Tax - Admin 2017 en

Tax Administration 2017
Comparative Information on OECD and Other

Advanced and Emerging Economies
Tax Administration
2017
COMPARATIVE INFORMATION ON OECD

AND OTHER ADVANCED AND EMERGING
ECONOMIES
This work is published under the responsibility of the Secretary-General of the OECD. The
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Please cite this publication as:

OECD (2017), Tax Administration 2017: Comparative Information on OECD and Other Advanced and
Emerging Economies, OECD Publishing, Paris.
http://dx.doi.org/10.1787/tax_admin-2017-en
ISBN 978-92-64-27911-7 (print)

ISBN 978-92-64-27912-4 (PDF)
Series: Tax Administration

ISSN 2308-7331 (print)
ISSN 2307-7727 (online)
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Foreword – 3
Foreword
The Tax Administration 2017 is the seventh edition of the OECD Centre for Tax Policy
and Administration’s biennial comparative information series first published in 2004. The
primary purpose of the Tax Administration Series (TAS) is to share information that will
facilitate dialogue on the design and administration of tax systems.
This edition of the TAS provides internationally comparative data on aspects of tax
systems and their administration in 55 advanced and emerging economies, and includes
performance-related data, ratios and trends up to the end of the 2015 fiscal year.
This is the first edition of the TAS where the data has been collected through a joint
web-based survey – the International Survey on Revenue Administration (ISORA)
– developed in co-operation between the OECD, IMF, IOTA and CIAT. This single
international survey is an important development which will simplify the collection of data
and will improve international comparability across a broader range of countries.
This edition was prepared by Michael Hewetson and Oliver Petzold. Considerable support
was received from tax officials of the revenue bodies that participated in the preparation of
the TAS, including the contributing authors, as noted in the Acknowledgments.
Tax Administration 2017 is published under the responsibility of the OECD
Secretary-General.
TAX ADMINISTRATION 2017: COMPARATIVE INFORMATION ON OECD AND OTHER ADVANCED AND EMERGING ECONOMIES © OECD 2017
Preface – 5
Preface
The Tax Administration Series has developed into a rich resource of comparable
information for tax administrations since the first edition was published in 2004. This
comprehensive survey of organisation, process and performance helps tax administrations
to understand better how they and their peers are operating. The new 2017 edition contains
more analysis of trends and activities and of the changing environment in which tax
administrations operate. It includes, for the first time, country-authored articles on some of
the latest developments in the field.
Our aim in regularly collating and publishing comparable data is to help tax administrations
increase the efficiency, effectiveness and fairness of tax administrations and reduce the costs
of compliance. This is an important and shared purpose. Together, the 55 tax administrations
that participated in Tax Administration 2017 raise some EUR 8.5 trillion in revenue. Even small
increases in compliance rates or compliance costs can have significant impacts on government
revenues and the wider economy. The challenge of efficient and effective tax administration is
not only to raise the revenue needed to fund public services – and increasingly to provide some
of those services – but also to minimise burdens on taxpayers. Maintaining trust in the efficient
operation and fairness of the tax system is key to ensuring its sustainability.
Tax administrations are embarking on a period of unprecedented change. The
emergence of new technologies, analytical tools and a vast increase in the scope and scale
of digital data offer significant opportunities to enhance tax administration and reduce
burdens. But there are also challenges to realising these benefits. These include pressures
on budgets and human resources, the capacity of tax administrations to respond swiftly to
rapid changes in business models and the choice of cost-effective technical solutions. The
value of the Tax Administration Series – and why I would encourage you to read this edition
- is in the light it can shine on these opportunities and challenges. Tax administrations and
governments can use this valuable resource to learn from each other and work together
to improve the design, management and performance of their tax systems, enhancing tax
administration around the world.
I would like to thank everyone who has been involved in producing this engaging and
highly informative report, in particular the teams in the participating tax administrations
that have contributed their time and expertise, as well as the OECD Secretariat which led
the preparation of Tax Administration 2017.
Edward Troup
Chair, Forum on Tax Administration
Acknowledgements – 7
Acknowledgements
The OECD has produced the Tax Administration Series (TAS), its comparative
information series on tax administration, since 2004. Since that time the publication has
grown in terms of its coverage, influence and importance and is now widely recognised as
an authoritative source of information on tax administration around the globe.
The 2017 Tax Administration Series would not have been possible without the direct
support and help of a large number of people.
The work was led by Michael Hewetson and Oliver Petzold both from the OECD’s
Forum on Tax Administration (FTA) Secretariat, under the supervision since January 2017
of Peter Green, Head of the FTA Secretariat.
The new TAS format and approach was developed by the FTA and benefited from the
input and direction provided by the FTA Bureau.
The principal author of the publication was Michael Hewetson, who also authored
Chapters 1, 2, 3 and 6. Ronnie Nielsen, from the Danish Tax Administration, authored
Chapters 4 and 5. Management and analysis of the data was undertaken by Oliver Petzold
who also authored Chapter 7.
Authoring support was provided in respect of Chapter 3 by Tatiana Kurancheva while
on secondment to the OECD Secretariat from the Mercator Program Centre for International
Affairs.
The authors are also thankful for the work of Tom Brandt, currently Chief Risk Officer,
Internal Revenue Service, United States and former Head of the FTA Secretariat, and the
work of the small but dedicated support team at the OECD Secretariat.
This edition of the TAS also benefits from articles on topical issues on tax administration
authored by officials of the Australian Tax Office, Canada Revenue Agency, Office of
the Revenue Commissioners (Ireland), Netherlands Tax and Customs Administration,
Skatteetaten (Tax Norway), Her Majesty’s Revenue and Customs Agency (United Kingdom)
and Internal Revenue Service (United States). These articles are featured in Chapters 8 to 15.
Finally, the authors would like to specifically acknowledge the work of the a large
number of staff in the 55 tax administrations that provided data and country examples,
reviewed content and responded to feedback and questions on the data and text that form
the basis of the publication.
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TABLE OF CONTENTS – 9
Table of contents
Abbreviations �� 15
Executive summary��17
Reader’s guide�� 21
Part I. Comparative information on tax administrations�� 25
Chapter 1. The changing face of tax administration�� 27

