The Audit Function
The primary purpose of the Audit Unit at the Inland Revenue Department (IRD) is to detect underreporting and tax evasion. That is, the Audit Function focuses on making sure that what customers report and remit to IRD is accurate.
In the past, there was not much of an Audit Function in the Inland Revenue Department. A strong focus is currently being placed on revamping and strengthening the function and staffing the Unit with competent human resources. There are two Auditors in the Unit who are working assiduously to bring the Unit up to par and meet the needs of the Department.
The goal is to create a robust Audit Function and to be proactive rather than reactive from both an internal and external perspective. The current Audit Function is geared towards directing policy and procedures from the legislative perspective and then translating that into how things are done on a day to day basis. The Audit Function therefore plays an important role in continually reviewing operations and day to day transactions thereby ensuring that what is done daily is in accordance with prescribed legislation.
A Strategic Plan which includes Key Performance Indicators is used to guide the Auditors’ work and productivity. The Audit Function has three main outcomes for this year:
1) Transparency in selecting taxpayers to be audited with use of a risk assessment criteria. It is important to note that there is a framework for which persons and organisations are selected for audits. It is a transparent system guided by and backed by legislation.
2) Increasing coverage of taxpayers being audited (increase the number of audits being conducted).
3) Increase revenue collections as underreporting is detected.
The existing Audit Function is a more robust system with greater consistency. One of the outcomes is increased transparency in situations so Auditors cannot be viewed as being biased. Legislation, as mentioned previously, is important and is used as back-up/ support for the Audit Function when dealing with customers. This has led to increased compliance. The development of the Audit Function still has a long way to go but the Auditors are making progress in creating a workable and effective system.
Cleaning up customers’ accounts currently takes up a large portion of the Auditors’ day. Customer accounts with the highest level of arrears are being reviewed to validate those arrears. IRD currently has a computerised system that keeps track of all transactions and an effort is being made to ensure all other information is also recorded in the system. Previously, the system was paper-based and in some cases important documents or information may have been stored in email or on paper in a physical file in a cabinet that has been stored away for quite some time. This information may not be brought to light until the customer comes in and shares it. As much as possible, the Department is currently aiming to keep all customer information on the computer system so it can be reliable and up to date. It is important for all departments to be able to access the same information to truly create synergies and to save time and effort. The primary goal with reviewing and cleaning up accounts is to ensure that information (including interest, charges or penalties) on accounts is accurate and can be justified by the Department. This is an important first step. Once there is a clean base from which to work, the Audit Unit will look more closely at underreporting and non-filing.
Findings from reviewing customers’ arrears may also show that a significant number of persons are not complying because of lack of knowledge. That information will be transferred to the Taxpayer Services Unit and will be used to directly educate the customer and/or the public as a whole. The idea is to create as much synergies in the Department as possible through the Audit Function.
As the Audit Unit is being revamped there are some challenges. Customers may not necessarily see the value of audit yet, or think that auditors just want information about their business. This is not true. Auditors have the right to – and only ask for and require information that is pertinent to the job. That is, if tax evasion is suspected or if the Auditors simply want to verify a figure is correct, they have the right to request further information or visit the establishment and review accounts to verify the numbers submitted. The right to do this, and the procedure by which this can be done, are backed by legislation in the Inland Revenue Department Act and the Inland Revenue Department Amendments Act 2018. Confidentiality is also paramount at the Inland Revenue Department and this is stated clearly in the Act as well. Customers can rest assured that their information is protected. Limited resources in the Unit are also a challenge. However, none of the factors mentioned are deterring the Auditors from doing as much as they can – and they are making significant strides.
Compliance and Audit Functions are complementary. The Units work closely together in order for efforts to materialise into collections. Audit is usually the first Unit to identify any inconsistencies and launch an investigation if necessary. If an entity has indeed under reported, the bill of the entity is changed to reflect the difference. The Compliance Officers will work closely with Auditors to ensure the issue is fully resolved. Both Departments rely on third party information to do the job and work closely with Customs, Immigration, Lands and Surveys, Social Security etc. to increase compliance.
Policies and procedures are essential at the Inland Revenue Department. All taxpayers should know and understand their tax obligations and are encouraged to comply with tax laws and not try to evade paying taxes. Taxpayers will be held accountable if they do and the Compliance Team has the authority and legislative support to take further actions to encourage compliance.
Persons are encouraged to visit the Inland Revenue Department during the hours of 8:00 am to 3:00 pm if they have any questions or concerns. Alternatively, the Department can be reached at 497-8334 or at inlandrevenue@gov.ai. IRD also has an active Facebook page – like and follow @AnguillaIRD.
