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The report sets out how tax compliance strategies are evolving in light of new technologies, data sources and tools, including the increasing use of advanced analytics. It also looks at how these changes might affect the role of audit and auditors in the future. Finally it suggests a number of areas where further work by the Forum on Tax Administration might assist tax administrations in their consideration and implementation of administrative reforms as a result of the changing compliance environment.

Tax compliance strategies have been evolving over the past two decades, shifting the focus from the individual taxpayer to a group of taxpayers and the broader compliance environment. Additionally, tax compliance strategies are developing towards a more systemic understanding of compliance risks. The on-going research to better understand what motivates tax compliance is allowing tax administrations to design and implement better systems and to develop more effective compliance strategies.

The Forum on Tax Administration (FTA) has been a driving force in developing thinking over the years about how to improve the effectiveness and efficiency of tax administration. This report, The Changing Tax Compliance Environment and the Role of Audit, should be seen in this context, setting out the changing landscape for both tax administrations and taxpayers and how these changes can be leveraged to enhance compliance, reduce burdens on taxpayers and build trust in the wider tax system.

This chapter concludes the report by recommending further work in a number of areas e.g. the core elements of tax administration and the expectations for developments, supporting easier calculation of tax and more robust and upstream verification, co-operative compliance programmes in particular for SMEs and more informal arrangements, data sources and data security covering aspects of data management and data protection and facilitating joint audits by examining potential solutions to international issues.

An audit provides more than just an examination as to whether taxpayers have correctly assessed and reported their tax liability and fulfilled other obligations. Audit plays a wider role in supporting tax compliance, deterring non-compliance and enhancing, the trust of taxpayers in the fairness and effectiveness of the tax system. This helps to reinforce social norms and to identify generic issues of potential concern to the functioning of the tax system.

The purpose of tax administration is to collect revenue needed to fund public services and public goods in accordance with the law. This includes three core elements: optimising compliance in a costeffective manner, reducing burdens and building and maintaining trust. These elements are impacted by all the activities done by a tax administration and therefore tax administrations should look at the mix of activities and how they can complement and support each other. The changes in the mix of activities are driven by changes in business models, developments in technology and the availability of data as well as changes in tax law.

The environment in which tax administrations work is undergoing fundamental changes. This change covers not only what they do and the technologies they use, but also the dramatic increase in data sources and analytical capabilities, as well as the growth in third party providers. These changes are allowing tax administrations to rethink how they can best achieve their objectives of a high-level of taxpayer compliance and satisfaction, efficient tax administration and a reduction in burdens for taxpayers. This is leading tax administrations to reconsider their current mix of activities and in particular how a changed mix of service offering can produce better compliance outcomes.

Taxation has significant global dimensions with a large number of businesses operating or trading in multiple countries. Also individuals are becoming increasingly mobile and may have sources of income or taxable transactions in different countries. In the face of aggressive tax avoidance and evasion, co-operation between tax administrations is increasingly important. Current experience with international co-operation in simultaneous and joint audits shows that co-operation can be valuable – for tax administrations as well as for multinational enterprises – in obtaining tax certainty.

This report is part of the Tax Administration of the Future Series. All the reports in this Series have consistent themes around the use of data, changing customer expectations and the role of emerging technologies and look at the challenges and opportunities that these changes create for tax administrations. This report, The Changing Tax Compliance Environment and the Role of Audit, describes the mix of activities tax administrations have pursued in managing compliance and how this will change over time in light of developments in technology, including new tools and expanded data sources. In so doing, it considers the role that tax audit plays in supporting the effective operation of the dynamic and fast changing broader tax ecosystem.