Introduction�� 28
Globally connected�� 29
Technologically enabled �� 29
Collaborative and integrated�� 29
Data and insight led�� 30
Better informed compliance management �� 30
Enabled workforce��31
And finally ��31
Chapter 2. T
ax collection �� 33
Net collections by tax administrations averages 20% of jurisdiction GDP �� 34
Net collections by tax administrations averages 54% total jurisdiction revenue�� 34
Tax audit is the dominant administration function using just under one-third of staff�� 36
Tax administrations covered in this survey have more than 750 million customers�� 37
Tax administration is big business globally �� 37
Note�� 38
References�� 38
Chapter 3. I nstitutional arrangements of tax administrations�� 39

Increasing responsibilities of tax administrations �� 40
Institutional arrangements for tax administrations�� 42
Organisational features�� 48
Chapter 4. Tax compliance risk�� 53

Framework for compliance risk management�� 54
The emerging practice of compliance risk management �� 54
Current compliance strategies�� 55
Compliance interventions�� 57
Key segments �� 57
Managing the shadow economy�� 59
Sharing economy�� 62
10 – TABLE OF CONTENTS
Tax gap measurements, random audits and robust monitoring of risk�� 62

Leveraging third-party data �� 63
Voluntary disclosure mechanisms�� 64
References�� 65
Chapter 5. The changing role of tax service providers �� 67

The role of tax service providers�� 68
Regulation of tax service providers �� 69
Services offered to tax service providers�� 70
New actors and technologies entering the market �� 71
New tax administration business models�� 71
References�� 74
Chapter 6. P
erformance of tax administrations�� 75
Registration�� 77
Assessment �� 81
Taxpayer service�� 88
Verification�� 96
Collections�� 104
Disputes��113
Notes��116
References��116
Chapter 7. B
udget and human resources ��119
Budgetary pressure�� 120
Productivity and innovation ��121
Workforce�� 125
Capability change��133
Notes�� 136
References�� 136
Part II. Topical issues in tax administration��137
Chapter 8. Advanced analytics��139

What is advanced analytics?�� 140
Application of advanced analytics �� 140
Organisational management of advanced analytics projects ��143
Change management��145
Building capability ��145
Next steps ��145
Chapter 9. Co‑operative approaches to tax��147

Mutual or conflicting interests��148
Risk management and taxpayer behaviour – the background to co‑operative compliance��149
Tax control framework – the central pillar��151
Exiting co‑operative compliance ��152
Next steps ��153
References��153
Chapter 10. Insights from innovations in tax debt management ��155

Innovation in tax debt management �� 156
Use of advanced data analysis in tax debt management�� 156
Segmentation��157
Behavioural approaches ��158
Campaign based activities��158
Next steps �� 160
References��161
Chapter 11. U
sing digital delivery to enhance the integrity of tax systems��163
Digital delivery and the evolution of compliance�� 164
Stronger identity security�� 164
Integration with natural systems�� 166
Emerging Technology��167
Measuring the impact of digital delivery��167
And finally ��168
References��168
Chapter 12. Large business and international��169

Compliance risk management��170
International collaboration ��170
Co‑operative compliance ��171
Tax certainty��172
Future direction��173
Notes��173
References��174
Chapter 13. I mproving mutual agreement procedures��175

