1.1. The Government of Brunei Darussalam derives its income from tax receipts and non tax receipts. Taxation income is derived from either direct or indirect taxation. There is no direct personal income tax in Brunei at present, however corporate tax are imposed on incorporated (limited liability) companies. The taxation revenues are summarised as follows:
1.2. Brunei Darussalam does not have VAT on goods and services, capital gains tax, sales tax or travel tax as imposed by other countries.
1.3. Such indirect taxation accounts for more than 52% of annual government revenue. The balance of income sources are from government charges for public services and utilities, these are from oil and gas royalties, electricity, water, and public utility charges, telecommunications, postal services, rental of government facilities, port charges, aircraft landing fees, medical services, registration and liscencing fees.
2.1. The appointment and powers of the Auditor General are provided for under the Brunei Constitution and the Audit Act respectively. The Auditor General is given certain powers of access, examination, and reporting as laid down under the constitutional law on appointment, powers and duties.
2.2. The Brunei Darussalam SA1 is responsible for the audit of revenues from services and utilities, it is also responsible for the audit of revenues derived from indirect taxation. Currently, the Brunei Darussalam SAI does not audit revenue derived from corporate tax and oil gas extraction which includes assessment of petroleum companies and tax on oil and gas extraction. The administrator for such revenue is the Taxation Unit of the Ministry of Finance who assesses the corporate tax and the Petroleum Unit of the Prime Minister's Office who monitors the extraction of oil and gas.
3.1. On the system of checking individual assessment of individual records/files on indirect taxation mentioned above, the SAI audits collection of revenue arising from land tax, property tax, customs import duties, stamp duty, motor vehicle tax, estate duties, airport passenger service charge. For these, the revenue administrators are the individual departments like the Customs and Excise Department, the Lands Department, the Judiciary Department, the Land Transport Department, the Civil Aviation Department, the Municipal Department. For the above departments, the SAI monitors the tax revenue as well as audit of the various records and files of the assessee in financial and compliance audits.
3.2. Checking of individual assessment records and files: The audit check of the above are limited to records already available with the revenue administration. Assessment is made by the revenue administration and all supporting documents e.g. land title deeds, vehicle ownership paper, house assessment records, import declaration records, land valuation for estate duty purposes originate from the government and all such records are available for audit examination. Therefore, it is not necessary for audit to assess other records not already available with the departments involved.
3.3. Audit of assessee's records: As explained in 3.1 it is not necessary to examine assessee's records for the kind of audits currently done by the SAI here. Other than government records, government officers from the various revenue administrators including the Taxation Unit are not empowered legally to have rights over assessees' records. The Police have power to search and seize records of individuals during criminal investigation, but not bank records and records maintained by attorneys. The Ministry of Finance can assess bank records under the Currency Enactment. Customs officers are also empowered to assessee records under the Customs Enactment and officers from the Anti Corruption Department also have some powers under the Anti Corruption Enactment. However, no single governmental body has blanket authority as regard to corporate and individual records such as powers given to the Serious Fraud Office of the United Kingdom, or to Internal Revenue Service of the UK, Australia, NZ for example.
3.4 Sample checking of assessment files: Audit does sample checking of assessment files e.g. customs records, house assessment rates, estate duties etc. Sample size is determined by a manual selection (judgemental sampling) based on a percentage of total assessment revenue for a particular month. The selection of individual file is by random selection based on the officers' discretion. Sample size is normally between 20% to 50%. If serious discrepancies are discovered during the course of the audit, then the SAI will perform a comprehensive audit with 100% sample size. The SAI does not use statistical sampling methods for revenue audits, but started using Audit command Language (ACL) computer assisted audit technique in expenditure audit on selection of payment voucher from 1991.
