The OECD’s Form on Tax Administration has issued a report called “Cooperative Compliance: A Framework” setting out the progress made by various countries in implementing a cooperative approach to tax compliance and setting out the next steps in cooperation between tax administrations, taxpayers and their advisers on tax compliance. The report is based on the practical experience of tax administrations from improved cooperation with taxpayers. It was compiled after seeking views from business on cooperative compliance.

Some years ago the OECD produced a study on the role of tax intermediaries which looked at the benefit of risk assessment. The report looked at the possibility of proceeding with some taxpayers and their advisers on the basis of a relationship of trust. The considerations and recommendations included in the original report have been updated in the light of this experience.

The report emphasizes that cooperative compliance depends on transparency from both the tax administration and the taxpayer. In the past five years there have been increasing demands for more transparent tax compliance from large companies and taxation issues have increasingly been seen as an important part of corporate governance. Good governance is also seen as an important factor within the tax administration. Taxpayers need assurance that enhanced cooperation with the tax administration is achieving its objective of facilitating the tax compliance process. The OECD document therefore includes some information on models of governance and best practice.

If taxpayers are to be persuaded that a cooperative compliance process is to bring benefits in terms of greater certainty, reduced compliance costs and freedom from tax penalties, there has to be a method of measuring the costs and benefits of the process to reach conclusions as to its effectiveness.    The report therefore provides information on tools for measuring the costs and benefits of cooperative compliance.  The report makes the point however that these tools are in need of further development.

The report comes to the conclusion that the cooperative approach to tax compliance has demonstrated its worth and that it is in keeping with modern risk-based approaches to tax compliance. The concept in the original OECD report of an enhanced relationship with taxpayers gave rise to concerns about the equality of taxpayers before the law, because some taxpayers would engage with the process more than others. The revised concept of cooperative compliance with taxpayers does not give rise to this concern because it does not lead to different treatment of taxpayers by the tax administration in the compliance process.