Precursors of the BEPS Action 14 minimum standard��177
BEPS Action 14 minimum standard��177
Innovative approaches to prevent disputes and for quicker resolution��178
Note��180
References��180
Chapter 14. T
he measurement of tax gaps ��181
What is the tax gap and why measure it?��182
Measurement and design options��182
Alternative approaches to measuring the tax gap��185
Limitations of tax gap estimates��186
Note��186
References��187
Chapter 15. Third-party data management – the journey from post-assessment crosschecking
to pre-filling and no-return approaches ��189
The pre-filled “pathway” �� 190
Post-assessment��191
Transformation phase�� 192
Pre-assessment verification�� 194
Note�� 195
Part III. A
nnexes�� 197
Annex A. Data tables�� 199
Annex B. Participating tax administrations�� 201
Figures
Figure 1.1 Tax administration eco-system �� 28
Figure 2.1 Key figures related to the administrations covered in this publication, 2015�� 34
Figure 2.2 Net revenue collected as a percent of gross domestic product, 2014�� 35
Figure 2.3 Net revenue collected as a percent of total government revenue, 2014�� 35
Figure 2.4 Average net revenue collections by major revenue type, 2015 �� 36
Figure 2.5 Tax administration staff usage by function, 2015�� 36
Figure 2.6 Taxpayer registrations by tax type, 2015�� 37
Figure 3.1 Tax administrations – wider roles, 2015 �� 41
Figure 3.2 Tax administrations – involvement in the collection of SSC, 2015�� 41
Figure 3.3 Institutional frameworks, 2015 �� 43
Figure 3.4 Taxpayer rights formally defined, 2015�� 47
Figure 3.5 Existence of special body for dealing with taxpayers’ complaints, 2015 �� 47
Figure 3.6 Large taxpayer offices/programmes, 2015�� 52
Figure 3.7 HNWI programmes, 2015�� 52
Figure 4.1 Compliance risk management process�� 54
Figure 4.2 Priority of compliance interventions, 2015 �� 57
Figure 4.3 Use of tax gap methodology, 2015�� 63
Figure 4.4 Use of third party data, 2015�� 64
Figure 5.1 Specialised services provided to tax service providers, 2015�� 70
Figure 6.1 Overview of core tax administration functions�� 76
Figure 6.2 Registration of active personal income taxpayers as percentage of citizen population,
2015 �� 77
Figure 6.3 Categories of third party information used in pre-filled returns, 2015�� 83
Figure 6.4 PIT and CIT on-time filing rates, 2015�� 85
Figure 6.5 VAT on-time filing rates – VAT monthly filers vs. VAT annual filers, 2015�� 85
Figure 6.6 Range in on-time payment performance by tax type, 2015�� 87
Figure 6.7 Dominant contact channel, 2015�� 90
Figure 6.8 Most common verification case selection criteria, 2015�� 97
Figure 6.9 Information and access powers, 2015 �� 97
Figure 6.10 PIT audit coverage and adjustment rates, 2015�� 99
Figure 6.11 CIT audit coverage and adjustment rates, 2015�� 100
Figure 6.12 VAT audit coverage and adjustment rates, 2015 �� 100
Figure 6.13 Verification adjustment ratio by audit type, 2015��101
Figure 6.14 Total year-end tax debt as a percent of total net revenue, 2011-15�� 106
Figure 6.15 Movement in total year-end collectable tax debt, 2011-15�� 106
Figure 6.16 Movement in tax debt cases between 2014 year-beginning and 2015 year-end�� 107
Figure 6.17 Make-up of tax debt older than 12 months (CIT, PIT, VAT), 2015�� 108
Figure 6.18 Powers to assist managing debt, 2015 �� 108
Figure 6.19 Powers to assist collection, 2015 �� 109
Figure 6.20 Powers to assist enforcement of debt, 2015��110
Figure 6.21 Number of administrative review cases initiated per 1 000 active PIT & CIT taxpayers,
2015 ��114
Figure 6.22 Changes in the number of administrative review cases at year-end, 2013 to 2015��114
Figure 6.23 Percentage of cases resolved in favour of the tax administration, 2015 ��115
Figure 7.1 Salary cost as a percent of total operating budget, 2015�� 120
Figure 7.2 Administration’s approaches to innovation, 2015�� 122
Figure 7.3 Development of primary IT solutions, 2015 �� 123

