Australia

Details

  • Service: Tax, Indirect Tax
  • Type: Regulatory update
  • Date: 11/12/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Jacqui Hardwick

Jacqui Hardwick
Director, Tax

+61 2 9335 7784

jhardwick@kpmg.com.au

GST – The business case for Data Analytics 

by Jacqui Hardwick, Indirect Tax Specialist and Roseanne Ross, Indirect Tax Specialist

Mr Compliance is a tax manager, who recently attended a KPMG seminar on the Australian Taxation Office's (ATO) compliance program and its increasing use of computer assisted verification testing (CAV), as part of its focus on the integrity of business systems (IBS).

Whilst Mr Compliance prepares the goods and services tax (GST) return business activity statement (BAS) using reports generated from the 'You Beaut' accounting system, the ATO's approach is concerning given that the information in the system originates from non-tax technical staff in various business locations.

 

The ATO asks Mr Compliance to complete an IBS questionnaire and to substantiate that the processes and controls enable him to be satisfied that the BAS are accurate.

 

Mr Compliance has no budget but wishes to obtain funding to get assistance to undertake a pre-emptive review of the data, given that 30 percent of all these ATO assurance reviews are escalated for further compliance activity if deficiencies (risks) are uncovered at this stage.

 

In KPMG’s experience, a compelling business case can be drawn from empirical evidence suggesting that 1-6 percent of all data entered is incorrect, due to incorrect system configuration and human error. If this error rate is applied to the GST throughput (i.e. gross GST payable and input tax credits claimable) the monetary risks and rewards can be significant, especially when general interest charges (11 percent per annum) and penalties (25 percent to 75 percent) are factored into the equation and a value is ascribed to Mr Compliance's time dealing with the ATO.

 

To proactively manage these issues, businesses should conduct regular data analytics projects to supplement GST governance programs. Projects conducted by KPMG demonstrate that most data analytics reviews are self-funding, due to the likelihood of identifying cost recoveries and cash flow benefits as well as offering the opportunity to mitigate penalties and interest through voluntary disclosures, should short payments be identified.

 

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