Electronic Tax Administration Some trends with regard to the recent OECD Report.
I hereby intend to make some comments on the subject, following the OECD´s[1] recent report, published in the eighth edition of the Tax Administration Series, which shows how the tax administrations (TAs) are evermore moving toward electronic administration and using a range of technological tools, data and information sources and risk analyses to increase tax compliance.
The Electronic Administration concept, as defined by the European Commission, implies “The use of ICTs in Public Administrations, by combining organizational changes and new abilities to improve public services and democratic processes as well as reinforce the support to public policies”.
This concept is being rapidly developing in the TAs throughout the world and requires various measures for its effective implementation.
Electronic administration implies different coordinated elements. On the one hand, the development of electronic services and on the other, the creation of regulations and technological instruments and likewise, a new public management model based on efficiency and effectiveness.
The main advantages of electronic administration are:
With respect to the term “interoperability”, the Ibero-American Interoperability Framework[2] includes, for the sphere of electronic administration, one of the most complete definitions currently existing, in line with the definition given by the European Commission. It defines interoperability as the ability of organizations and unlike and diverse systems to interact with agreed and common objectives and for the purpose of obtaining mutual benefits.
Interaction implies that the organizations involved share information and knowledge through their business processes, by means of data exchange between their respective information and communication technology systems.
I believe this is a key aspect in order that the Governments may count on powerful information systems and in the particular case of the TAs, they may allow them to more efficiently fulfill their purpose.
The OECD and many other Organizations and countries are intensively working on electronic government and have issued, among other documents, a recommendation[3] whose objective is to support the development and implementation of digital government strategies that may bring the governments closer to the citizens and enterprises.
It is thus recognized that the current technology is not only a strategic promoter for improving the efficiency of the public sector, but it may also support the effectiveness of the policies and create more open, transparent, innovative, participative and reliable governments.
Nevertheless, the multiplication of technological options may generate new risks and greater social expectations which the governments are not always prepared to face.
Currently TA involves the “administration of information”. Therefore, I believe it is important that the new technology incorporated in the TAs, may effectively be useful to improve their performance, by generating a unique, complete, quality and reliable information system for making decisions and fulfilling their strategy.
Undoubtedly, ICTs are available to everybody; that is, for those who wish to use them to evade, as well as for the TAs to be more efficient in their management.
The availability of new technologies, the new sources of information and increasing international cooperation afford the TAs new opportunities and challenges to be more efficient and effective in their management.
There is an important gap in its use by the private sector with respect to the public sector, especially in many developing countries, which undoubtedly constitutes a challenge for the TAs.
The OECD’s recent report precisely highlights this issue on stating that there has been an increase in electronic administration, since there has been a significant change toward electronic administration with increasing options for online filing of returns and payment of taxes.
In average, the rates of electronic filing of individual income tax returns currently exceeds 70%, while corporate income tax is around 85%.
The digital contact channels (such as electronic mail, online digital assistance) continue to increase. For example, electronic mail contacts increased 20%, while traditional channels continue to decrease (for example, personal contacts decreased 15%). More than 40 administrations are using or plan to use artificial intelligence to be more efficient.
On the other hand, it is said that there is an increasing use of predictive behaviors as a compliance tool. Behavior analyses allow for better understanding how and why taxpayers act and they are also used to design policies and practical interventions. It is specified that more than 10 TAs are using behavior researchers and more than 35 have data scientists.
Likewise, it is said that compliance risk management is being used, since the TAs are adopting an evermore proactive approach for compliance risk management, whenever possible, thereby trying to intervene in earlier stages rather than after the tax returns may have been filed.
In almost two thirds of the TAs, formal cooperative compliance approaches for large taxpayers exist or are planned. This is particularly important, since the data indicate that in the majority of jurisdictions, between 35% and 60% of total net revenues, including payments withheld from the employees, were received from taxpayers covered by their large taxpayer programs.
On the other hand, it is noted that the increasing availability and exchange of data now allow compliance through design approaches for covering a variety of revenue sources, even through the previous filing of tax returns that is carried out by approximately 70% of the TAs covered by the report.
In relation to this issue, another recent OECD[4] report highlights the fact that more than 90 jurisdictions that participate in a global transparency initiative under the OECD’s Common Reporting Standard (CRS) since 2018, have now exchanged information on 47 million accounts abroad, with a total value of approximately 4.9 billion Euros.
The automatic exchange of information initiative (AEOI), activated through 4,500 bilateral relationships, constitutes the greatest tax information exchange in history, as well as the conclusion of over two decades of international efforts to counteract tax evasion.
The voluntary dissemination of extraterritorial accounts, financial assets and revenues in the period prior to the full implementation of the AEOI initiative generated over 95 billion Euros in additional revenues (taxes, interest and fines) for the OECD and G20 countries in the 2009-2019 period. This cumulative amount has been increased by 2 billion Euros since the OECD’s last report in November 2018.
Having reached this point of the significant technological advances which the TAs have achieved, I wish to emphasize once again the importance of the human resources issue.
The OECD’s own report states that the TA’s labor force is growing older since 2014. The percentage of staff older than 54 years increased by two thirds of the TA capable of providing data.
I consider this a key issue, since to the aging of the population, one must add that not all the TAs have the adequate professional profiles for facing the stages which the Electronic Administration requires.
Likewise, it stands out in many of them that the regular staff has been decreasing these past years.
I understand that every TA must make a diagnosis of this matter and analyze the number and profile of the officials it should incorporate; such as, for example, professionals dealing with data analysis, information technology, engineering, among other specialties.
I am convinced that the change will be continuous and shall move forward by leaps and bounds, for which reason it is necessary to acquire new skills in order to operate a modern electronic TA firmly based on managing information.
As I always say, the success or failure in the use of the new technology shall also be a direct consequence of the human resources available in the TAs, who should distinguish themselves for their integrity and permanent motivation and training, with compensations in keeping with the tasks performed, willing to acquire new skills, specialized knowledge, continuous training, with creativity and geographical mobility; in short, neither more nor less than an adequate management of knowledge.
[1] https://www.oecd.org/tax/administration/use-of-digital-technologies-set-to-increase-tax-compliance.htm The Tax Administration Series which was initially published in 2004, provides broad scope comparative information on the performance of 58 advanced and emerging tax administrations, as well as an analysis of the main trends and developments in the tax administration.
[2] Bases for an Ibero-American inter-operability strategy. Ibero-American Interoperability framework document ratified in 2010 by the XX Ibero-American Summit of Heads of State and Government.
[3] http://www.oecd.org/gov/digital-government/recommendation-on-digital-government-strategies.htm
[4] http://www.oecd.org/tax/exchange-of-tax-information/implementation-of-tax-transparency-initiative-delivering-concrete-and-impressive-results.htm
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