copernican revolution in tax administration

8/14/2019 Copernican Revolution in Tax Administration

1/22

12 August 2007

1

Putting the Client First

The emerging Copernican Revolutionof Tax Administration

Stuart HamiltonCentre for Tax Policy & AdministrationOECD


2/22

12 August 2007

2

Im from the OECD, and Im here to help.

really!

There is an increasing recognition that helping clients

comply in a way that assists them to grow: enables better compliance

allows clients to get on with the job of business, and

helps attract investment to the country in a fair and

transparent manner.

A Client Centric Strategy is a key part of enabling this

Aims

Putting the Client First


3/22

12 August 2007

3

Administrationcentric view

Tax

ClientClient

Client

Client ClientClient

Traditional view: A client must meet the administrations needs

Changing world views - from:


4/22

12 August 2007

4

Clientcentric view

Client

TaxTax

Tax

Tax TaxTax

Client

Client

Client

Client

New view: That the administration is responsive to client needs

A Copernican Revolution

Changing world views - to:


5/22

12 August 2007

5

Revenue authorities are important in creating a viablemarket economy

Revenue authorities interact with all businesses in theeconomy - they need to do so even handedly

Revenue regulations can spur or retard markets. Overregulation can stifle commerce, under regulation canundermine honest compliant clients.

A careful balance is required.

Effective neutrality of treatment between market segmentsis generally the policy aim.

Businesses and Revenue authorities - a developing partnership

Tax matters to business


6/22

12 August 2007

6

There is a growing recognition by Revenue authorities thatservice provision to business and citizens is critical inensuring high levels of voluntary compliance.

By making the system easier to comply with(Simplification)

By helping businesses to comply with the system(Service)

Thus enabling and 'encouraging' compliance

Revenue authorities and services to business and citizens


7/22

12 August 2007

7

Ready(The client knows what compliance is - knowledge)

communication strategies

Willing(The client is prepared to comply - attitude)incentives contained in instruments relationship with the regulatory agency acceptance of the reasons for the regulation trust in government

Able(The client has the capacity to comply - systems) regulatory design simple to comply, low compliance costs strategies that develop client capacities, business models

We want to have Clients who are ready, willing and able tocomply - and do...

Clients who are: Ready, Willing and Able to comply


8/22

12 August 2007

8

Compliance

Remembering that ...

Most clients

pay most of their tax

most of the time ...

Compliance models represent that most pay most of their tax


9/22

12 August 2007 9

Revenuestrategy:

Enforce

PersuadeAssist

SupportEducateEncourage

Customerbehaviour:

Evading

ResistantResigned

Trying

UninformedWilling

Not every problem is a nail to which the only response is a hammer ...

Compliance

Enabling compliance is the key factor for most Clients

-Spectrum-


10/22

12 August 2007 10

Client rights and Client obligations

It is a two way street

Right to: Obligation

Informed, assisted & heard Honesty

Appeal Co-operative approach

Pay correct tax only Provide accurate information

Certainty Keep records

Privacy Pay tax on time

Confidentiality

Rights and obligations...


11/22

12 August 2007 11

ClientGroup

Admin FunctionFiling, Payment, Audit, Debt Mgmt, Service,Appeals etc

VAT

W&S/SS Withholding Tax

Corporate Income Tax

TaxType

Large Business Taxpayers

Small Medium Business

Individuals non business

Traditional systems are organised by tax type or admin function

Systems

Solving the tax Rubik Cube


12/22

12 August 2007 12

Structures

Audit AppealsAdvisings

TaxAdministration

COMPLEX

SMB

NBUS

Client

COMPLEX

SMB

NBUS

COMPLEX

SMB

NBUS

Small and

MediumBusinesses

Non BusinessIncome Taxes

Complex-

LargeCorporates

A

D

V

I

C

E

A

U

D

I

T

A

P

P

E

A

L

TaxAdministration

A

D

V

I

C

E

A

U

D

I

T

A

P

P

E

A

L

A

D

V

I

C

E

A

U

D

I

T

A

P

P

E

A

L

Client

Functional vs Market Structure


13/22

12 August 2007 13

Cumulative distribution of tax paid

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340 360 380 400 420 440 460 480 500 520 540 560 580 600

