In public administration, there is one rule that rarely fails: you cannot improve what you do not measure. In tax matters, this premise is crucial. Attempting to reduce tax evasion or strengthen compliance without a clear diagnosis is like trying to cure a patient without medical tests: there may be intuition, but there is no strategy.

Therefore, having an objective “snapshot” of the actual state of a tax administration is an essential tool for strategic planning. It is not a matter of internal perceptions or optimistic rhetoric, but rather a technical, comparable, and evidence-based diagnosis. That is precisely the role of TADAT.

The Tax Administration Diagnostic Assessment Tool (TADAT) is a tool developed by international organizations to evaluate the performance of tax administrations. It does not analyze tax rates or tax bases but rather evaluates how the institution responsible for collecting taxes functions.

The TADAT tool examines nine key areas (such as taxpayer registration quality, risk management, auditing, collection, transparency, and accountability) through 55 indicators. Each indicator is rated from “D” (poor performance) to “A” (international best practices). The result is an external, objective assessment that can be compared between countries and over periods of time. In simple terms, TADAT answers a central question: How well does the tax administration work, and where are its main weaknesses and strengths?

For years, it was assumed that strengthening tax administration helped reduce tax evasion, but the available empirical evidence was limited. A recent study by the International Monetary Fund now provides clear results. Based on an analysis of data from more than 100 countries over a decade, the report shows that improving institutional performance, as measured by the TADAT, has concrete and measurable effects on tax compliance levels.

According to the study, moving from low levels of performance to intermediate standards is associated with significant reductions in noncompliance, particularly in consumption taxes, such as VAT, and income taxes. Overall, the results confirm that a more effective tax administration can close compliance gaps in a sustained manner.

The message is clear: strengthening the tax administration is crucial to reducing evasion and to tackling any process of modernizing the tax system in an orderly manner. The analysis also shows that allocating more resources alone does not guarantee better results. What makes the difference is how those resources are managed, especially in areas such as risk management, smart enforcement, and facilitating voluntary compliance.

In addition, the study highlights an often-underestimated factor: trust. Where taxpayers perceive a more credible, fair, and professional tax administration, compliance improves even further, reinforcing the effects of good institutional management.

The TADAT tool, therefore, is neither an academic exercise nor a formality linked to international cooperation. It is a strategic compass that allows reforms to be prioritized, progress to be monitored, and efforts to be focused on where they really generate results.

The tax administrations that move forward are not those that promise miracles, but those that dare to look in the mirror. Ignoring this means continuing to manage blindly; using it well means understanding that improving compliance begins with an honest diagnosis.

References:

1. tadat.org
2. https://www.imf.org/en/publications/wp/issues/2025/10/09/closing-the-gap-how-tax-administration-performance-shapes-compliance-571094

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