Figure 7.4 IT from external/both: Product type, 2015 �� 123
Figure 7.5 Most common administrative functions/operations fully or partially outsourced, 2015 �� 125
Figure 7.6 Double pressure on workforce�� 125
Figure 7.7 Staff usage by function, 2015�� 126
Figure 7.8 Age profiles of tax administration staff, 2015�� 127
Figure 7.9 Age profiles of general labour force, 2015�� 128
Figure 7.10 Average length of service vs. average age profile, 2015 �� 129
Figure 7.11 Percentage of female staff – total female staff vs. female executives, 2015 �� 129
Figure 7.12 Attrition and hire rates, 2015�� 130
Figure 7.13 Number of administrations having specialised positions, 2015��135
Figure 8.1 Use of advanced analytics��141
Figure 8.2 Key characteristics of advanced analytics projects�� 144
Figure 9.1 Co‑operative compliance approaches – Existence and implementation status, 2015��148
Figure 9.2 Nature of co‑operative compliance programmes, 2015��149
Figure 9.3 Co‑operative compliance programmes: Features and requirements, 2015�� 150
Figure 10.1 Phone campaign results – self employed, Norway �� 160
Figure 10.2 Phone campaign results – limited companies, Norway�� 160
Figure 13.1 Evolution of the inventory of MAP cases in OECD member countries, 2006-15��176
Figure 14.1 Tax gap measurement and random audits��182
Figure 14.2 HMRC’s interpretation of the tax gap�� 184
Figure 14.3 Effect of information reporting on individual income tax reporting compliance,
tax years 2008‑10��185
Figure 15.1 A pre-filling maturity “pathway” �� 190
Tables
Table 2.1 Percent of tax administration staff usage by function, 2013 and 2015 �� 37
Table 3.1 Taxpayer’s rights and obligations�� 46
Table 5.1 Services and registration of tax service providers, 2015�� 70
Table 6.1 Return filing rates by channel (in percent) �� 82
Table 6.2 Payment rates by channel (for CIT, PIT and VAT) �� 82
Table 6.3 Average on-time filing rates by tax type�� 84
Table 6.4 Average on-time payment rates by tax type �� 86
Table 6.5 Service demand by channel�� 89
Table 6.6 Taxpayer satisfaction surveys by taxpayer segment, 2015�� 95
Table 6.7 Verification adjustment rate by segment, 2015�� 102
Table 6.8 Administrations that track the collection of verification debt, 2015�� 102
Table 6.9 Participation in tax and crime work��103
Table 6.10 Summary of tax and crime work�� 104
Table 7.1 Human resource management approaches, 2015��131
Table 7.2 Human resource autonomy, 2015��132
Table 7.3 Staff satisfaction and performance management, 2015��133
Table 7.4 Remuneration, 2015��133
Boxes
Box 3.1 Institutional arrangements�� 42
Box 3.2 Board arrangements�� 45
Box 3.3 Taxpayers rights and obligations�� 47
Box 3.4 Finland – replacing legacy tax systems with tax COTS application�� 49
Box 3.5 China – administrative challenges in implementing VAT reform�� 50
Box 4.1 Integrated approach to managing risks�� 56
Box 4.2 Integrated risk assessment for large business �� 58
Box 4.3 Dedicated HNWI programme�� 59
Box 4.4 Use of certified cash registers�� 60
Box 4.5 Co‑operation and innovation�� 61

Box 4.6 Voluntary disclosure programme�� 64
Box 5.1 Working with tax service providers�� 69
Box 5.2 Exposing business rules and APIs�� 72
Box 5.3 Collaboration with software developers�� 72
Box 5.4 Advice for implementation for Engagement and Involvement approaches�� 73
Box 6.1 Registration and identification�� 78
Box 6.2 Security and authentication�� 79
Box 6.3 Identity protection �� 80
Box 6.4 Cross border identity management �� 81
Box 6.5 Foreign Account Tax Compliance Act (FATCA) Data �� 83
Box 6.6 Data management and storage�� 88
Box 6.7 Managing demand�� 90
Box 6.8 Supporting self-service �� 92
Box 6.9 Mobile app and tax�� 93
Box 6.10 User design and engagement�� 96
Box 6.11 Information and Access powers�� 98
Box 6.12 VAT real time risk model�� 98
Box 6.13 Innovation in VAT��101
Box 6.14 Tax and crime��103
Box 6.15 Predictive modelling ��110
Box 6.16 Automated enforcement��111
Box 6.17 Education and communication��112
Box 6.18 Cross border collection activity��112
Box 6.19 Appeal and review processes��113
Box 6.20 Settling large tax disputes ��115
Box 7.1 Tax administration economy and efficiency measures��121
Box 7.2 Outsourcing debt collection, 2015�� 124
Box 7.3 Succession planning and leadership programmes��131
Box 7.4 Capability change�� 134
Box 7.5 Delivery of tax administration capacity building ��135
Box 8.1 Data mining models for non-filer programmes��142
Box 8.2 Text mining of inbound emails ��142
Box 8.3 Centralised governance of advanced analytics �� 144
Box 9.1 Use of legislation��149
Box 9.2 Use of tax risk management��151
Box 10.1 Debt risk modelling�� 156
Box 10.2 Segmentation��157
Box 10.3 Outbound call campaign ��159
Box 14.1 Measuring tax gaps ��183
Box 15.1 Combining information from multiple sources��191
Box 15.2 Collection of data for third parties�� 192
Box 15.3 Working with third parties to obtain data�� 193
Box 15.4 Bringing it together �� 195
A bbreviations – 15
Abbreviations
AE Agenzia Entrate (Italy)

