full title of presentation (change this on all the slide masters) strategic leadership in a...

FULL TITLE OF PRESENTATION (change this on all the slide masters) www.ato.gov.au

Strategic leadership in a technical and policy delivery environment

The Tax Office experience of compliance management in the large business sector

28 May 2009

Jim KillalyDeputy CommissionerLarge Business & International (Case Leadership)Australian Taxation Office

Medicare Leader Series

Comparative studies in compliance management

The Strategic Management System models - how they all fit together

1) Leadership2) Strategic Innovation3) Harnessing New Technologies4) Mastering Complexity5) Speed of Learning

The 5 Trimtabs

Internal Capabilities MapInternal Capabilities Map

Resources

OperationalPlans

CultureDistributed

Intelligence Networks

Strategic FrameworkStrategic

Intelligence Systems

OrganisationalConfiguration

Productivity &Performance

Systems

Our Challenge(Ambition)

• Collect budgeted revenue• Implement tax reform• Address risks to tax compliance• Maintain community confidence

Our Driving Force(Heartbeat)

Knowledge of the law and our expertise in applying it

Ability to collect, understand anduse information to manage the

whole system

Our PurposeManage and shape

systems that support and fundservices for Australians and

give effect to social and economic policy

Our VisionBe world’s best at what we

do and a leader in theinternational community

The Value We Add(Niche)

Our collective insight intothe whole system

Our concern to safeguard theinterest of the whole

community

Our to design and manage regulatory systems

shaping shaping ourour futurefuture

Our Guiding PrinciplesOffer solutions that are in the community interest, yet match

the individual circumstances of our clients

Be open and accountable with clients and each otherEstablish appropriate alliances

Anticipate, identify and manage issues in real-timeAct with integrity

Meet our internal and external obligations

Strategic Framework

Viable Systems Model

2

1

3*3

4

5

1 Operational Elements2 Co-ordination3* Audit3 Control4 Intelligence5 Identity

Conversation

Sensing

Designing

Makingsense

Hames and Oka ATO Strategic Navigation Model

AlternativeFutures

InternalCapabilit

y

TransactionalEnvironment

ContextualEnvironment

PredictedFuture

DesiredFuture

Actioning

Niche

Conversation

Sensing

Designing

Actioning

Makingsense

Hames and Oka ATO Strategic Navigation Model

Alternative

Futures

InternalCapabilit

y

Transactional

Environment

ContextualEnvironme

nt

PredictedFuture

DesiredFuture

NicheCompetitors, Alliances

demographic

Alignment requires constant analysis of fit and capability

External context

Internal capability


ocial

conomic

olitical

echnological [ways of knowing, doing, understanding]

nvironmental

onal [The pervading ethical issues and perspectives]

ax technical

How are these relevant to us and how might they impact?

SSEEPPTTEETTTT

The Context in which the Tax System (and Medicare) operates

Social

Tonal

Environmental

Technological

Political

Economic

Team Tasks

The interrelatedness ofenvironmental perspectives


Social (some examples)

• Characteristics of the population and business sector – the psyche of the multinational enterprise; social demographics

• Attitudes to the law and trends in compliance behaviour• Inbound and outbound migration of people, businesses, technologies, therapies• Debate about what it means to be an Australian, community beliefs and values• Attitudes to citizenship, community, individualism• Corporate DNA (and professional businesses) and approaches to doing business• Trends in demographics, wellbeing, education levels, ageing• Indigenous Australia• Attitudes, participation, diversity in education and work life• Australia’s relationships with the rest of the world – national psyche• Sense of security, cohesion• Extent of and trends in pluralism, fundamentalism, nationalism, ethnicity• Country and city; accessibility to services• Health trends


Economic (some examples)

• Global economic Context, developments and broad policy issues

Major trading and investment relationships; patterns and trends, structural dynamics and drivers

Degree of fit of domestic with international and impacts

Commodity prices

Energy prices

Global interest rates and bond yields

Exchange rates

• Industry OutlookGovernment sector c/f business sector (pharmaceutical benefits, health system, insurance, licensing)

Farm sector

Housing sector

Manufacturing and mining

Financial services

Pharmaceuticals and health services

• Profitability and productivity Patterns and trends in the domestic economy

Sectoral issues like health services

• Domestic EconomySupply/demand

Supply side issues; accessibility; awareness of products and services; affordability

Nature and extent of stocks and flows of goods, services, property within Australian economy; intentionality regarding future economy

