On November 29th, 2022, the Ministry of Finance (hereinafter: “MF”) hosted a conference titled: "Tax Transparency. Cooperative Tax Compliance Programme - cooperation and better compliance with tax law regulations". The conference drew a great amount of interest - there were several dozen participants in the audience, and the conference was being watched online by as many as 700 people.
The purpose of the conference was to summarise the current status of the Cooperative Tax Compliance Programme, share the preliminary results of the ongoing evaluation of the Program, and to reveal the shroud of secrecy regarding the direction of its further development.
Cooperative Tax Compliance Programme - What is it about?
The Cooperative Tax Compliance Programme (hereinafter: “the Programme”) is based on the guidelines for organising the tax system proposed by the OECD, the so-called Horizontal Monitoring Compliance. During the conference, MF representatives stated that the assumptions and framework of the Cooperative Tax Compliance Programme is inspired by a similar programme operating in Austria.
The Polish approach is similar to the forms of cooperative compliance programs implemented around the world, based on three basic principles: mutual trust, understanding and transparency - said the Deputy Finance Minister, head of NRA junior insp. Bartosz Zbaraszczuk.
The main premise of the project is close and continuous cooperation between the National Revenue Administration (NRA) and the largest corporate income taxpayers, implemented by taking steps to ensure compliance with tax law based on mutual trust, transparency and understanding of both parties. In practice, the tax returns of the taxpayers are reviewed for compliance with tax laws before entering the program. In addition, the NRA auditors review the completeness, effectiveness and documentation of the Tax Control Framework (hereinafter: “TCF”). Joining the programme entails a number of benefits for the taxpayers, which include the individualised approach of the NRA to the form and frequency of tax supervision, the ability to enter into tax law interpretation agreements on a simplified basis, or the application of preferential statutory interest for late payment of tax arrears. The range of possible benefits is relatively broad and is presented in an accessible way on the website of the Cooperative Tax Compliance Programme.
The Cooperative Tax Compliance Programme is already operating in various forms in approximately 30 countries around the world.
For a more comprehensive description of the key principles, assumptions, benefits, and details related to the application and operation of the Cooperative Tax Compliance Programme, see our previous publication.
Conference - Key findings and conclusions
The main purpose of the conference was to share experiences, observations and existing practices, both on the part of the taxpayers (including those who have already joined the Programme), the NRA, as well as tax advisors involved in preparing and supporting the application process for the Programme. In addition, the conference was an important step to popularise the new concept of how to cooperate with the NRA among taxpayers, because, as was pointed out during the presentation summarising the evaluation of the Cooperative Tax Compliance Programme, awareness of taxpayers eligible for the Programme regarding the functioning of said solution (i.e. taxpayers whose income value reported in the tax return in the previous tax year exceeded the equivalent of 50,000,000 EUR) is low. The conference attracted considerable interest on the part of taxpayers and tax advisors, it was followed by dozens of people present at the headquarters of the Ministry of Finance and - at times - by more than 700 people participating in the conference online.
Representatives of entities with whom the Head of the National Revenue Administration concluded a cooperation agreement, i.e. the companies, which have already formally joined the Cooperative Tax Compliance Programme, reflected on its concepts in a positive way. In particular, the growing understanding and openness of the NRA auditors towards the functioning solutions and business practices during the application process to the Programme was appreciated. It was indicated that the decision to apply for the Cooperative Tax Compliance Programme helped to organise and document the functioning processes and to analyse the comprehensiveness and correctness of the TCF. In addition, at the stage of verification of the application, the taxpayer gains the opportunity to assess tax settlements and the correctness of the implementation of the TCF in conditions that are different from those of a standard tax audit. After the implementation of the Programme, attention was paid to both image-related benefits of the company and people directly involved in the application process, and to the improvements of the quality of cooperation between the accounting/tax department and other departments in the company.
At the same time, challenges related to the process of joining the Programme were pointed out. Among the most significant were the time-consuming application process or the need to engage additional resources in order to prepare the application, handle the pre-audit and implement recommendations.
During the conference, it was highlighted that the Cooperative Tax Compliance Programme in its essence is not quite suitable for all taxpayers. It was indicated that it is crucial to understand the nature of the Programme, which is oriented towards an honest discussion with NRA representatives, bearing in mind the goal of properly fulfilling tax obligations. In practice, the taxpayer should approach the tax area in a responsible and reliable manner, follow appropriate procedures, have proper control measures, use adequate resources and tools to fulfil tax obligations, and independently identify and report to the NRA any errors in settlements or tax risks. Therefore, before deciding to join the Programme, it is recommended to consider all possible pros and cons, because an ill-considered decision may result in a disproportionate amount of work in relation to the benefits assumed by the entrepreneur. According to the representatives of taxpayers who spoke at the conference, before formally starting the application process, it is also worth analysing the appetite for tax risk and openness to tax transparency among key individuals in the company.