AEOI Automatic Exchange of Information
AFIP Administración Federal Ingresos Publicos (Argentina)
ATO Australian Taxation Office
CFA Committee on Fiscal Affairs (OECD)
CIAT Inter-American Center of Tax Administration
CIT Corporate income tax
CRA Canada Revenue Agency (Canada)
CRS Common Reporting Standard
CTPA Centre for Tax Policy and Administration (OECD)
DGFiP Directorate Générale des Finances Publiques (France)
DIAN Direccion de Impuestos y Aduanas Nationales (Colombia)
DT Direct Taxes
EC European Commission
EOI Exchange of Information
ETCB Estonian Tax and Customs Board
EU European Union
FATCA Foreign Account Tax Compliance Act
FDSR Financial Directorate of the Slovak Republic
FTA Forum on Tax Administration (OECD)
FTE Full-time equivalent
FTS Federal Tax Service (Russian Federation)
GDP Gross domestic product
GST Goods and Services Tax
HMRC Her Majesty’s Revenue and Customs (United Kingdom)
HNWI High Net Wealth Individuals
HR Human Resource
HRM Human Resource Management
IMF International Monetary Fund
16 – A bbreviations
IOTA Intra-European Organisation of Tax Administrations

IR Inland Revenue (New Zealand)
IRAS Inland Revenue Authority of Singapore
IRBM Inland Revenue Board of Malaysia (the direct taxes administration)
ISORA International Survey of Revenue Administrations
IRS Internal Revenue Service (United States)
IT Information technology
IVR Interactive voice response
LB&I Large Business and International
LTO Large taxpayer office
MOF Ministry of Finance
NAFA National Agency for Fiscal Administration (Romania)
NAO National Audit Office
NRA National Revenue Agency (Bulgaria)
NTA National Tax Agency (Japan)
NTA Norwegian Tax Administration
NTCA Netherlands Tax and Customs Administration
NTS National Tax Service (Korea)
OECD Organisation for Economic Co-operation and Development
PAYE Pay-as-you-earn
PIT Personal income tax
SARS South Africa Revenue Service
SAT Servicio de Administración Tributaria (Mexico)
SKAT Danish Tax Administration
SME Small and medium-sized enterprises
SRS State Revenue Service (Latvia)
SSC Social security contributions
STA Swedish Tax Agency
STI State Tax Inspectorate (Lithuania)
SUNAT Superintendencia Nacional de Administración Tributaria (Peru)
TIN Taxpayer Identification Number
VAT Value added tax
VDP Voluntary Disclosure Programme
VERO Finnish Tax Administration
WBG World Bank Group
Executive summary – 17
Executive summary
The 55 tax administrations participating in the seventh edition of the OECD’s Tax
Administration Series (TAS 2017) collect net revenue of EUR 8.5 trillion (2015), equal
to about 20% of the GDP. They are large and complex organisations employing almost
2 million staff that deal with the tax affairs of more than 750 million personal and
corporate taxpayers. Their combined operating budgets amount to EUR73 billion, less than
1% of net revenue collected.
Part I of the TAS 2017 contains seven chapters that provide performance-related data,
trends and commentary based on data up to the end of the 2015 fiscal year. Part II includes
eight articles authored by participating administrations on a range of topical issues in tax
administrations. Part III, which is available in electronic form, consists of tables containing
the responses from taxpayers that form the basis of the analysis.
The TAS 2017 shows the significant change that is taking place in tax administrations,
with both internal and external drivers at work. Tax administrations are improving
delivery performance and sharpening their compliance focus while actively changing the
compliance environment. At the same time they are moving to more effectively use and
manage data, with an increased focus on the security of taxpayer information and data.
Significant change continues
This report highlights four significant drivers of on-going change:

