Change management in tax administrations.

Often, the tax Authorities (TAs) they are immersed in greater or lesser magnitude processes of change derived both from internal modernization and improvement projects and from the need to align with the orientations and objectives proposed by international institutions (OECD, IMF, CIAT, etc.)

The change management processes depends on the starting point and the specific circumstances of each moment and of each Tax Administration (TA). Therefore, each TA has to define the most appropriate solution, considering their priorities and circumstances since there are no single solutions or closed recipes to conduct the transformation and improvement processes. Moreover, successful solutions in one country (or in several) and at a certain time may not be appropriate or applicable in another environment or at another time.

New technologies offer enormous opportunities for improvement, but their rapid evolution can force organizations to redefine their change projects or to undertake new ones. In other words, technology is a fundamental tool to transform organizations, but, at the same time, it requires constant adaptation and transformation.

In the last 40 years, the TAs of Europe and America have been undergoing a constant process of change. In this context of permanent transformation, the processes of reform and improvement of TAs require defining, promoting and developing a strategy to manage change. The strategy must be comprehensive and include a number of essential elements to ensure that plans and projects are executed efficiently and aligned with the overall strategy of the organization. It is not about implementing the most innovative solutions but those that fit the current needs of each TA and at any time. Knowing solutions applied in other countries is highly recommended, but their implementation requires a rigorous and critical analysis of whether other people’s solutions fit our TA and at this time.


How could a comprehensive strategy for change management be designed and implemented in TAs?

First of all, and before starting a wide-ranging change process, it is necessary to analyze in detail why the TA must face the change, how the new project fits with the general strategy of the organization and what impact the intended change will have internally and in the relationship with society.

It is especially important to consider the experience of other TAs and to consider the practices that have given good results in other organizations, as well as to analyze the causes explaining why certain processes have failed.

From a methodological point of view, change management it can be addressed through various models that large and complex organizations such as TAs, can consider when introducing and managing change processes. Among the possible models to consider, with organizational scope, stand out the model ADKAR, [1] the model of Lewin, the model of the 8 steps of Kotter etc…

Change management, from the point of view of these methodologies, can be defined as the process, tools and techniques necessary to achieve the required results and increase understanding and internal capabilities to manage organizational changes and continuously improve the quality, effectiveness and efficiency of the organization. And all this, of course, considering as the central element of the process the people who have to direct and implement the change process.


Several stages must be addressed to implement and manage this change management strategy, which can be specified as follows:

Ensure the political support and effective leadership of the organization’s management team.

Accurately assess the real situation of the TA, its strengths, weaknesses and opportunities for improvement.

Integrate the improvement plans within a global Compliance Risk Management (GRC) vision and supported by a comprehensive Compliance Improvement Plan (PMC).

Communicate the change internally and externally by identifying the resistances it provokes and the possible supports and allies.

Approve and apply staff training actions so that they adapt to the new environment and get involved in the transformation process.

Political support for the changes and the conviction of the management team of the need for the changes is essential. Those responsible for TA have to believe in change and assume the risks and costs that a structural change entails. The lack of real commitment to change by the management team is often the main reason the change and modernization projects of some TAs fail.

In addition, if the change project has the support of external assistance (national or international), it is essential that the project is managed and led by the staff of the TA itself. Only in this way will there be possibilities for it to be internalized by the organization and sustainable over time to achieve the desired effects.

In this sense, it is essential to evaluate whether both the main sponsor of the change and the rest of the management team openly support the change or if neutral or even reactive positions to the change are observed. These resistances to change must be identified and deactivated as soon as possible.

In any process of change of a certain importance, the resistance of certain groups will appear (even from those who will benefit from the reform). The attachment to the status quo and the fear of change is very frequent in organizations and it must be deactivated fundamentally, with information.

To fight the resistances (active or passive) to change, the members of the TAs’ management teams must be initiative-taking, and forge alliances and coalitions that facilitate transformation.