4.1. The SAI of Brunei Darussalam is organised into various audit teams led by an auditor. The various revenue tax audits based on ministies/departments are allocated to the designated auditor for that department. The allocation is usually for a number of years before the personnel are reallocated to other audits. For a routine revenue/tax audit the team is normally made up of four officers. For audits of a more complex nature as well as non routine audit e.g. system based audits, value for money (VFM) audits, IT audits, other personnel are selected based on their individual background e.g. academic qualifications, training, experience, expertise, performance etc. In the case of a fraud audit requiring investigative auditing, the routine audit team may, if necessary be supplemented by additional personnel including Senior Auditor and Assistant Auditor.
5.1. Reports are routinely based on findings/observations submitted by the team during the course of the audit to the auditor in charge. Minor discrepancies are normally settled on the spot after discussion between the auditee and the team leader, a 'spot query' may also be issued and signed by the team leader which can be settled on the spot. The significant observations submitted by the team are compiled by the Auditor and a report to the auditee is drafted and submitted to the Senior Auditor/Assistant Auditor General for finalization. Prior to the report being issued, an exit interview is conducted between auditors and auditees. The auditors will present the findings to the auditees for their comments and discussion during the exit conference. The audit report is forwarded to the Head of Department as well as the ministry responsible, the Treasury, The Ministry of Finance and the Prime Minister's office. Important observation from all the reports issued will be compiled into the Auditor General's annual report which is submitted to His Majesty the Sultan as required by law.
6.1. The usage of computers are increasing in Government Departments. The system of revenue collection (billing) are fully computerised for electricity charges, telecommunications, and water supply. Other revenue and tax collection e.g. port charges, rental of government facilities and equipment medical services, postal services are not computerised and manual system continues to be in operation. The system of Road Tax revenue collection is manual. Other tax administrators e.g. airport departure tax, customs import duties are manual. However, computer systems are slowly being introduced. The Land Department has a computerised information on land ownership which is being expanded to include assessment of land tax. The Land Transport Department is considering computerising vehicle registration and ownership information.
6.2. The SAI in Brunei Darussalam has a small IT audit section with officers who has IT audit expertise. IT staff are involved in audit as well as playing a role in IT support of the SAI.
7.1 Structure of administration under each tax law: Various tax laws are administered by their respective departments as follows:
7.2. Interpretation of Statutes/Judicial pronouncements: Difference in opinion in interpretation of statutes/judicial pronouncements sometimes occur between audit and revenue administration. Such an outcome is however, rare because usually before any statute/judicial pronouncement is approved, there is consultations and dialogue between the Ministry of Finance, the Treasury Department, the Revenue Administrator and the SAL However, if problem does arise, then, under the provisions of the Audit Act the SAI may call on the Attorney General for his interpretation of the law in question and his decision on the matter is final.
7.3. Legal Remedy for Assessee-Government Disputes: In Brunei Darussalam, the channel for legal remedy has not been officially established for disputes between assessee and government because disputes are rarely encountered. However, if the need arises, it will be handled by the High Court.
8.1. Skill and Expertise: The administration of government revenue collection in Brunei is not complicated and the SAI audit of revenue collection is simple and straight forward. The SAI is not faced with problems concerning skill and expertise. The audit conducted is mainly financial and compliance audit and to a lesser extent, IT audit of revenue administration. At the moment, audits that are more technical in nature and complexity are outside the scope of the SAI and is under the administration of the Ministry of Finance, e.g. corporate taxation. From time to time, the Prime Minister's Office may request the Auditor General to perform a special non-routine audit, e.g. value for money audits of certain government expenditure projects. From time to time, the Police Commercial Crime Section may also seek SAJ expertise in commercial crime fraud cases. The SAI is able to handle such work. For more complex cases, the Ministry of Finance employs outside auditors/consultants/forensic accountants to investigate. The SAI does not handle such cases e.g. finance company frauds, international fraud.
8.2. Legal and Technical Constraints Under the legal framework in which the SAI Brunei functions, the SAI encounters no legal constraints or technical problems affecting the audit of revenue administrators.
