ICT as a Strategic Tool to Leapfrog the Efficiency of Tax Administrations

Chapter 2. Conceptual Framework: The Tax Administration Functions

Raúl Zambrano, who is an enthusiast of the tax administration, asks me to write a “lovely” post (sic) on the “Conceptual framework: The functions of the tax administrations”.

This request comes to me when I am engaged in the reading of a very interesting novel by David Foster Wallace, the pale king, of whom the critic says: The setting of the novel is the Treasury Department in Peoria, Illinois, in the American Midwest, in the mid-1980s. Wallace turns his attention to a group of officials that chance has brought together there. The premise he has chosen is one of unusual narrative audacity: he carries out an exhaustive analysis of existential tedium as a fundamental ingredient of the human condition”.  [1]

What’s more, according to the critics, the author says, “Pay attention to the most tedious thing you can find (tax returns, televised golf) and a boredom like you’ve never seen will come crashing down on you in waves and almost kill you.[2]

In these psychological conditions, in this quasi-festive mood provoked by this great novel, I wonder if it is possible to write a “pleasant” or “funny” post about the work of the tax administrations. I’m afraid the immediate answer is no. I invite you to ask yourselves the same question.

But apart from this challenge and the answer of each one, the previous lines make me wonder if the citizens really know what the tax administrations do, what their functions are.

This is precisely what the second chapter of the book to which this post is dedicated intends to do, describing, by way of introduction and in general terms, the main functions of a tax administration: the registration and identification of taxpayers, services to citizens, the process of declaring and paying taxes, tax control, enforced collection, the practice of refunds, dispute resolution and revenue accounting.

Establishing and keeping the taxpayer registry updated -with detailed information on the taxpayers and the obligations to declare and pay- or the assignment of a single identification number seem tasks within the reach of any modern administration, but if we go deeper into the performance of our administrations we see that this is not the case.

The design and implementation of increasingly de-formalized taxpayer services, with greater possibilities of interaction with the taxpayer, with for example, automated systems of questions and answers by means of increasingly advanced technologies that unfortunately are not simple to implement or within the reach of many countries.

The pre-filled declarations and, in general, the measures to reduce compliance costs that have been written about so much and on which it is so difficult to advance – due to the very complexity of the tax systems – are a challenge that, although known and studied, is no less important. As well as the challenge of incorporating the increasingly varied and powerful sources of information that have turned the tax administrations into data managers that must be able to process and exploit them.

The extension of the different means and systems of payment in multiple devices and systems to diversify the options of tax payment in a framework of transparency and reliability of the current account system with the taxpayer requires coordinated actions with the financial sector, involved in its own digital evolution.

The chapter also mention the deep transformation of the audit or control function, with more interaction between different tax jurisdictions, less intrusive techniques and cooperation schemes with taxpayers.

In this (boring?) accelerated description, we could not miss a mention of the enforced collection processes and the need to improve and modernize them in order to face the enormous backlog of unpaid tax debts that in many countries is growing uncontrollably as well as the amount of pending litigation and disputes that forces the implementation of technological solutions and the introduction of new legal and regulatory measures that to prevent the surge of the conflict or favor its early resolution.

And finally, in their functions, the tax administrations must comply with accounting, financial, internal and external control regulations and offer citizens the highest levels of transparency and high ethical performance, which is essential to underpin the legitimacy of the tax systems and achieve voluntary compliance with tax obligations.

I am sure that most people think that all these functions are very tedious, lacking in risk and emotion, or that they are “very grey” but let us hope that, regardless of what each one of us finds more enjoyable or funny, citizens think and know that all these functions are essential to ensure sufficient public resources to finance public policies, to improve the quality and level of public services and the living conditions of the citizens that the tax administrations serve.

[1] https://elpais.com/diario/2011/11/26/babelia/1322269942_850215.html

[2] https://www.megustaleer.com/libros/el-rey-palido/MES-021218

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