Skills; awareness of health issues (eg aboriginal welfare, men’s health)

Dimensions and integrity of financial system

Productivity issues, infrastructure (including health infrastructure)

Economic relations with other countries and regions

Global trade and investment trends (net importer)

Nature and depth of capital and debt markets

Venture capital market

National savings trends

Relativity of AUD to other currencies – trends, forecast, where are the foreign exchange risks

Patterns and trends in consumption (eg health services)

Trends in employment and remuneration, wealth and poverty

Cost of money/interest rates – trend, forecast, price set – offshore/onshore


Political (some examples)

• Trends in Commonwealth/State relations - Security, crime, resources, infrastructure, service delivery, efficiency

• “Government” at all levels is constantly evolving and redefining itself and what it will and will not do, and with whom

- What is a public good? Public service? • Separation of powers, role of the public sector, values, trends in relations between the

legislature and the courts• Expectations and issues regarding accountability and how that is demonstrated• International relations, tensions, trends in alliances, associations, markets• Party political agendas, directions, philosophies• Relations between the political level, public sector and influential sectors of the community and

industry; competitors and strategic alliances• Community expectations of “government”• Australia’s place in the world, treaty networks and relations with other countries• Nature and extent of Australia’s participation in global and regional forums, agendas and

outlook.• ATO and Medicare as part of the Australian Public Service and serving a constituency• Whole of government; departmental niche (the value we add over and above what we do; our

unique perspective; how we best position and manage key relationships in the strategic environment; evolving and being appropriate in whatever context; ability to shape)


Technological (some examples)

• Ways of knowing, doing, understanding – not just IT• Information technology, communications, electronic forms of dealing (eg Hicaps)

- Levels of participation, alienation, integration, compatibility, mobility- ‘Big brother’

• New ways of business (bigger medical practices, less relationship based, promotion of diagnostics, specialisations, new drugs & therapies; cautionary and preventative approaches)

• Advances in psychology, economics, financial engineering, medicine, health services, nanotechnology, physics, skill sets generally

• Nuclear technology, renewable and non-renewable energy• Data and text mining and the field of analytics, pattern and trend identification / analysis• Emotional intelligence and relationship management• Business analysis and financial analysis and modelling (Medicare business data)• Systemic thinking; tools for understanding and managing complexity (eg influence

diagrams, Boolean curves)• Leadership and change management – situational, distributed, differentiated, combined• Educational theory and methodologies to increase speed of learning and synthesis• Space technology, astrophysics, satellites, “star wars”, global diagnostics, widespread

availability of health information• Brand and channel management


Environmental (some examples)

• Global warming (environmental footprints)• Climate and weather patterns and phenomena (Cyclone Larry)

- In Australia and other countries (bushfires, earthquakes, king tides, tsunamis)• Shifts in tectonic plates - the arc of instability• Water management and salinity

- Shifting face of the earth- The ‘Chandler wobble’

• Management of resource extraction and environmental restoration and rehabilitation (minerals, deforestation)

• Fish stocks and other food sources• Pollution (all sources) and waste management• Management of nuclear technologies (energy, medicine and weapons)• Population trends and impacts, human geography, urbanisation, regional development• Health and hygiene (viral and other infections and diseases)• Transport, Construction, Infrastructure • Tyranny of distance

- Communication responses; remote management


Tonal (some examples)

• The big ethical issues being debated and important current themes• “Failed states” “The axis of evil”• Citizenship (individual and corporate) and migration• Value based organisations• Religious tolerance/intolerance/significance• Fairness – rich and poor – housing affordability – the working poor• Marriage, adoption, rights of children• Lessons from Glenn Wheatley imprisonment• Extent to which the state should be able to intrude into family life• Violence against women and children• The limits of medical and scientific research and experimentation• Be alert, not alarmed – provide information – increased surveillance• Entitlement versus self sufficiency• Extent of responsibilities to the disadvantaged and alienated• Employment and workplace relations• Cohesiveness of Australian society• Personal responsibility; State and Commonwealth responsibilities; community expectations• Individual rights and community interests• Environmental responsibility


Tax technical (some examples)

• The end point, not the starting point!• Budget and Tax Reform measures – constancy of change and complexity present

risks• Reviews – constant need to keep sharpening our game on the key things• Trends in tax planning – varying appetites for risk – identifying the governing mind

