|1. Strategy Overview To support business development and encourage voluntary compliance, small businesses will be provided better access to professional services and bookkeeping tools. Strategies for this segment are guided by risk profiling and rely on strengthening intelligence. Risk treatments are designed to be preventative, low cost, and project based.|
|2. Segment Profile||3. Priority Risks (high, medium, low)||4. Risk Treatments|
|2.1 Definition Businesses with sales below the value-added tax registration threshold, excluding those eligible for the patent or benchmark regime.|
2.2 Amount/type of tax revenue:
|3.1 Registration risk: Medium|
Some are unregistered; others are not registered for all taxes.
3.2 Filing risk: Medium
|4.1 Measures for facilitating compliance|
Simplified registration, filing, and payment processes to reduce errors New business assistance program (right-from-the-start approach)
Easily accessible tax administration advice tailored to the needs of small businesses and delivered through multiple channels
Improved accessibility to professional advice in partnership with small and medium enterprise incubators
Free electronic and paper-based bookkeeping tools
Early intervention calls, visits, and letters to prevent errors from occurring
Closer working relationships with State Registration Department
4.2 Measures for dealing with noncompliance
Comprehensive audits for highest risk cases Hidden economy campaign
Limited-scope risk-based audits
Use of small business benchmarks for prevention and detection
Income verification program
Outbound telephone calls for small arrears cases
Voluntary disclosure initiative with concessional penalty imposition
4.3 Measures for simplifying tax policy design Small businesses will be taxed under a simplified regime (based on turnover or cash flow) with simple tax returns and no requirement to submit financial statements.
|Tax Type||Revenue (billions)||Small businesses are prone to drop out of the system due to complexity or cash flow problems. Some drop out because of competition from unregistered businesses.|
3.3 Underreporting risk: Medium
Both deliberate and inadvertent underreporting occurs. Low business acumen results in errors and the informal economy sees deliberate omissions.
3.4 Payment risk: Medium
Cash flow pressures are prevalent and payment default is common. Almost 80% of arrears cases are small, representing only about 5% of debt by value.
|ROY EXC||0.12 0.014|
|Revenue from this segment represents about 1.9 percent of total tax collections|
2.3 Number/type of taxpayers: Mostly sole traders, limited liability companies and partnerships. About 50,000 legal entities; nearly 150,000 sole traders, with varying levels of business/financial skills.
2.4 Number/type of tax returns: Small businesses have multiple tax obligations, and entities are required to file quarterly. Most do not require audit certification.
2.5 Key industries: Wholesale and retail, construction, manufacturing, and professional services.
|5. Compliance Indicators||6. Workflows|
|Registration:||% increase in registration||Number of:|
• Assistance products
• Voluntary disclosures
• Registration checks
• Outbound calls
• Pre-filing letters
• Advisory visits
• Limited-scope audits
• Comprehensive audits
• Debt collection actions
|% reduction in lost registrants|
|Filing:||% increase in on-time filing|
|Reporting:||% increase in audit strike rates|
|% of audit acts sustained on dispute|
|Payment:||% reduction in arrears|
|% increase in collections of audit acts|
|7. Capacity Development||Information Systems, Data Management, and Analytics|
Fully implement se If-assessment and optimize e-tax. Streamline registration, filing, and payment processes. Ensure risk management supports compliance strategy (rather than driving them).
General and functional management, technical, industry specialization, service, and communication skills training
|Administrative Tools and Procedures|
Develop channel management strategy, optimize call center and web services. Design a new business program.
Build alliances with the tax profession and other agencies servicing small businesses.
Management and Organization
Integrate compliance strategies into operational plans.
Appoint a senior headquarters official to oversee development of small business compliance strategy.