The Auditor General reported that the Tax Compliance Unit is well equipped to carry out tax investigations.  It employs professional staff and has a comprehensive data warehouse to support its investigative work.  However, up to 2004, the Unit’s contribution towards Government’s net revenue yield was below that envisaged when the TCU was launched.       

The TCU was established to contribute towards the attainment of Government’s overall fiscal policy by increasing the tax revenue yield through better enforcement.  The Unit operates through the delegated authority of the Inland Revenue Department, the VAT Department and the Social Security Department.  It has no authority or autonomy in targeting cases for investigation or of enforcing the recommendations in its investigations’ reports.  The Unit is generally reacting to the demands of the tax collecting and social security departments.     

The TCU was rendered less effective as it lacked the general direction of the Strategy and Policy Management Board.  In the absence of Board meetings, communication and coordination between the tax collecting and social security departments was weakened. 

The data warehouse facilities at the TCU provide up to date information to support tax investigations.  The opportunity exists to integrate additional information held by Governmental entities with the data warehouse to further support investigative work.  Although utilised by the TCU for all of its investigative work, the data warehouse is not being fully exploited by the tax revenue departments to enable them to examine those taxpayers who pose the highest risk to tax revenue.

Up to May 2005, the TCU assessed additional tax liability amounting to Lm9.4 million regarding 174 tax investigations, which is well below the estimates made during the planning phases of the Unit.  Moreover, those plans envisaged that the TCU would employ 96 persons but by the end of 2004, only 32 members of staff were employed. 

 A number of investigations which resulted in nil or marginal assessments of additional income tax and VAT liability points to weaknesses in targeting for tax investigations by the departments referring cases to the TCU.  Following the conclusion of investigations, many cases remain outstanding at the Inland Revenue and VAT Departments as most taxpayers challenge, with some degree of success, the TCU’s assessments. 

The TCU managed to raise assessments amounting to Lm2.6million over the three year period covered by Forward Tax Agreements, which the Unit undertakes on behalf of the tax revenue departments. This amounts to an increase of about Lm1.5 million in tax liability over the three year average prior to the Scheme with respect to the 198 Agreements concluded by the end of 2004. The assessed tax liability of those participating in the Scheme had, on average, more than doubled.  However, the overall impact on the participating economic sectors was marginal due to the low response by taxpayers to the Scheme.  

Given adequate support from its Board and more co-operation from the tax collecting departments, the TCU can be in a stronger position to make a more notable contribution towards Government’s fiscal objectives, and instilling further a culture of tax compliance.