Tax reliability index

What it means

The tax reliability index is the rating the tax administration assigns to taxpayers based on how they meet their duties: filing on time, paying, audit outcomes.

The grades are highly reliable, reliable and unreliable. The rating is public, so a bank, a customer or a competitor can look it up.

The index is not the same as a certificate that the company has no tax arrears. It is assessed in retrospect and reflects behaviour over a longer period, so a company with no debt can have a worse rating and one with a current arrear a better one. For a bank or a contracting authority these are two different pieces of information, each answering a different question.

How it works in practice

A highly reliable taxpayer earns benefits: lower penalties, shorter deadlines in certain procedures, a more accommodating approach to applications. An unreliable one gets the opposite and more audits.

The index improves through what is right anyway: file on time, pay on time, answer requests. That makes it a decent measure of bookkeeping quality rather than a target in itself.

We keep an eye on our clients’ index and, when it drops, look for the specific cause: a late return, an unpaid advance, an unread message in the electronic mailbox. It can usually be pinned down precisely, and we then set up a check so the same slip does not recur before the next assessment.

What to watch out for

Small repeated filing delays drag the index down even when the tax was paid. Companies notice when they need a certificate for a tender or a loan, and by then it cannot be fixed quickly.

The index is worth watching for trading partners too. A supplier rated unreliable is not necessarily a fraudster, but on a larger deal it is a signal to look more closely. If it later turns out they did not pay the tax in the chain, the tax authority asks whether the customer could have known, and an overlooked public warning will not help them with liability for tax.