Businesses increasingly operate on a global basis, producing and selling goods and services in multiple jurisdictions, often using complex supply chains, organisational structures and financing arrangements. Such activity is not confined to the largest businesses anymore, and as opportunities for trade expand, many smaller enterprises are increasingly operating in a cross-border environment.

The pace of globalisation and the rapid digitalisation of the economy leave tax administrations with little choice but to engage in ever closer co-operation, including through Joint Audits, to ensure that taxpayers pay the right amount of taxes, to reduce administrative burdens, increase efficiencies, enhance tax certainty and avoid double taxation and double non-taxation to benefit governments and taxpayers alike.

It is the second time the FTA has worked on Joint Audits within the last ten years (OECD, 2010). Against the background of increasing globalisation, including the rapid digitalisation of the economy, tax administrations have little choice but to engage in ever closer co-operation, including through Joint Audits, to ensure that taxpayers pay the right amount of taxes, to reduce administrative burdens, increase efficiencies, enhance tax certainty and avoid double taxation to benefit governments and taxpayers alike.

These statements are a powerful testimony to the increasing globalisation of business and the need for tax administrations – that remain confined to national borders – to engage in ever more enhanced forms of international tax co-operation. This report focuses on the most advanced form of audit-related tax co-operation with the highest levels of integration and co-ordination under the heading of “Joint Audits”.

Mutual administrative assistance covers a wide range of different forms of international tax co-operation ranging from a simple request for information to a Joint Audit as defined in the 2010 Report.

Within the wider OECD/G20 tax certainty agenda (IMF/OECD, 2017), improved dispute prevention and dispute resolution is a key concern of business but can equally benefit tax administrations by creating incentives for low risk behaviour among taxpayers and helping tax administrations to better match resources to tax risks. Here, Joint Audits, in particular in co-operative situations can play an important role, thus helping to facilitate international trade and cross-border investment to foster economic growth (IMF/OECD, 2017, 2018).

Whenever an auditor is pursuing an audit that goes beyond a purely domestic context there is the question of whether to use international tax co-operation. The auditor may conclude that no international tax co-operation is necessary because, for instance, the taxpayer has provided all relevant information and there is no reason to believe that any of the information is either incorrect or incomplete or that the case has any other material international ramifications. There are other situations where the auditor requests particular information using information exchange instruments and can complete the audit on the basis of the information obtained. And there are situations where enhanced tax co-operation and in particular Joint Audits may be the best course of action.

In order for Joint Audits to be conducted successfully, it is essential that they are based on a solid legal framework, both domestically and internationally. This chapter sets out the current international landscape that supports the exchange of information in connection with Joint Audits and provides an overview of the current domestic legal framework.

The joint engagement of the participating tax administrations with the taxpayer is a key element of a Joint Audit compared to the conduct of a purely domestic audit. The experience from tax administrations shows that a close and early involvement of the taxpayer provides for the best outcome of a Joint Audit. The precise involvement of the taxpayer will of course depend on the circumstances and there will be differences between a Joint Audit in a co-operative and in a non-co-operative context, but even in the latter case open engagement by tax administrations can sometimes result in a change of taxpayers’ behaviour.

At a time when good progress is being made in addressing base erosion and profit shifting through the G20/OECD BEPS Project, it is also important to focus on tax certainty. In this context, the importance of providing greater tax certainty to taxpayers to support trade, investment and economic growth has become a shared priority of governments and businesses (IMF/OECD, 2017).

The previous chapters outlined the role of Joint Audits, summarised the main reasons to engage in this form of international co-operation and provided details on specific topics. This chapter provides practical guidance and related recommendations on how to start, conduct and complete a Joint Audit procedure based on the best practices identified during the Project.