Eje 3: Investigación, educación y gestión del

Many tax administrations that have adopted a taxpayer segment-based model have a large taxpayer unit, which is a division dedicated to taxpayer services, audits, and other tax affairs of large taxpayers, typically large enterprises. While such a unit chiefly deals with corporations, some tax administrations also have a unit dedicated to high net worth individuals (HNWIs).

There are broadly four benefits to tax administrations from setting up a division that focuses on large taxpayers. First, as large enterprises often conduct their business operations countrywide beyond a single district, it is difficult for a district tax office, the jurisdiction of which is geographically limited, to cover large taxpayers’ wide range of business activities. Therefore, the large taxpayer unit is typically located in the headquarters or provincial tax offices that have a wider jurisdiction and can therefore deal with large taxpayers’ tax affairs more effectively.

Second, a relatively small number of large taxpayers contributes a large proportion of tax Figure 6 Organization Chart of the Inland Revenue Authority of Singapore

Individual

GST = goods and service tax.

Source: Inland Revenue Authority of Singapore.

revenues in many jurisdictions. For example, in Japan, large taxpayers, which make up less than 1% of total enterprises, contribute two-thirds to the total amount of declared taxable income from all enterprises. Therefore, it is important for tax administrations to dedicate a fair amount of resources to large taxpayers.

Third, large enterprises tend to have characteristics different from other small and medium-sized businesses, for example, they often have international transactions, ICT-based accounting, and complicated tax planning schemes to minimize tax burdens. Tax administrations are, therefore, required to have audit teams equipped with specific knowledge and expertise to deal with large enterprises. Fourth, as large enterprises are often subject to not only corporate income tax but also to multiple taxes including VAT, withholding personal income tax with respect to the salaries of employees, and other indirect taxes such as liquor tax and petroleum tax, it is efficient from both taxpayers’ and tax authorities’ perspectives that large taxpayers have a designated single unit in charge of large taxpayers rather than different units for different tax purposes.

Table 5 shows whether tax administrations have a large taxpayer unit, and if they do, its operations.

The majority of revenue bodies (16 out of the 22 surveyed) have such a unit. Among the remaining 6 jurisdictions, the Internal Revenue Commission of Papua New Guinea and the Internal Revenue Department of Myanmar are considering setting up such a division.

Table 5 Large Taxpayer Unit Operations

Jurisdiction

Large Taxpayer

Unit If Yes, Criteria of Large Taxpayers

Cambodia Yes Turnover over $250,000

and international companies

2,000 102 No

People’s Republic of China^a Yes Combination of industry,

turnover, and ownership (45 at

headquarters) 2,600 Yes

Hong Kong, China No No

India Yes The amount of taxes paid

in five major cities 172 165 No

Indonesia Yes 1,073 618 Yes

Japan Yes Capital over ¥100 million 32,010 2,326 Yes

Republic of Korea Yes Total income over

W50 billion 5,185 (regional

offices) No

Kyrgyz Republic Yes Revenue from

trade activity over Som50 million and tax paid over Som2.5 million^b

317c 54^d No

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With respect to the criteria for defining large taxpayers, each country has different criteria, often a combination of quantitative and qualitative criteria. For example, Singapore uses net tax assessed, turnover, and complexity as criteria to identify large taxpayers for corporate income tax purposes.

While the criteria vary across jurisdictions, the three most often employed criteria are turnover;

qualitative factors such as specific industries, ownership, and complexity; and the amount of taxes paid or assessed.

Jurisdiction

Large Taxpayer

Unit If Yes, Criteria of Large Taxpayers Lao People’s Democratic Republic Yes Turnover over KN5 billion 1,034 25 No

Malaysia Yes Specific industries Yes^e

Maldives No No

New Zealand Yes Turnover over NZ$100

million, or in specialized industries

15,600 177 Yes

Papua New Guinea^f No No

Philippines^g Yes Taxes paid, gross sales, and

net assets 1,934 645 No

Singapore Yes Tax assessed, turnover,

and complexity for

Tajikistan Yes Total income, tax paid, and

the number of employees 243 75 No

Thailand Yes Turnover over B2 billion 2,000 800 No

a  People’s Republic of China: There is a dedicated large taxpayer department in the State Administration of Taxation (SAT), but currently there is no national uniform standard for large taxpayers. The large taxpayer department in the SAT head office has 21 staff members and deals with 45 large taxpayers, who are selected based on a combination of industry, turnover, and ownership criteria. SAT offices at and below provincial levels set their own standards for large taxpayers, taking into consideration the differing levels of economic development across provinces. In total, there are around 2,600 SAT staff members dealing with large businesses.

b  Kyrgyz Republic: The criteria for selecting large taxpayers are approved by Government Decree No. 144 of the Kyrgyz Republic dated 7 April 2011.

c Kyrgyz Republic: The large taxpayer unit (LTU) deals with 276 large taxpayers and the LTU in the southern region with 41.

d Kyrgyz Republic: The LTU has 45 staff members and the LTU in the southern region has nine.

e Malaysia: The unit also administers the tax affairs of very important persons.

f Papua New Guinea: The Inland Revenue Commission is considering implementing a large taxpayer office.

g Philippines: See Revenue Regulations No. 1-98 and No. 17-2010.

Sources: ADB, Organisation for Economic Co-operation and Development.

Table 5 Continued