The Tax Compliance Unit’s contribution towards the government’s net revenue yield was below that envisaged when the TCU was launched, a National Audit Report presented in Parliament says.

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. However, only a fraction of this amount had been collected.

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.

The National Audit Office report said the unit was rendered less effective as it lacked the general direction of the Strategy and Policy Manage-ment Board.

“In the absence of board meetings, communication and coordination between the tax collecting and Social Security departments was weakened. Moreover, those plans envisaged that the TCU would employ 96 people but by the end of 2004, only 32 members of staff were employed.”

The report states that 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 the TCU’s assessments – with some degree of success – the NAO report added.

It concluded that, given adequate support from its board and more cooperation from the tax collecting departments, the TCU could be in a stronger position to make a more notable contribution towards the government’s fiscal objectives, and instil further a culture of tax compliance.