(sometimes it is outside the business) and pressures for and against compliance – each may require a different strategy but need to make a cohesive compliance framework that promotes cooperation and self-regulation and addresses non-compliance

• Procedural compliance patterns• International issues – transfer pricing and tax competition between countries• Risk assessment fieldwork and intelligence• Requests for advice and cooperative compliance products• Research, education and taxpayer assistance• Court and tribunal approaches and decisions and litigation strategy (literalism,

purposive, economic, legal); civil proceedings, prosecutions and penalties• Community reactions, representations• Rethinking the capability and resource options – program level and case level


1) Leadership2) Strategic Innovation3) Harnessing New Technologies (ways of knowing, doing and understanding)4) Mastering Complexity (understanding and managing it)5) Speed of LearningThe 5 Trimtabs

Internal Capabilities MapInternal Capabilities Map

Resources

DistributedIntelligence Networks

Strategic Framework

OrganisationalConfiguration

OperationalPlans

StrategicIntelligence Systems

Strategic intent should drive implementation and operations and shape organisational culture.The 5 Trimtabs radically accelerate organisational improvement !!

CultureProductivity &Performance

Systems

SegmentSegment

LB&ILB&I

ATOATO

Control & Mgt

(System 3)

Intelligence (System 4)

Environment

Operations (System 1)

Seg

Operations

Coord (System 2)

Identity & Leadership(System 5)

Audit &Change Engine

(System 3*)

Control & Mgt

(System 3)


Environment


LB&I

Operations

Coord (System 2)

Identity & Leadership

(System 5)

Audit & Change Engine

(System 3*)

Control & Mgt

(System 3)


Environment


Team

Operations

Coord (System 2)

Identity & Leadership

(System 5) Change Engine

(System 3*)

Case TeamCase Team

Source – The Viable Systems Model, Stafford Beer

Using the Viable Systems Model,Medicare strategic plan, market analysis, business performance statistics and external feedback (including surveys of key stakeholders if there are gaps) and benchmarking as a diagnostic set to evaluate the present organisational configuration and potential for improvement

Financial Services

Large clients

1X1 relationship

National Client GroupClient Management

LB&I High Level Design : Systemic Management - Strategic Market & Client Focus

Corporate BICTax

Planners HWIProjects commissioned by the

GMTProject capability

Subject Expertise

Energy and R

esources

Multi-M

edia &Info TechnologyFunctional Centres

LDD

Middle Market Alliance (LB&I)

$100MNow$250m

$1M

Other Centresof

Expertise

Priv’n

InnovationLosses

CGTITD

FinancialArrangements

Insur. &Super

Note: The placement of CoEs in Operations does not assume control by LB&I

$10M

Middle Market Alliance (SB) (Note: displaying the Alliance is not meant to imply increased ownership by LB&I)

National Industry Groups

The organisational configuration needs to strike an appropriate balance between specialisation and generalisation and market focus and functional expertise – taking an ‘outside in’ view of what is required


Shaping Our Future

Our PurposeTo shape and manage the tax system in ways that improve the social and economic wellbeing of the

Australian community.

Our VisionA tax system in which all sectors of the community and industry lend support and take an active interest, and

which best positions Australia domestically and internationally.

The Value We Add (Niche)Insights into economic activity and the global frameworks

that facilitate appropriate flows of revenue from our clients, while ensuring that Australia remains

internationally competitive.Insight into compliance behaviour and how to design laws and leveraged approaches that best support, facilitate and

encourage corporate citizenship and that promote cooperation between ourselves and our clients.

Insights into the alignment of tax administration with real-time market operations, and where the balance lies between the interests of our clients and the wider

community.

Our Challenge (Ambition)To continue to effect a smooth transition to the new tax system, while still collecting budgeted revenue.To minimise the disruption and cost to our clients.To ensure government and community confidence that our clients meet their Australian taxation obligations in a fair and equitable global tax system.To have an appropriate presence in the market, so that we know what is happening as events are unfolding.To nurture dynamic, effective and tailored relationships with all our stakeholders.To ensure that staff are skilled and equipped to meet existing requirements and respond rapidly to emerging needs.

Our Driving Force (Heartbeat)Our ability to master the complexities of today’s business environment, identifying emerging risks and opportunities, and being able to use our combined expertise in policy, legislation and administration to implement improvements in partnership with our clients.Our expertise and commitment in representing Australia’s revenue interests in the international community.Our ability to design systems that minimise operating costs for all stakeholders.