The managers must clearly convey the objectives and challenges posed by the change process and that there must be no doubts about how decisions are made so that the entire organization can focus on the work to be done.

Communication plans must identify the key messages and objectives and determine who the transmitters are going to be, what the recipients are going to be, channels and frequency of communications.

At the same time, it is particularly important to define and implement staff training plans to cover the training needs demanded by change management (managerial and managerial skills, project management, impact of new technologies, etc.). It is about enabling the adaptation of personnel to new environments since, in general, structural changes require a cultural change in the organization´s personnel and changing the culture of consolidated organizations is really complicated.

Another fundamental aspect to successfully implement change processes is to define a demanding but achievable schedule. The schedule must be subject to permanent monitoring, evaluating the progress and demanding accountability from each of the project managers at all levels, from managers to the operational agents.

Predicting goals to be achieved throughout the change process is important to maintain the staff confidence. In this sense, it is highly recommended to achieve some initial results (the so-called early victories) to consolidate the trust of the staff (and even society) in the change project undertaken.

Finally, based on our experience in the work of TAs, we believe important that the change processes try to rationalize and simplify, as far as possible, the procedures to be applied. The work of TAs requires applying hundreds of procedures that often affect millions of taxpayers; therefore, any superfluous procedure or requirement that does not add enough value must be eliminated to achieve an adequate level of efficiency and effectiveness. Simple procedures become complex when they are overcrowded and applied to millions of people; complex procedures, when overcrowded are likely to become inapplicable.

The methodologies we have mentioned provide specific tools that allow us to evaluate these aspects and establish communication, training and action plans to mitigate resistance to change.

The analysis of the degree of maturity of TAs are also an essential element to determine their position, both from an absolute point of view and from a perspective of comparative analysis between TAs; they become one of the references that can guide the change management strategy.

In this context, TADAT can be a useful tool to evaluate, in a standardized way, the soundness of the fundamental components of a country’s tax administration system and its level of maturity in relation to practices that in general, can be considered positive considering the current state of TAs’ development.

On this point of maturity analysis there are other tools, such as” Change Management Maturity Model” by PROSCI [2] that is based on the analysis and evaluation of socialization, standardization, competences, application and leadership skills, and that can be applicable in the scope of TAs .


Final considerations.

Although, as we have pointed out, there are no universal solutions or unique recipes, we think it is worth considering the following considerations:

  1. The methodology to be used for change management can be approached with the support of various theoretical models.
  2. Structural change processes of TAs are defined after a comprehensive analysis of the organization using the Risk Management methodology.
  3. To support the change, it is positive to develop and implement a comprehensive tax compliance improvement plan (PMC), which is the ultimate objective of the TAs.
  4. The personnel of the organization should be at the center of the overall strategy to conduct any structural changes in the TA.
  5. Therefore, together with the PMC, a communication plan and a training plan that promotes cultural change and allows the personnel of the organization to internalize and take ownership of the change process are necessary.
  6. The resistances to change that may block it, especially in the early stages of the process, must be identified and counteracted.
  7. Any transformation process, in order to be sustainable, must be sponsored, directed and applied by the personnel of the organization itself, without prejudice to the external support it may receive.
  8. It is advisable to know about solutions applied in other countries, but their implementation requires a rigorous and critical analysis of whether these solutions are the best option here and now.
  9. It is important define a demanding schedule for the change process and give it a permanent follow-up of responsibilities at all levels, from the managers to the agents.


[1] ADKAR® is an individual change model developed by PROSCI® that describes the five sequential steps to success in change management. These steps are Awareness (A): Awareness of the need for change, Desire (D): Desire to participate and support the change, Knowledge (K): Knowledge about how to change, Ability (A): Capacity to implement the acquired skills and behaviors, Reinforcement (R): Reinforcement to sustain the change.

[2] This PROSCI methodology uniquely integrates individual change management and organizational change management to ensure that organizational results are achieved and tries to leverage change management strategies and activities to drive individual transitions and ultimately organizational success.

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