• The use of new technologies, tools and data to improve the effectiveness and
delivery of contemporary services – This report sets out a series of examples of how
administrations are adapting their processes to allow more timely and targeted action
to support taxpayers to meet their tax obligations and receive their entitlements.
• Reducing the cost of tax operations and burdens on taxpayers – The report
provides information on administrations use of innovative approaches that are
allowing them to operate a more efficient and effective tax system, with reduced
burden for taxpayers.
• The taking on of new responsibilities – Many administrations report new roles
that utilise the strong capabilities of tax administration in delivery of service and
payments, operating registry services, managing and using data and compliance
management.
• Implementing changes to the international tax environment – Tax administrations
globally are implementing the far-reaching and major changes to the international
tax rules developed over the last five years, including the outcomes under the
OECD/G20 Base Erosion and Profit Shifting (BEPS) project.
18 – Executive summary
Strengthening delivery performance
The collective performance of tax administrations covered in this publication has

generally strengthened over the last two years, including steady growth in the provision and
use of digital services, particularly to support taxpayer self-service, the use of e-channels to
file or pay and improvements in telephone communications, which remains the dominant
service channel. There are however two areas to note for further consideration:
• On-time filing and payment – two important indicators of voluntary compliance
are the rates of on-time filing and on-time payment. These rates are around 90%
for on-time payment and 85% for on-time filing. While this appears high, given
the large number of taxpayers required to file and pay periodically, even small
increases in filing and payment rates can raise significant amounts.
• Tax debt – at EUR 1.8 trillion tax debt levels are still substantial. With administrations
reporting that around 45% of tax debt (around EUR 800 billion) is considered
collectable, there remains significant scope for making further in-roads into
outstanding debt levels.
Sharpening compliance focus
The use of more sophisticated tools is allowing administrations to more actively