Our Guiding PrinciplesWe value our people, their efforts and achievements.We act with integrity, understanding, fairness and professionalism. This includes being open and accountable with each other and with our stakeholders.We follow the values and principles of the Taxpayers’ Charter and the Cooperative Compliance Model.We value good working relationships with all of our stakeholders, and employ codesign in managing and shaping tax systems to achieve outcomes that appropriately balance the various interests.We think and act systemically, employing strategically appropriate, whole-of-client responses in real time so as to effect mutually beneficial outcomes.We take account of all aspects of the tax system and our clients’ interactions with us and develop appropriate responses to address the underlying causes of patterns and trends as they are unfolding.We are continuously improving our capability, responsiveness and adaptiveness.

LB&I’s early adaption of the Strategic Navigation System

FULL TITLE OF PRESENTATION (change this on all the slide masters) www.ato.gov.auHigh Level Design for ATO Large Business & International Line (LB &I)

CORPORATE OUTCOMES LB & I ALIGNED OUTCOMES

Key alignment factors

Deliver toGovernment

Maintain communityconfidence

Minimise compliancecosts

Efficient, adaptiveATO

Policy and tax legislation which iseasier to comply with and enforce, and

is aligned with markets

Sustainable and predictable revenueflows

Tax paid on international dealingsrepresents Australia's fair share

Improve overall levels of compliance byLB&I clients

Reduce opportunities for aggressive taxplanning

Build mutual understanding with clients

Align with markets and worlds bestpractice

LB & I CORE PROCESSES*

Payment & product processing

Debt & lodgement enforcement

Policy & law development

Client identification

Research

Revenue monitoring and forecasting

Risk assessment

Fieldwork

Disputes & litigation

Technical advice

LB & I PRACTICES

Revenue management

Relationship management

Technical Excellence &Integrated Tax Design

Compliance Assurance

PURPOSE: Demonstrate how Corporate outcomes are achieved throughalignment of processes and practices

*Some core processes are owned by others but affect LB&I clients. For example, paymentprocessing, but LB&I checks all large refunds and manages payments of audit settlements.


Our DirectionATO Outcome

Effectively managed and shaped systems that:support and fund services for Australians; andgive effect to social and economic policy

To achieve this we will:

Deliver to GovernmentAgreed OutputsMaintenance of overall compliance

Tax design capabilityTax reform

Maintain community confidence

Minimise compliance costs

Efficient, adaptive ATO

LB&I Outcome

To ensure that Australia gets its fair share of tax by managing and shaping tax systems which reflect the realities faced by large business and associated key individuals in domestic and global markets

LB&I Measures of Success

Extent to which policy and tax legislation is shaped by LB&I and is easier to comply with, enforce and is aligned with markets. Our policy views actively sought and acted upon. The Govt fully briefed on current and emerging issues.

Extent to which LB&I revenue is sustainable and predictable and our share of budgeted revenue is collected.

Extent to which tax paid on international dealings represents Australia’s fair share.

Extent to which aggressive tax planning and its promotion is reduced.

Extent to which LB&I is improving overall compliance and satisfies the community that we are addressing non-compliance.

Extent to which LB&I clients are satisfied that we understand each other, we are fair and professional, and we take into account the impacts of our administration on them.

Extent to which LB&I is aligned with markets, achieving worlds best practice and delivering the LB&I Outcome.

LB&I’s early adaption of the Strategic Navigation System


The ‘Iceberg Model’ – Joining the dots

.

Events, transactions

and core processes

Patterns and Trends

Structural Drivers & Dynamics

World views

React

Anticipate

Design, change, influence

Transform

Levels of analysis, thinking and conversation

Externals Tax OfficeMedicare or any otherorganisation

•The ability to regularly move back and forward through the different levels allows us to connect the little picture to the big picture and make meaning of what we are seeing .

•Knowing the structural drivers and dynamics and the relationship between them allows us to shape the system•From this we identify opportunities for leverage and reform

What is the ‘system’ in focus?It must be defined in terms of the external and internal processes that relate to each other, including the interfaces


Advice Field Research DisputeManagement

QA

SIGNUM

TECHNICALEXCELLENCE

TECHNICALCAPABILITY

CASESRULINGSDATABASE

COMPLIANCEASSURANCE

INDUSTRYSEGMENTLEADERSMEETINGS

Registrations,Cancellations,

& Lodgement

Intelligenceand Risk

Assessment

RevenueManagement

Tracing Policy Intent through to real world behavioural outcomes while taking a market focus. Operating accordingto the principles of the Taxpayers Charter and the Co-operative Compliance Model.

