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that administer most or the majority of the central government revenues. The existence of a compliance risk register should be noted in the PEFA report narrative for this dimension.

19.2:3. Examples of the compliance risk observed among large payers include those associated with the transfer pricing and other profit-shifting arrangements of multinational enterprises operating in a given country while conducting extensive crossborder transactions. In resource-rich countries, companies involved in the extractive industries sector, given their size and function, typically belong in the large payer segment. Shifting profits through transfer pricing presents a major risk associated with the taxation of natural resource revenue. The report

should also identify any risk-mitigation measures applied by revenue authorities, such as audits, investigations, transfer pricing controls, and outreach activities and communication.

19.2:4. For this dimension ‘comprehensive’ refers to the coverage of all categories of revenue. A ‘structured and systematic approach’ means an approach which has clearly documented procedures and steps, is methodical and regularly repeatable. ‘Compliance risks’ relates to revenue that may be lost if payers fail to meet the four main revenue obligations areas, including: (i) registration; (ii) timely filing of declarations; (iii) payment of liabilities on time; and (iv) complete and accurate reporting of information in declarations.

Dimension 19.2. Scoring

Score Minimum requirements for scores
A Entities collecting most revenues use a comprehensive, structured and systematic approach for assessing and prioritizing compliance risks for all categories of revenue and, as a minimum for their large and medium revenue payers.
B Entities collecting the majority of revenues use a structured and systematic approach for assessing and prioritizing compliance risks for some categories of revenue and, as a minimum, for their large revenue payers.
C Entities collecting the majority of revenues use approaches that are partly structured and systematic for assessing and prioritizing compliance risks for some revenue streams.
D Performance is less than required for a C score.

Dimension 19.2. Timing, coverage and data requirements

Time period Coverage e Data requirements/ calculation Data sources
At time of assessment CG.
  • Information on the procedures and approach used by entities collecting central government revenues to assess and prioritize compliance risks; and whether it covers (i) all categories of revenue; (ii) key payer segments (at a minimum, medium and large revenue payers); and (iii) payers’ four main obligations.
  • Documented risk management approach used by revenue authorities to assess and prioritize compliance risks.
  • A register of identified compliance risks for each payer segment (and for large- and medium-sized payers at a minimum). (The best information sources are the entities collecting most or the majority of central government revenue.)

 

Pillar Five: Predictability and Control in Budget Execution
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