AMENAZAS DEBILIDADES

The tax administration should aim at implementing audit programs that balance coverage, quality and deterrence of non-compliance. These programs should be based on processes and procedures that are objective, efficient, effective, fair, and transparent. Key performance indicators should be established and monitored to ensure that these objectives are being met.

9.1

DEFINING WORK CONTENT

Critical job elements and desired performance standards should be documented. Job elements are the set of actions that are followed in order to achieve a given target.

Monitoring of time taken to perform audits will provide information on relative yields and enhance future audit planning by focusing on return of investment. There should be a systematic capturing of data that enables the generation of reports that provide the following information across tax offices:

• Number of audits completed per person-year;

• Number of audits completed by type of tax, type of audit, and type of taxpayer;

• Additional revenue and penalties collected;

• Proportion of taxpayers audited by tax type and audit type compared to the total taxpayer population;

• Length of audit time by taxpayer type and audit type;

• Percentage of audits resulting in revised assessment;

• Percentage of audits where taxpayer accepted assessment and vice versa;

• Percentage of taxes assessed where taxpayer did not seek review and vice versa;

• Percentage of tax assessed where taxpayers’ appeals were not successful and vice versa; and

• Percentage of audits completed within prescribed time limits, by type of audit.

The design of the performance measurement indicators will depend on the data available and the costs of processing them. In addition to the performance indicator deduced from the above, quality measures described in Chapter 7 should also be used.

9.2

SETTING PERFORMANCE STANDARDS

Single figures in respect of the above measures are meaningless on their own, and therefore it is necessary to analyze them against planned outputs, patterns and trends over a period of time to assess the effectiveness of the audit program. Performance standards should take into account both work content and provisions of the law (such as the time required to notify a taxpayer of any intended action).

9.3

WORK LOAD VERSUS QUALITY

In setting the standard turnaround times, the tax administration should focus more on quality output rather than volume of completed work. A maximum turnaround time should be selected for each audit or taxpayer type, and measured in business days. Examples of turnaround schedules are shown in Tables 9.1 and 9.2 below.

Table 9.1: Example of Standard Turnaround Time Schedule by Tax Head (in Business Days)

Tax Type/Head Prepare and Notify Taxpayer

Provision for Taxpayer Response Time

Conduct Audit Total Time

VAT

Table 9.2: Example of Standard Turnaround Time Schedule by Taxpayer Segment (In Business Days)

Tax Type/Head Prepare and Notify Taxpayer

Provision for Taxpayer Response Time

Conduct Audit Total Time

Small

The tax administration should choose the method to adopt depending on the nature or structure of its audit teams and the risk profiling. The business days are the cumulative days spent by a team on a case. Where, for example, 3 staff members work on a case for 5 days, the effective business days are 15.

9.4

KEY PERFORMANCE INDICATORS

The tax administration should set key performance indicators (KPIs) per audit team depending on the types of audit cases, competency of auditors, and the standard turnaround times. However, as noted in Section 9.1 above, single figures on their own are meaningless, and therefore it is necessary to analyze them against planned outputs, patterns and trends over a period of time. A range of KPIs need to be used to properly measure effectiveness of audit. Standard audit times should be used as a guide and not be overly prescriptive. Over-standardization of timeframes for audits may result in simple audits taking longer than necessary, or issues in complex audits not being properly considered due to time constraints. It is therefore advisable to allow for adjustment of standard times when developing the audit case plan, taking into account the identified issues and risks. As noted in Table 9.2, standard audit times and other performance measures should also be differentiated between taxpayer segments.

9.5

SERVICE LEVEL AGREEMENTS

Service level agreements (SLA) should be concluded between units which feed into each other regarding the quality, quantity and timing of cases passed between them. All units should agree on the SLA’s which should be realistic and provide ease of accountability. A unit which persistently fails to meet the SLA should be sanctioned after an enquiry into the causes of repeated breaches. The SLA’s should be reviewed periodically for relevance and effectiveness.

9.6

MEASURING COMPLIANCE IMPROVEMENT

The ultimate objective of the audit program is generally an improvement of compliance.

Some tax administrations therefore attempt to measure improvement in compliance by monitoring the tax compliance gap through project-based audits on specific sectors of the taxpayer population. Others monitor change in taxpayer compliance with record keeping, filing and payment obligations, as well as movements in reported tax subsequent to audit activities, as measures of the effectiveness of audit programs. Some administrations also conduct surveys of the taxpayer population to assess attitude to audit and compliance. It is prudent to adopt a hybrid of parameters to measure improvement in compliance.