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Horizontal Monitoring

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1 Horizontal Monitoring
Theo Poolen Deputy Director-General Dutch Tax and Customs Administration (DTCA)‏ January 2009 SII April 2008 1

2 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 SII April 2008 2

3 Towards a new approach Changes in society and culture
Input from business community - no trust business-tax administration - backlog International developments corporate governance SII April 2008 3

4 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 SII April 2008 4

5 Segments 1,500 LB 11,000 MSB’s 1,200,000 small businesses 5

6 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 6

7 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 7

8 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) 8

9 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 9

10 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’’ 10

11 in control statement (SOX)
SAS70 (TPM) Peeling the onion Audit annual accounts SOX-audit Tax audit External audit Tax Assurance Internal audit in control statement (SOX) Business process Tax audit Internal control Other techniques COSO 11

12 Our work changes transactions Work will primarily be aimed at the TCF
Business cycles Business cycles transactions Work will primarily be aimed at the TCF BCF/TCF Testing the TCF Audit tolerance Tax issues (‘risks’) Discussion in advance Tax returns 12

13 Horizontal monitoring small businesses
Solving compliance issues in advance with trade and industry organizations Promoting the use of trusted administrative software Tax intermediaries SII April 2008 13

14 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 SII April 2008 14

15 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 horizontal monitoring Tax payer Tax intermediaries Tax administration SII April 2008 15

16 thank you for your attention

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