Actively identifying:

and creates a feedstock for reform and leverage by recording, sharing and managing content.

These Programs either:(i) Stop the flow or(ii) Make it much more effective


The Four Windows

1. Law and revenue (or outlays)

How is the law going?

Are our revenues (or outlays) what we expected from lead indicators?

How is compliance going?

What is the residual compliance risk and is it acceptable?

2. Business alignment and effectiveness

How is our business going?

Inputs, outputs, effectiveness, community support

3. Stakeholder Relationships

How good are our relationships with stakeholders? (eg industry groups, Minister’s office, APS dependencies, internal clients, our service providers)

4. Environmental Knowledge and Positioning

How well do we know our environment and how well are we positioning in the environment?

Analysis has to be evidence based – can be quantitative or qualitative as appropriate


Philosophy of Administration

• It is the community’s tax system• A systemic behavioural approach needed

Keeping the people in the picture and building relationships across all functions

Tax system part of wider global socio-economic system Tax administration should reflect market and business realities,

not impede business, and operate in real time Tax performance needs to be evaluated against economic

performance Tailored approaches appropriate to the risks

• Need to engage industry & MNEs with underlying tax policy and LB&I’s programs

- Cooperation objective- Giving stakeholders a say promotes buy-in on tax system

integrity



• There are several interrelated drivers of compliance (law, education, assistance, active compliance)

- “Compliance” needs to be reframed to reflect all the building blocks- Industry needs to be part of an ongoing dialogue on this and have a

design role - without compromising objectives- A balanced multifunctional program and external expertise are

needed to support the new approach• Tax administration needs to be transparent

- Publication of strategic statement- Publication of risk model and methodology- Mirroring of each other’s performance- Publication of ATO views of how the law works- Taxpayers need to be engaged at the case level and ATO needs to

explain any concerns at each stage


• The quality of tax administration derives from the design of the law

• Tax administration needs to reflect and dovetail with the natural systems in the market in which the law is to apply

• Insofar as practicable, administrative design for compliance should be structural and build in assurance at the earliest point in a value chain (eg the deduction of tax from wages, the focus on corporate governance by directors of multinationals and integrity of their processes).

• Insofar as practicable, tax administration should operate in real time but transitions will be needed

• Dealing with legacy issues that have an ongoing effect is ‘real time’ because they otherwise affect the present

• Forward compliance arrangements and communication of outlier performance to external managers of compliance (eg tax agents, or medical service providers in the case of Medicare) can have normative effects while maintaining cooperative approach.



BISEPS of the Cooperative Compliance Model - factors and examples

B Business The extent and nature of the group’s business activities and transactions.

Location and size of industry.

Business plans and strategies.

Entity and group structure.

Capital structure, financial performance and ratios.

I Industry Conditions affecting the industry – region, size and participants.

Industry associations.

Industry profit margins and cost structures.

Industry skill levels.

Impact of technological and business change.

Financial performance.

Industry norms and regulatory environment.

S Sociology Knowledge and norms of the professional/business group, e.g. standard of record keeping and lodgement timeliness.

Culture of the organisation and management.

Business, professional networks and reputation.

Approach to community and corporate citizenship.

How the group deals with finances and paying tax.

Linkages to gatekeepers and advisers.

E Economy Domestic, international environment and trade conditions.

Key overseas developments.

Government policies – interest rates, inflation, tax system and economic reforms.

P Psychology Management objectives and philosophy.

Views and reactions of management to wider community.

Approach to managing risk and drivers of the risk strategies.

Attitude and relationship with the ATO.

S Systems of compliance

Decision making systems, processes and organisational structure.

Quality Assurance standards and records.

The support and authority the corporate taxpayer’s tax compliance team receives from management.

The degree of ease in accessing information.

Nature and purpose of transactions e.g. value, type, conduct, methods, timing, costs and benefits.

Compliance history.

Tax analysis of issues and expected range of tax results.


Cooperative compliance is about movement; both up and down the pyramid, from active enforcement measures at the top, to self regulation and cooperation at the base. The movement depends on taxpayers and their advisers’ appetite for risk, agencies’ ability to have sufficient coverage to detect risk and effectively treat the symptoms. It also depends on the ability of those responsible for compliance management to devise leveraged strategies to deal with the underlying causes and strengthen the structural drivers of good compliance – and create pathways and compliance products to transition to cooperative relationships.