manage compliance risk and determine effective compliance interventions across the
spectrum of taxpayers:
• Large business taxpayers – Between 35% and 50% of overall net revenue collected
comes from large business taxpayers. Many tax administrations have set up
dedicated units to manage the particular compliance risks and complex business
issues emerging from this significant group of taxpayers.
• High Net Worth Individuals (HNWI) – The HNWI segment is estimated to have
grown fourfold over the last two decades. Managing compliance within this group
remains a high priority for tax administrations, particularly as regards off-shore
transactions and structures.
• Small and Medium Enterprises (SMEs) – In many jurisdictions, the SME sector
employs the largest number of people and has the greatest exposure to the cash
economy. It remains an area of critical focus, with many administrations reporting
new approaches to facilitate and support tax compliance.
• Shadow economy – A large number of administrations report the use of new
technologies and analytics approaches which are enhancing their efforts to reduce
the size and impact of the shadow economy.
• Sharing economy – The rapidly expanding global sharing economy presents an
emerging tax risk. Tax administrations are increasingly reaching out to other
government agencies and other tax administrations to secure transaction information.
Executive summary – 19
Changing the compliance environment
Since the 2015 edition of the publication, tax administrations report progress in
improving levels of tax compliance. Levers used include simplifying tax requirements,
expanding co‑operative arrangements and more managing of compliance, such as the pre-
filling of tax returns.
• Simplifying tax requirements – Without exception tax service or customer
strategies are looking to incorporate design approaches that include mobile and
digital solutions that best fit with taxpayers preferred means of engagement.
• Co‑operative arrangements – Some administrations are starting to extend co‑operative
compliance approaches successfully used in the large business area into other tax
segments. This expansion is largely based on improvements in compliance risk
management made possible by access to a wider range of data, advanced analytics and
risk assessment techniques. In addition the emergence of new businesses and services
is allowing some administrations to move away from being the principal provider of
tax service in some areas.
• The changing international landscape, including as a result of the outcomes of
the BEPS project, is leading to a desire for enhanced international co‑operation,
including in multilateral risk assessments and the expanding opportunities for joint
or simultaneous audit.
• Managing compliance – New data sources and approaches are allowing administrations
to extend no-return or pre-filled options, primarily for personal income taxpayers, into
other more complex areas. The pre-filled approach has led to impressive compliance
rates and lower administrative costs for personal income tax, which for many represents
a significant share of the tax base.
Managing, using and securing data more effectively
Lower storage costs coupled with advances in analytics technologies have allowed
administrations to not only source more data in support of new approaches and products, but
to also facilitate better management of tax risks. This includes how they look to upstream
and manage compliance closer to the taxable event or where it most naturally occurs for the
taxpayer. New data approaches are also allowing administrations to differentiate service and
intervention treatment based on the perceived tax risk of a transaction, taxpayer or event.
Administrations also report work to further strengthen security of taxpayer information,
as well as putting considerable effort into ensuring internal processes prevent unlawful
attempts to obtain information and to ensure that the person they are dealing with is in fact
the taxpayer. Increasingly these approaches, which in many instances have now extended to
multi-step authentication, are making use of biometric information, unique to the taxpayer.
This is also opening up new opportunities for whole of government approaches to the
benefit of the citizen and administration.
R eader’s guide – 21
Reader’s guide
Tax Administrations covered by the report
The Tax Administration Series (TAS) 2017 is the seventh edition of the OECD Centre
for Tax Policy and Administration’s comparative information series. The primary purpose
of the series, which commenced in 2004, is to share information that will facilitate
dialogue among tax officials on important tax administration issues, and that may also
identify opportunities to improve the design and administration of their systems.
This edition of the series provides internationally comparative data on aspects of tax
systems and their administration in 55 advanced and emerging economies. It covers all
jurisdictions that were members of the OECD’s Forum on Tax Administration (FTA) at
the launch of the 2016 tax administration survey. In addition, it includes information on
Peru, that became a member of the FTA in March 2017; the non-FTA jurisdictions that are
members of the European Union (i.e. Bulgaria, Croatia, Cyprus,1 Malta, and Romania); as
well as Morocco (which increases the reports’ geographical coverage).
Missing from the 2015 edition are Saudi Arabia and Thailand, which both decided not
to participate in the 2017 publication.
Changes to data gathering process and reporting
Since the publication of the 2015 edition of the TAS there has been considerable change
in the way the OECD has gone about its production:
• Throughout 2015 the OECD, worked collaboratively with the Inter-American
Center of Tax Administrations (CIAT), the International Monetary Fund (IMF)
and the Intra-European Organisation of Tax Administrations (IOTA), to develop
a new joint International Survey of Revenue Administrations (ISORA). This new
performance framework standardised terminology and requirements for capturing
global tax administration performance information.
• This new survey was issued to jurisdictions participating in this publication along
with other members of CIAT, IOTA and the IMF at the Beijing Plenary of the FTA in
May 2016. Survey information was gathered using the IMF’s Revenue Administration
Fiscal Information Tool (RAFIT). All data contained in the publication has been
subject to four rounds of validation by the OECD and participating administrations.
• The format and approach to the TAS itself has changed. The commentary is more
succinct, and focuses on significant issues and trends across tax administration. It
provides:
- Increased analysis, backed by more than 170 data tables.
22 – R eader’s guide
- More than one hundred examples of innovation and practice in tax administrations
that enhance the commentary.
- Eight articles authored by officials working in participating tax administrations
that provide an “inside view” on a range of topical issues tax administrations
are managing today.
Data comparability
The TAS includes performance-related data, ratios and trends up to the end of the
2015 fiscal year for the jurisdictions concerned. Given the “comparative” nature of this
series that dates back to 2004, every effort has been made to ensure that terms retain their
previous meaning.
At the request of survey participants the four organisations have gone to considerable
effort to agree and document a range of words and terms used in the survey and their
meaning. This has allowed a significant reduction in the number and use of footnotes in
the publication compared to the 2015 edition. While this has improved data integrity and
comparability between administrations, care is needed in making comparisons with prior
year information as definitions may now exist for terms not previously defined, or in some
instances, have changed. This may mean that a small amount of data and ratios reported in
previous editions can no longer reliably be used.
Publication structure
The series examines the fundamental elements of modern tax administration systems
and uses data, analyses and examples to highlight key trends, recent innovations, and
examples of good practice and performance measures and indicators. The first part of the
publication is structured around seven chapters as follows:
• Chapter 1 provides an overview of how tax administration is changing as
administrations respond to a changing global environment, leveraging new
technologies, delivery approaches and business arrangements, to move more services
and transactions into real or near real-time.
• Chapter 2 provides information on the aggregate net tax revenues of surveyed
tax administrations. It also provides key statistics that illustrate both the size of
tax administrations in the 55 jurisdictions covered by this publication and their
importance to governments and economies in discharging their primary role.
• Chapter 3 describes the increasing responsibilities being undertaken by many
tax administrations, the institutional structures adopted to administer these
responsibilities, and the key features of tax administration organisational design.
• Chapter 4 provides an introduction to contemporary compliance risk management
and looks at areas of risk and mitigation strategies; and approaches to managing
key segments: large businesses, high net worth individuals, small and medium-
sized enterprises and the shadow economy.
• Chapter 5 explores the changing role of tax service providers and the nature of
their working relationship with the tax administration. It also comments on how
administrations are responding to the challenges and opportunities presented by the
new business models and technologies.
R eader’s guide – 23
• Chapter 6 summarises operational performance data for: registration; assessment;

