Compliance Risk Management

Tax Compliance and Risk

Management Overview
Session Objective
Develop an understanding of the
three key concepts for this course:
• Tax compliance
• Risk
• Risk Management

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 • The requirement for
taxpayer and third
parties to comply with
What is Tax their obligations under
tax law and regulations
Compliance? • The major obligation is
that the taxpayer pays
the required taxes and
duties on time and in
full
• There will also be
obligations in relation
to information
reporting and record
keeping

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Four Pillars of Compliance
In any Taxation System, Taxpayers are usually required to comply with obligations to:

1 2 3 4
REGISTER FILE REPORT PAY
Register, if File a return form, Provide accurate Pay any tax liability
required to do so. on time and in full. information on that may result in
their tax affairs . full and on time.

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Question
What is meant by describing something
as a risk?
How would you define risk?

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 • “The possibility of loss, injury,
or other adverse or unwelcome
Risk Basics -‐ circumstance; a chance or
situation involving such a
Definition possibility (Oxford English
Dictionary)
• The possibility of incurring
misfortune or loss (Collins
English Dictionary)
• The effect or impact of key
uncertainties on meeting
objectives” ISO31000

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 • Uncertainties related
to taxpayers meeting
their tax obligations
What are Tax • to register
Risks? • to file
• to report
• to pay

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 Vision:
Contribute to the nation building process through
the development of an effective revenue system.
DRC Vision
Mission:
and Mission To ensure that the tax and customs
administration has the capacity to collect taxes
efficiently and effectively at minimum cost
through impartial and consistent enforcement of
regulations, and to provide a convenient and
honest service to the taxpayers.

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Question
What risks other than tax risks might
have an impact on a DRCs ability to
meet it’s vision and mission.

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Tax authorities face two types of
risks
•Compliance risks, where revenue may be lost if
businesses and individuals fail to meet their
obligations as taxpayers (registering, filing, making
payments and reporting accurately).

•Institutional risks, where the tax administration

functions may be interrupted or jeopardized due
to internal or external factors.

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 • A systemic approach to
dealing with risk to
ensure objectives are
What is Risk achieved.

Management? • It occurs at several

levels – strategic,
enterprise, operational
and tactical
• Made up of a series of
processes, activities
and actions to ensure
the organization faces,
identifies and
harnesses its risks and
opportunities

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Why practice Answer:
risk • Increase odds of success
• To achieve objectives it is
management? critical key risks are
identified and managed (as
a form of defence)
• Informs decision making
and improves strategy,
plans and governance.

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Why is Risk Management So
Important for Tax Administration?
• Tax Administrations face numerous risks that
could adversely affect revenue and tax
operations.

• Risk management is essential for effective tax

administration. It plays a key part in shaping
how resources are used by the tax
administration to maximize its goals effectively.

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Risk
Risks must be managed
Management effectively using a
Approach disciplined, structured
approach to identify,
assess, prioritize and
mitigate risk

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 • The risk management
Risk framework and systems should
be aligned with and reflect
Management existing standards
• Many countries follow an
Framework International standard for Risk
Management.
• This enables a common risk
system and common risk
language across the
organisation
• To support the system,
organizations develop common
processes.

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OECD Compliance Risk Management Model

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Risk Management Applies
Broadly in Tax Administration?

• The concepts and principles of risk management

can be applied broadly within a tax
organization.
• The organization’s annual strategic plan
• Monthly team plans
• Day to day organizational activities.

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Question
To what extent is risk management
practiced in DRC ?

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 Structured and
multi-‐year
approach to
Evaluation of compliance risks
effectiveness of Identification,
major mitigation assessment,
activities as quantification
feedback for and prioritization
future planning of risks

Tax Compliance
Risk Compliance
improvement
Compliance risks
structured
around taxpayer

Management:
programs and risk
segments,
mitigation taxpayer
strategies Good practices in obligations and
core taxes

Recognized Good
COMPLIANCE RISK
MANAGEMENT

Practice -‐Tax gap analysis

-‐Studies into
Intelligence
gathering and
hidden activities research to
-‐Studies of identify
taxpayer attitude compliance levels
towards taxes and risks

-‐Analysis of tax
Third party audits and
information from declarations
a variety of -‐Analysis of
sources environmental
scanning 22
Source: TADAT POA 2: Risk Management
 • Tax Compliance is ensuring
taxpayers comply with their
obligations under tax law and
regulations

Review • There are four broad areas of

tax compliance, registering,
filing, reporting and paying.
• Risks are uncertainties which
may impact on achieving your
objectives
• Risk management is a
systematic process to identify
and manage risks
• Tax authorities need to manage
both tax compliance and
institutional risk

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