATIO

N

•SERVICE

•ASSESSMENT

main processesmain processes integratedintegratedapproachapproach

Structure and role of the Large Business Units

The units or teams are branche-oriented

•for example: industries, transportation, trade, etc.

Advantage:

•more knowledge about the target group

•single desk for all tax affairs

•compliance

•higher quality of audits

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Structure and role of the Large Business Units

Each team deals with 40 - 60 entities The units or teams are branche-oriented The entities are registrated in the Client

information system (IKB) and the transparent risk assesment system (ATK)

The team gives each entity the treatment according to its tax importance and tax risks

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Structure and role of the Large Business Units

Integration on team or unit level Processes

•assessment, collecting and auditing Taxes

•income tax, company tax, value added tax and wage tax

‘Small’ taxes, like dividend tax and capital tax are treated by specialised groups in the tax office

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Structure and role of the Large Business Units

Each entity has a account manager He is resposible for:

•a correct and actual picture of the entity

•keeping the treatment plan up-to-date•long range treatment

•coming year treatment

•input to the team plan•depth of treatment

•to propose audits when necessary

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Structure and role of the Large Business Units

Personnel:

•50% academical

•managers

•legal specialists

•financial-, EDP-, statistical auditors

•account managers

•30% middle educated employees

•the same activities, but lower taxexposure

•20% administration Each employee has a personal computer with

access to the national systems27

Tasks Account Manager

Risk management Treatment Plan Entity overview & monitoring progress Internal and external Relationship

management Company meeting Provisional assesment Preliminary consultation Assessment

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Tasks Tax Auditor

Preliminary consultation Preliminary investigations National projects Fraud projects Training and education Other

29

Tasks Tax Inspector

Assessment Assessment after audit Appeal Preliminary consultation Fraud projects National projects Training and education Other

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Staffing

Total number of employees in the DTCA is 30.000

Total number of employees in the LBU’s is 750, i.e. 2,5%

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Staff in LBUs:

•50% academical

•managers

•legal specialists

•financial-, EDP-, statistical auditors

•account managers

•30% middle educated employees

•the same activities, but lower taxexposure

•20% administrative support Each employee has a personal computer with

access to the national systems

Staffing

32

Education

Tax Assurance Courses on the Business University Nyenrode together with tax advisors, CEO’s and CFO’s of VLE’s.

Collaboration with several universities for training programs on taxes and auditing for tax-, EDP-auditors, tax-inspectors etc.

Also collaboration with business schools for “training on the job” programs

Because of the new strategic approach a strong need of training on social skills

Masterclass training courses in negotiation and co-operation

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Training on social skills

New strategy (more cooperative, preventive, instead of repressive)

More cooperation between the employees (working as a team)

More cooperation with the LBU More internal sharing of knowledge Main focus: trust, transparancy and

understanding. This takes a total new way of thinking. Not only with the tax-employees, but

also with the taxpayers, and the intermediaries (for instance KPMG, Trust Rules)34

Hypegiaphobia,Trust rules (KPMG)

1. Make contact personal2. Define common goals3. Set the right example4. Built trust with sensible rules5. Share responsibility and trust6. Stay on course and keep calm, even

when things go wrong7. Rely on informed trust, not on blind

trust8. Be mild onmistakes but crush abuse9. Dear to experiment and learn from

experiences35

Knowledge Sharing

pilots with joint audits, with tax-auditors, tax-specialist and account-managers

expert- or knowledge groups: EG Very Large Enterprises, EG Tax/EDP/Statistical Audit/ EG International Fiscal Affairs, etc

intervision between audit teams, LBU’s: learn from each other, best and worst practices

a lot of experimenting, a lot of mistakes, but a lot lessons learned.

reactions of the taxpayers are quite positive!

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