Rank of tax paid in class

ProportionoftotalLB&Itax

Chosen by largest tax contribution Chosen by largest income reported Chosen by largest total assets

Not all Clients are equal - some matter more than others

Structures


14/22

12 August 2007 14

Countries with Dedicated Organisational Units for Large Taxpayers

Africa Algeria, Benin, Burkina Faso, Cameroon, Cote d'Ivoire, Gabon,Guinea, Kenya, Madagascar, Mali, Morocco, Niger, Togo, Uganda.

Asia Bangladesh, Mongolia, Philippines, Sri Lanka, Cambodia

Ex Soviet Union Azerbaijan, Georgia, Russia, Ukraine

Europe Albania, Bulgaria, Finland, France, Hungary, Ireland, Latvia,Romania, Slovakia, United Kingdom, Serbia.

North America USA.

Central and Argentina, Bolivia, Columbia, Ecuador, El Salvador, Haiti,

South America Mexico, Nicaragua, Paraguay, Peru, Venezuela.

Middle East Iran, Pakistan, Saudi Arabia, Yemen.

Pacific Australia, New Zealand.

The trend towards Large Taxpayer Units

Structures


15/22

12 August 2007 15

Depth ofKnowledge

Width of

Knowledge

The Specialist

The Generalist

Breadth of Client needs

The Frontline

Staff: Specialists vs Generalists - no magic point of balance

Staffing


16/22

12 August 2007 16

Emerging trends in revenue authority client service approaches

Trends re service provision

From > To

Taxpayer > Client/Customer

Segmented service > Integrated one stop shop Paper communications > Electronic

Cheques & cash > Electronic Funds Transfer

Manual responses > Automated responses

Reactive programmes > Proactive programmes

Assistance > Self help & education

Evolving system


17/22

12 August 2007 17

PAPER v ON-LINE

7-14 days v On-line batch/real time

Pages of data to be keyed v small electronic data file

Single interface v multiple interfaces/approaches

Other benefitsKeying errors significantly reducedRequests for additional data reduced

Better client service can be provided

Its Better, Faster, Cheaper - but not easy!

Paper v On-line processing

Evolving system


18/22

12 August 2007 18

Revenue authorities - pulling and pushing a country on-line

Revenue authorities can pull a country on-line by makingservices and materials available over the Internet: 24/7

Legislation

Rulings & Guidelines

Tax record keeping and calculation software

Help -> FAQs, KB Systems, Proactive assistance

Governments can push a country on-line by requiringpayments and form filing to be made over the Internet

Generally medium to large businesses are targeted, thoughthe systems are available to all

Evolving system


19/22

12 August 2007 19

Pull requirements

To pull a country on-line Revenue authorities have to be earlyadopters of technology

Interactive - SMEs are a key target audience here(Non-resident SMEs are a consideration - if you want them to

comply.)

Plain language guidance with relevant examples(multi-language may be a consideration)

Linked with other relevant Government agencies(business entry point portal to Government)

Grouped around business events(Responsive to business needs at a point in time. One stop shop.)

Evolving system


20/22

12 August 2007 20

Push requirements

To push a country on-line the necessary infrastructure mustbe created & available

It must be secure - but not difficult to use

It must be reliable > first time, every time, any time

It should be a win-win implementation and provideadoptees with something - cost savings &/or greaterconvenience &/or certainty. Eg:

ability to estimate and keep track of taxes falling dueability to consolidate tax accounts - reduce payment churnability to schedule payments (match to cash flows, ifactor)

Evolving system


21/22

12 August 2007 21

For deliberate evaders Better, Faster, Cheaper will have a down side


22/22

12 August 2007 22

Contact......

More info

www.oecd.org Theme: Taxation

Contact

[email protected]

copernican revolution in tax administration

Documents