REPORT 2013

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16 FRCA SIX MONTHS REPORT 2013 Description Nasese Foreshore Joint Tsunami Evacuation Plan Remarks Risk Officer is part of the Nasese Foreshore Joint Tsunami Evacuation Plan Committee. The committee has agreed for FRCA to develop an evacuation route from the back of the FRCA Nasese Complex into the Police Academy compound for our staff to proceed to the evacuation point as this is a shorter route. ESU Files Legal Drafting Customs IRS Opinion 8 13 5 28 39 We have closed the following files DMU LEU Customs ESU Tax Tribunal Legal Drafting 815 2 2 4 26 5 New Risk Identification – Various sections are to identify emerging risks and register it with Internal Assurance Section. This can be done during the reviews or at any point in time. It has been noted that sections hardly identify new risks. Most of the emerging risks are identified by the Internal Assurance Section either through ESU investigations or Internal Audit. FRCA Extreme & High Risk Summary There are 8 (5 extreme and 3 high) risks that was pending from the 2012 Extreme & High Risk List. Records Management Work on clearing backlog filing and rearrangement of filing area has seen marked improvement in both on and off site storage. Archiving of records also continued Recruitment & Selection There were 35 staff appointed through the recruitment process with 26 new recruits (Customs(2), Corporate(3), Tax (21)) and 9 internal promotions Taxation(8), Corporate (1). Termination of Employment Four staff resigned with 3 Taxation staff migrating while 1 Corporate staff joined a local training institution to facilitate his studies. Two support officers were deemed to have resigned for absence without approval for periods of 7 days or more and breaching the Leave Policy & Procedures. Five staff were summarily dismissed on ethical grounds in line with the Zero Tolerance Policy by the Board. Legislation The Legal Services section has the responsibility of drafting FRCA laws. The Legislation Unit liaised with relevant stakeholders within and outside of FRCA to achieve this purpose. Expert external consultant such as Professor Lee Burns were used by the Division to assist in the drafting process. The Legislation Unit, in 2013 focused on the consultation, drafting of laws in relation to Income Tax Decree; Revenue Measures for 2013; Stamp Duty, Customs Act & Regulations, Capital Gains Tax Decree, and Airport Departure Tax. The Draft Income Tax Decree is now with the office of the Attorney General for vetting and approval. Litigation In terms of litigation, we conducted several hearings in the Tax Tribunal and High Court. we have conducted have 4 hearings before the Tax Court. These were all appeals from the Tax Tribunal where the Tax Tribunal ruled in favour of the Authority. Out of the 6 matters, 4 appeals have been dismissed and 2 awaiting judgments. The Division opened the following files from 1 January – 31 July 2013: Economic Modeling & Analysis The Economic Modeling & Analysis Unit, which is part of the Policy Section, in the first half of the year continues to deliver its core functions in terms of finalizing the monthly forecasts in the beginning of the year, while also providing revenue analysis to the board in terms of the monthly Revenue Board papers. In doing so, the team continues to improve the standard of its revenue analysis, going in depth in providing economic explanations to the CEO and the FRA Board on the reasons for revenue performance in each tax category. The unit continues to facilitate data request received from stakeholders daily, and the demand for such data has grown significantly compared to previous years, since the demand for tax data has grown from our stakeholders. While it continues to provide weekly revenue reports, while it also works on having daily forecasts ready. It continues to represent the authority in the Macro-technical Committee, and in doing so provides the necessary data needed for the revision of the country’s Gross Domestic product. As year progresses on, the unit is also anticipating the challenge of the 2014 National Budget Works preparation, which is also a core function for the team. Research Planning and Policy Development An important function of the Unit is to ensure that FRCA meets all its statutory requirements as per the FRCA Act. This involves the drafting and finalization of the Corporate Plan, Annual Reports and Half Yearly Reports. The RPPD Unit has completed all the works on the Annual Report within the required statutory timelines. The draft Annual Report was submitted to the Minister for Finance on 30th April 2012 with unaudited accounts. The Unit is also part of various initiatives such as the Balance Scorecard and Performance Assessment, and the Service Excellence Awards. Taxation Revenue Services Similarly, there were 1577 cases for Capital Gains Tax received of which 1419 were processed from January to June this year. Of the number processed, 295 cases were payable. The Authority collected $5.2m in Capital Gains Tax which was over the forecast by $1.7m and is consistent with economic growth in the real estate sector. Stamp Duty payments also reflect this. Property related transactions accounted for 45.4% of stamp duty collection in the month of June. Additionally, motor vehicle loan rates were decreased dramatically with increased demand indicative in the bill of sale transactions. Stamp Duty received a total of 112,297 documents for the first six months of this year and collected $17.8m worth of tax. This was a growth of 97.9% for the same period last year. Customs Risk & Compliance The main focus of Customs Risk & Compliance whilst fulfilling its responsibilities of audit, investigation and gathering intelligence, is to solicit voluntary compliance through a partnership arrangement with stakeholders. However, in the event that dues cannot be collected for a certain period of time, Customs legislations are enforced to recover these dues. This function falls under the role of Desk Audit which is now
17 risk based thus modifying the approach from volume based to blue lane profiling. To ensure that the Audit Compliance perspective is consistent and that targets are met, the role of field audit was further divided into three streams i.e.: (1) Concession, Recovery & Environment Compliance; (2) Trade Compliance (TFF, DSS, SPARTECA, PACER etc); and (3) Valuation, Warehouse, Gold Card & Company Audit. As a result of the above, in the first half of 2013 Customs Risk & Compliance collected $15.7m in revenue, $13.5m more than the same period last year. The Recovery Unit collected 82% of the total amount of revenue collected in 2013 which is an overwhelmingly positive indication of the shift in approach that has taken place. However, the above change was implemented only in the Headquarters in Suva in the second half of 2012. It is hoped that a similar model will be implemented throughout the Authority by the end of 2013, provided that necessary resources are allocated. Of the $15.7m collected in the first half of this year, Audit Compliance collected $14.3m and Investigation collected $1.32m. Taxation Audit & Compliance In 2013 the Audit Compliance Section was challenged with the target that has been set at $86m for the year. This was a 64% increase from the 2012 audit compliance target which was at $52.4m. • Demarcation of threshold - The threshold demarcation was fixed as $50m VAT threshold for Small and Medium and Large and International. The Transfer Pricing, Fraud and VAT teams do not follow into this category. Audit Results As of end of June 2013 the section achieved the following results: Team Cases completed Value of Assessments raised ($) Cash collected ($) VAT 174 7,804,180.64 4,052,725.43 Small & Medium Large & International Transfer pricing Fraud and Evasion 269 12,156,597.73 6,389,648.66 103 8,883,725.48 2,908,185.08 6 921,222.04 6,648,057.91 40 2,798,642.09 1,037,651.71 Total 592 32,564,367.97 21,036,268.79 Audit Framework • Industry Matrix - The industry matrix strategy was agreed to run the audit and compliance unit based on industries while not conforming to the accepted FSIC code. The reclassification was based according to historical audit experience of such industries. Staff in group discussions at a Compliance Workshop
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Page 23 and 24: 23 STATEMENT OF FINANCIAL POSITION
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REPORT 2013

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