The representatives of the taxpayers also highlighted the advantages of engaging a tax advisor to guide through a lengthy and extensive process and take over selected tasks from their shoulders. Due to the complexity of the application process and the need to involve a number of different stakeholders, including those outside the financial department, the benefits of engaging a dedicated advisor who will coordinate the application process were emphasised.
The involvement of PwC
Since its very beginning, PwC experts have been greatly involved in the development of the Cooperative Tax Compliance Programme. A dedicated training programme for the NRA and MF employees, conducted by PwC experts at the request of the Directorate-General for Structural Reform Support (DG REFORM), which is part of the European Commission, has already been completed. In addition, PwC is currently taking part in a project aimed to develop a strategy for the development of the Cooperative Tax Compliance Programme, with a particular focus on the possibility of opening the programme to a wider group of taxpayers.
The PwC team also supported SIG Sp. z o.o., which was the first company to conclude a cooperation compliance agreement with the NRA. Our Experts comprehensively supported the Company in the process of preparing an application for a cooperation compliance agreement with the Head of the National Revenue Administration, as well as during the very process of joining the Programme.
Throughout the conference, panellists who were involved in discussions with representatives of the Ministry of Finance, the National Revenue Administration and taxpayers included representatives of PwC. PwC Partner Tomasz Barańczyk shared his insights during the panel "The role of the tax function and the importance of tax transparency", while Director Dorota Bokszczanin discussed issues related to the development of the Cooperation Tax Compliance Programme in Poland during the panel "Quo Vadis – Cooperative Tax Compliance Program, compliance and transparency".
Development of the Programme
During speeches and panels, representatives of the Ministry of Finance revealed a few intriguing details regarding the planned changes in the development of the Cooperative Tax Compliance Programme. It was reported that efforts are being made to refine the supporting documentation on the form and functioning of the TCF. In particular, Best Practices in this regard are to be published, and the guidelines for taxpayers are to be refreshed. In addition, experts from the Ministry of Finance, with the involvement of taxpayers and tax advisors, will be developing an extensive methodology for evaluating the TCF. The Ministry plans to tailor the requirements and methodology of TCF assessment to specific industries in which taxpayers operate.
The aforementioned measures are intended to help taxpayers improve their understanding of TCF requirements and prepare them appropriately for verification by the NRA auditors. As a result, this is expected to allow a significant acceleration of ongoing audits and a reduction in their intensity.
It is also worth noting that representatives of the Ministry of Finance recognized the important role of tax advisors in supporting taxpayers in the process of adapting the TCF to the requirements and in the process of applying for the programme. Therefore, efforts are currently being made to define the role of tax advisors in aforementioned processes.
In terms of the long-term development of the Cooperative Tax Compliance Programme, it was indicated that the possibility of medium-sized and small enterprises joining the Programme is under consideration.
Summary
The organisation and the course of the conference, the openness of the Ministry of Finance to the opinions of taxpayers and tax advisors and the steps planned towards the development of the Cooperative Tax Compliance Programme may inspire optimism in terms of long-term development of the Programme. As emphasised during the conference by a representative of one of the taxpayers who have joined the Cooperative Tax Compliance Programme, an especially noticeable aspect was the change in attitude and openness on the part of NRA auditors towards the taxpayers' functioning processes and mechanisms in the tax area. Certainly, this is due to drawing conclusions from the first application processes, but we are convinced that it is also the result of the training conducted by PwC for representatives of the NRA and the Ministry of Finance.
In this context, it is worth noting that a change in the approach to cooperation and the development of a new relationship formula must take place not only on the side of the Ministry of Finance and the National Revenue Administration, but also on the side of taxpayers and tax advisors. Only when all parties involved start cooperating on new terms will there be a chance for the Programme to succeed.
Certainly, all parties involved still have a long way to go to build mutual trust, understanding and transparency, which underpin the functioning of the Cooperative Tax Compliance Programme, but at the moment we can look to the future of the Programme with hope and optimism.
In terms of either assessing whether the Cooperative Tax Compliance Programme is the right solution for your company, or supporting the process of preparing or applying for the Programme, the guidance of the PwC team, which is highly specialised in the indicated areas, would certainly prove helpful. We also encourage you to read through the recently prepared summary of the development status of the Cooperative Tax Compliance Programme.
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