Large taxpayer operations

The move to a “customer segment” structure recognized that the needs of taxpayers in each segment were quite different; serving them effectively required diverse services and distinct ways of delivering those services. As part of this restructure, the Large and Mid-Size Business Division (LMSB) was established to administer the tax affairs of the largest taxpayers.

The stated mission of the LMSB operating division:

•to be a world-class organization, responsive to the needs of its customers in a global environment, while applying innovative approaches to customer service and compliance;

•to apply the tax laws with integrity and fairness through a highly skilled and satisfied workforce in an environment of inclusion, where each employee can make a maximum contribution to the mission of the team.

The Large and Mid-Size Business (LMSB) Division serves corporations, subchapter S corporations, and partnerships with assets greater than $10million.

LMSB is organized along five industry lines, with each industry headquarters located where the core businesses reside. These industries are:

•Heavy Manufacturing and Transportation;

•Natural Resources and Construction;

•Financial Services;

•Communications, Technology and Media; and

•Retailers, Food, Pharmaceuticals and Healthcare.

The Office of Field Specialists completes the field operations.

Headquarters functions that support the field include:

•International;

•Pre-filing and Technical Guidance;

•Strategy, Research, and Programme Planning;

•Management and Finance;

•Performance Management, Quality Assurance and Audit Assistance;

•Communication and Liaison;

•Business Systems Planning;

•EEO and Diversity;

•Division Counsel; and

•Division Appeals.

Experience of some other countries-

ARGENTINA

LTO began in Argentina in the late 1970s and was copied by other Latin American countries, notably Peru, Bolivia and Uruguay, in the early 1980s.

A single LTU in Buenos Aires monitors 3,700 taxpayers who account for approximately 50 per cent of all revenue generated.

KENYA

The Large Taxpayers Office (LTO), headed by a Commissioner was formed as an operations unit in 1998 to provide one-stop shop services in the administration of Income Tax and VAT matters affecting large taxpayers.  It was established as a fully-fledged Department in the year 2006 with a staff complement of 262, with the sole purpose of administering domestic tax matters affecting large taxpayers.

The primary objective of the LTO has been to promote efficient tax administration with the goal of achieving compliance at minimum cost to both taxpayers and the Kenya Revenue Authority (KRA).

The LTO aims to improve services to Kenya’s largest taxpayers by means of focused customer care informed through better interaction and consultation. In doing so the LTO will coordinate closely with its counterpart, the Domestic Revenue department, on all policy matters affecting the administration of domestic taxes.

The LTO’s mandate covers the administration of income tax, VAT, domestic excise and agency taxes and levies in respect of the following:

•All Companies with annual turnover in excess of Kshs.750 million plus their Subsidiaries and Associates

•Banks and insurance companies irrespective of turnover threshold

•Manufacturers of wines and spirits irrespective of turnover threshold.

•State corporations with annual turnover/budget in excess of Kshs. 750 million

•Head Office operations of Central Government Ministries and Departments

•Local Authorities with City status.

•Individuals of High Net Worth

The taxpayer population as at September 2010 comprised approximately 1100 institutions contributing about 75% of domestic taxes revenue.

There are 4 core units within the LTO’s service delivery chain:

Taxpayer Services                                                           

•Frequently Asked Questions

•Refunds

•Taxpayer Education

•Taxpayer Recruitment

Compliance & Debt Management       

•Relationship Management

•Collection

•Queries and disputes

•Enforcement

•Returns Processing (http://www.revenue.go.ke/ito/itorelationshipmngt.html)

Audit                                                         

•Procedural audits

•Refund claims audits

•Objections and Appeals

Policy formulation

This function is jointly shared with the Domestic Revenue department.  It deals with the policy framework in respect of the following:

•Service standards – timeliness in processing returns, queries, refunds.

•Legal queries – legislation, objections, appeals, tribunal proceedings.

•Audit – standards, quality assurance, assignment selection.

•Compliance & Debt Management – taxpayer statements, dispute resolution, distress action.

•Double Tax Agreements.

   Compliance by large taxpayers is of great significance given their contribution to the economy generally and to tax revenue specifically. Moreover, the risks involved in this market segment rotate mostly around complex tax planning arrangements that seek to exploit the grey areas within tax law.

Because of these revenue risks, the large taxpayer segment usually attracts relatively intense audit effort.                            LAHORE

The LTU started functioning with around 200 taxpayers of Lahore Region. It is an integrated tax administration, catering for all federal domestic taxes, such as income tax, sales tax and federal excise duty operating jointly from one location.

This interfacing and integration has helped substantially to smooth-out the tax administration. The LTU handles all domestic taxes (income tax, sales tax & federal excises).  The following sectors qualify for the criteria laid down for selection of cases in the LTU:

1. Automobiles

2. Banks

3. Beverages

4. Cement

5. Non Residents

6. Oil and Gas

7. Paper and paper Board

8. Sugar

9. Textiles

PAKISTAN   LTU Karachi,

The LTU was launched on 1st July 2002, symbolizing the new face of Federal Board of Revenue tax administration. Taxpayers belonging to financial, pharmaceutical and oil and gas sectors are in the LTO. The Tax Administration Reforms Programme in Pakistan (TARP) envisages a complete shift from conventional bureaucratic concept of enforcement to voluntary compliance, from periodic assessment to risk based audit.                                 

PERU

The earliest LTU began in Peru in 1982.  LTU in Lima was assigned responsibilities for the most important taxpayers nation wide and it followed the Argentina model.

TANZANIA

The Large Taxpayers Department (LTD) was formed on 1st October, 2001 as part of the reform strategies the Tanzania Revenue Authority (TRA) embarked upon with a view to improving and modernizing tax administration in the country.

The LTD is a one- stop centre for  domestic  taxes such as the Corporation tax,  Excise Duty, Employment taxes, VAT, etc., payable by a large taxpayer. There were only one hundred taxpayers at the commencement of the LTD, but there are over 400 taxpayers as at 2010.  The main criteria for selection of a large taxpayer at the time the Department was established were mainly the aggregate tax payment exceeding Tshs. 400 million (U.S $400,000) for five consecutive years and also preferred specific sectors like banks, and oil marketing companies.