Active enforcement

Assisted

self-regulation

Self-regulation and cooperation

The compliance pyramid


Capital

Labour

Investment

Refunds

NRDWT

Non-Residents?

Interest paid to Non-Residents(Related party?)

Interest paid to Residents

(Related party?)

Royalties paid to Non-

Residents

Royalties paid to

Residents

Intangibles

NRIWT NRRWT

Tax Liabilities

Residents

Foreign Tax

Credits?

Tax Liabilities Tax Liabilities

Super

FBT

Quarterly Instals &

Other Payments

Quarterly & other paymts

Revenue Gains

Franking Deficit Tax?

Shareholder/Option Holders

Banks & other capital

providers

Capital

Liabilities/Debt

Retained Earnings

FinanceOperationsStructure

GovernanceTangiblesIntangibles

Capital Allowances

Revenues Profits

Capital Gains

Franked Dividends

Distributions

Residents

Dividends

Non -Residents

Franking Accounts

Franked Dividends

Reductions (Tax

Offsets)

Expenses/Outlays

Interest Salaries

PAYGWT

Royalties

GST

GST Input Credits

UnfrankedDividends

UnfrankedDividends

Refund?

Foreign Tax Credit

/Other OffsetsIncome

Tax

Assets BusinessAssets Business

Business Value Chain

Excise

PRRT

Other inputs to

production or supply

The purchase of assets will involve a disposal by another party and the transaction may give rise to an income tax or CGT issue for that other party.

Superannuation contributions are assessable income of the superannuation fund or policy that receives those moneys.

Trends in PAYGWT can also be affected by the behaviour of those receiving the salaries (eg negative gearing, family tax benefits).

GST

What is the Medicare value chain?

Cases unable to be resourced

Action pool for risk assessments

Large business

HEALTH CARDRisk Profiled Cases(Note Risk Pool Value / Currency / Completeness of coverage of taxpayers and years of income

Demographic(relevant population & structural drivers

affecting it)

Middle market

Risk Engine

Pool of cases for risk

management products

TIME

Open / closed years – real time / currency

Point in time that figures compiled

Case selection process


NFAs(analyse these)

Pool of cases for audit products

Action pool


Amended Assessments

Notional tax adjustments (Note also the gross amount of losses disallowed)

VALUEProductivity

ModelInputs Outputs

Outcomes

•Demographic •Risk assessment /

treatment framework•MIS

•Professionalism

LB&I risk mgmt model – October 2004

Revised – May 2009

• Is the residual risk acceptable?• Is the level of risk stable or growing?• How could we resource these cases?

Productivity gains?Additional resources from ATO?Additional resources from Govt?

• What is my risk profile across the whole patch? • How much of the patch do I know?• What is the value of the risk pool?

How much am I addressing?What is the per annuym value of the pool re the tax base?What is the trend in the risk pool?

NFAs(analyse these)

Settled

Paid

Payment arrangements

Unpaid

50 / 50 arrangements

Disputes

Tax

Penalties

Market and other intelligence

REPORTING SYSTEM


SPECIFY & EVALUATE /

MONITORCASES

SYSTEM

Plan and manage cases:

• Hypothesis driven auditing

• Collaborative approaches

CASES SYSTEM

FEEDBACK LOOPS:What is all this telling us about

• the risk engine parameters• the integrity / value of the information in the

health card• our case selection proces – are they

appropriate • the management of our case work – work

practices etc• our allocation of people to casework• the level of our skills

COMMUNITY SUPPORT

INDICATORS OF LEVEL OF VOLUNTARY COMPLIANCE

Patterns of rulings requests

Cases where taxand economic performance are aligned

Cases where no adjustment was warranted


Productivity Analysis

Soundly based comparability is the key

Objective Benchmarks(investor perspective)

Capital pricing model for the economy (eg risk free rate of return would be minimum hurdle rate) +Risk weighting of assets & operations Notional rate of returnCapex analysis: rate of return, NPV, payback periods, cash flows

Market AnalysisResults are impacted by market dynamics - market & product life cycle• barriers to entry• barriers to exit• risk of substitutes• number of competitors• degree/nature of competition• performance relative to peers