9.1. Brunei Darussalam is currently encouraging industrialisation in order to diversify from its dependence from oil and gas. In this regard, tax expenditure programs exist to encourage the growth of industry. The SAI however are not involved in the planning or implementation of tax expenditure schemes.
10.1. Customs tariff in Brunei Darussalam is based on the Brunei Darussalam Trade Classification. The Brunei Darussalam Trade Classification, which incorporates the Brunei Darussalam Customs Tariff, is set out in accordance with the new Standard International Trade Classification which is produced by the Statistical Commission of the United Nations Economic and Social Council and recommended for use in 1960. This new Standard International Trade Classification is a combination of two systems, that of the Standard International Trade Classification already in existence prior to 1960 which follows generally the degree of manufacture of the commodities enumerated, and that of the Brussels Tariff Nomenclature, a standard system of nomenclature for tariff purposes adopted by a considerable number of countries since 1959. The new Standard International Trade Classification combines the two systems to preserve the accurate identification achieved by the Brussels system with the Standard International Trade Classification of commodities.
11.1. The basic accounting of revenue and pre-control system is laid down by the Treasury Department such as receipt forms control, cash books, voucher forms and posting documents. Any changes in pre-control records and procedures will have to be submitted to the Treasury Department. The Treasury will then discuss the matter with SAl who will advise on the internal control aspects of the pre-control. There is usually a series of meetings between the. revenue department, the Treasury Department and the SAI before new pre-controls are implemented.
11.2. Current examples of changes in revenue collection system is the collection of airport passenger service charge. Currently, it is collected by the airline at the point of departure. The airline accounts for the collection and remits the proceed to the Civil Aviation Authority at regular intervals less a small service fee. The new proposal made by the Civil Aviation Authority is for the tax to be collected at point of ticketing. This raises problems in collection of the tax from the various airlines involved and the monitoring of such collection. The tax administrator, the Ministry of Finance, the Airline and the SAl are currently in the process of discussing and working out the new pre-control system before implementation. The proposal of University of Brunei Darussalam to computerise its expenditure accounting is another example where the auditee presents their proposals to Treasury and SAI for discussion and approval.
11.3. The SAl of Brunei Darussalam in its routine revenue audit also covers a study of the auditees' accounting and internal control system. Problems in accountability due to weaknesses in auditees' system is brought to the attention of the auditees. The SAl will recommend change/modifications in the system to be discussed and agreed upon by the auditees. The observations and recommendations will also be included in the audit report.
12.1. Under the provision of the Financial Regulations, each revenue collecting Department Head is required to submit to the Treasury Department annually, a statement of the arrears of revenue. In the case of departments supplying utility service e.g. electricity, water and telecommunication services, the amount of arrears and uncollected revenue are very substancial. However, for the following indirect tax revenue under SAI audit, there is no arrears of revenue as the tax must be paid before the service is rendered e.g. issue of road tax receipts, payment of stamp duty before the title deed for land ownership is released, customs duties before the import can be released. In regard to land tax, a small amount is charged to land owners annually. However, the amount due from land owners are many years in arrears. Currently information on land ownership is computerised and the incorporation of the annual tax payable is being implemented into the computer system. This will ease the collection of land tax as well as making it convenient for landowners to pay the annual tax. Municipal house assessment tax also has arrears from past years which have not yet been paid.
12.2. As regard to corporate tax collection, the SAI at present does not have the information and statistics regarding the extent of such arrears defaults.
13.1. The SAI Brunei Darussalam's audit of tax revenue is quite straight forward with no legal/technical problems being encountered. Brunei Darussalam SAI audit of tax administrators' function in assessment, scope and mandate of audit is not as wide as other SAIs. Its role in tax audit is mainly in the audit of indirect tax revenue. Direct tax audit is limited to estate duty and stamp duties only. In future, it is possible that the audit scope of the SAI Brunei Darussalam will be expanded and will include corporate taxation.