One of the main areas of agreement arising out of the sixth meeting of the OECD Forum on Tax Administration on 15-16 September 2010 is the proposal for joint audits by two or more revenue bodies. The agreement to progress the establishment of a joint audit process is based on a “Joint Audit Report” commissioned by the OECD Forum on Tax Administration to examine how international coordination and collaboration could be advanced through the use of joint audits.
This report sets out the findings and recommendations based on a project carried out by a group consisting of 13 countries: Australia, Canada, Denmark, France, Japan, Korea, Mexico, Netherlands, South Africa, Spain, Turkey, the United Kingdom, and the United States of America.
The areas of tax compliance identified as suitable for a joint audit approach in the Report include
- Transfer Pricing Issues
- Taxpayer residency or Permanent Establishment determinations
- Analysis of complex tax structures and entities operating in tax havens and aggressive tax planning schemes
- Complex business restructuring processes
- Particular tax frauds in Value Added Tax
- Using joint audits for criminal investigations
The Report also identified a number of challenges and put forward recommendations to implement a joint audit system in the following broad categories:
- Issues deriving from the domestic legal structure.
- Issues deriving from differences in revenue bodies administrative procedures.
- Different audit standards.
- Possible expanded role of Competent Authority.
The report concludes that joint audits should provide participating countries with streamlined audit efforts, reduced incidences of double taxation, and accelerated mutual agreement procedure. Joint audits also have the potential to shorten examination processes and reduce costs, both for revenue authorities and for taxpayers.
Full details of the Joint Audit Report are available here