Lens on Profitability

Lens on expected tax

Compare with TFP: Functions Assets Risks

Eg Capital Allocation Method for Bank Branches

Health Card

Arif’s Method John Box’s Method

100+Y Enterprise (1)

100+X

100 Average

100-X

100-Y

100 Enterprise (1)

90

80

70

60

50

Additional insights relative to some of the other blocks

Lens on productivity

Relativitiesin efficiency

Lens on profitability

Based on 2 coefficients

Lens on expected tax performance

Revenue effectiveness + Cost effectiveness

Draws on all financial ratios

Leader

Both allow relative rankings but have to be able to test “leader” and “average”

Structural Factors• Organisational Structure, processes, operations and the functions, assets and risks reflected• How business funds itself & manages the flow of funds – capital structure• How business governs itself (budgeting,decision-making, strategy, managing financial performance) – effectiveness of corporate governance.• How it innovates• How it is adapting over time & why• Ownership demographic (foreign residents, institutional, individuals) & relationship with stakeholders (balanced scorecard)

Reality check on commerciality

KNOWLEDGE MANAGEMENT & SYSTEMATIC APPLICATION - BUSINESS + MARKET ANALYSIS + HEALTH

CARD

Business Model & Analysis• Value chain• Critical assumptions• Profit & cost drivers• Strategy• Global deployment of assets and percentage contribution to profit from each jurisdiction• Tax haven dealings

ATO/Enterprise Relationship Gauge Description of how relationship is going across all interactions (policy, advice, audit, payments, lodgments, taxpayer feedback on ATO performance)

ComparativeB/sheet and

P&L analysis

Comparative Analysis of B/S & P&L• For 5 years• Trends in extent of operations, investment, distributions, income & expenses & financial ratios

Leader Mind FactorsThe strength of managementThe attitude to taxationReward systems for management and for tax functionSuccess for business

Compliance History• Past issues• Current issues• Current risk rating• Years covered• Trend in tax payments & effective tax rates• Issues that carry forward

BUSINESS & FINANCIAL ANALYSIS


Step 4

Step 1(c)Examine business sector approachesto their applicability

• Capital Investment

• Dividend Policy

• Differential Rate of Return

• Gearing Policy

Business Sector Models &Comparative Analysis of:• Balance Sheet• Profit & Loss• Financial Strategyover a series of years

ATO Financial Strategy

& Investment Strategy

Product

Market

CapabilityOPA Sub-outputsSub-Plan BSL

Other quantities Raw financial data collection

Step 2Articulate

ATO financialstrategy

ATO FINANCIAL STRATEGY FRAMEWORK

Step 1(b) Step 3

ATO Budget Allocation & Resources

Operational Plans

Productivity

ATO Strategic Directions

Last Year

Year 1 Year 2 Year 3 Year 4 Year 5

Ge

ne

ral L

ed

ge

r

Analysis of cost drivers and expenditure

patterns

Step 1(a)Analysis of financial implications of ATOstrategic directions,

especially shiftsand efficiencies


Business Outcome

Measures / effectiveness

External EnvironmentEvaluation of Operational Effectiveness

Step 4

Step 1(c)Examine business sector approachesto their applicability

• Capital Investment

• Dividend Policy

• Differential Rate of Return

• Gearing Policy

Business Sector Models &Comparative Analysis of:• Balance Sheet• Profit & Loss• Financial Strategyover a series of years

ATO Financial Strategy

& Investment Strategy

Product

Market

Product

Market

CapabilityOPA Sub-outputs CapabilityOPA Sub-outputsSub-Plan BSL

Other quantities Raw financial data collection

Step 2Articulate

ATO financialstrategy

ATO FINANCIAL STRATEGY FRAMEWORK

Step 1(b) Step 3

ATO Budget Allocation & Resources

Operational Plans

Productivity

ATO Strategic Directions

Last Year


Ge

ne

ral L

ed

ge

r


patterns

Last Year


Ge

ne

ral L

ed

ge

r


patterns

Step 1(a)Analysis of financial implications of ATOstrategic directions,

especially shiftsand efficiencies


Business Outcome

Measures / effectiveness

External EnvironmentEvaluation of Operational Effectiveness


What difference did we make to compliance?Why is it so? What do we think will happen next? Where to from here?

full title of presentation (change this on all the slide masters) strategic leadership in a...

Documents

slide masters

s s e e p p t t e e

strategic leadership

compliance management

strategic innovation

alliances demographic

tax system

tax compliance