service; verification; collection; and disputes. What in previous editions were
separate sections on powers and electronic and digital service delivery are
now included into this chapter which concludes that overall performance by
tax administrations remains strong. It also notes the significant challenges that
lie ahead in utilising new technologies and business approaches to continue to
decrease compliance burden and enhance compliance. This chapter also highlights
a number of areas where administrations are invited to consider opportunities to
improve performance and reporting.
• Chapter 7 describes how tax administrations are managing the significant on-going
pressure on their operating budgets. In so doing it comments on improvements
in productivity and innovation that are helping them manage financial pressures
and in some cases allowing them to fund the development of new capabilities. It
provides information on tax administrations’ workforce and sets out challenges
administrations are facing in increasing their capability while managing a
workforce that in general terms is reducing in size and on average getting older.
The second part of the publication includes eight articles authored by participating
administrations. These provide a country view on a range of topical issues in tax administration.
The final part of the publication, part three contains tables that contain the responses
provided by tax administrations 2 which form the basis of the analysis in this report as
well as details of the administrations that participated in this publication. This part of the
publication is available in electronic form only.
Data tables
The tables and charts in the publication are all accompanied by a dynamic hyperlink
or StatLink that directs readers to a corresponding Excel™ file containing the underlying
data. These links are stable and will remain unchanged over time.
All data tables, figures and charts in the main body of the publication contain source
notes. Typically, these notes refer readers to the underlying data that is contained in part
three of the publication.
Symbols and abbreviations that are used in the tables are explained at the bottom of
each table. The reader should note that where no data is shown for a specific jurisdiction in
a table this is primarily due to it being: a construct of how the survey question was asked;
the opening question to a sub-section of the survey being answered in the negative and,
therefore, the jurisdiction did not have to answer the follow-up questions; or the underlying
survey question was optional and the jurisdiction choose not to answer it.
Forum on Tax Administration
Readers wishing to find out more about the OECD’s work on tax administration should
go to www.oecd.org/tax/forum-on-tax-administration/.
24 – R eader’s guide
Caveat
Tax administrations operate in varied environments, and the way in which they each
administer their taxation system differs in respect to their policy and legislative environment
and their administrative practice and culture. As such, a standard approach to tax
administration may be neither practical nor desirable in a particular instance. Therefore, this
report and the observations it makes need to be interpreted with this in mind. Care should
be taken when considering a country’s practices to fully appreciate the complex factors
that have shaped a particular approach. Similarly, regard needs to be had to the distinct
challenges and priorities each administration is managing.
Notes
1. Note by Turkey: The information in this document with reference to “Cyprus” relates to the
southern part of the Island. There is no single authority representing both Turkish and Greek
Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus
(TRNC). Until a lasting and equitable solution is found within the context of the United
Nations, Turkey shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European Union: The
Republic of Cyprus is recognised by all members of the United Nations with the exception of
Turkey. The information in this document relates to the area under the effective control of the
Government of the Republic of Cyprus.
2. For Japan, given that it publishes its currency Figures in millions the currency Figures included
in the tables have had added a suffix of “000” in order to fit the survey requirements that
Figures needed to be provided in thousands.
PART I. Comparative information on tax administrations – 25
Part I
Comparative information
on tax administrations
1. The changing face of tax administration – 27
Chapter 1
The changing face of tax administration
This chapter provides an overview of how tax administration is changing as the eco-
system in which tax administrations operate becomes broader and deeper, including
as a result of a vast increase in the flow of digital information. Administrations are
responding to these challenges through the introduction of new technologies and
analytical tools. This is allowing tax them to rethink how they operate, offering
the prospect of lower costs, increased compliance and a reduction in burdens for
compliant taxpayers.
28 – 1. The changing face of tax administration
Introduction
The emergence of new technologies, increased digitalisation and the unprecedented

flow of information is creating fundamental and rapid change across the economy. This is
causing many governments to re-examine how public service delivery is best carried out in
the 21st century. All tax administrations covered in this edition of the Tax Administration
Series report are re-thinking not only what they do but how they do it. This is not an insular
change but involves looking at the position and role of tax administration in the wider “tax
ecosystem” and against the objectives of lowering costs, enhancing voluntary compliance
and reducing the burdens arising from paying taxes, thus helping to promote growth and
investment (see Figure 1.1).
Figure 1.1. Tax administration eco-system
R
-ADMINIST ATIVE FEATUR
NON ES
Third Legislation &

parties regulation
Structure
Workforce
Compliance Globally
management connected
TAX
ADMINISTRATION Economic
ECO-SYSTEM environment
Data & Technology &
insight infrastructure
Culture Collaborative Strategy
Government
agencies &
regulation
on bodies
Citizen
expectations
In concrete terms this means they are looking at how they can deploy new technologies
and new delivery approaches to improve their effectiveness as well as the efficiency of their
operations. In addition they are engaging with third party providers of data and services
in new business arrangements that extend the traditional view of the tax eco-system,
including through monitoring and standard setting. As a consequence tax administration
is becoming more about stewarding of the wider tax eco-system rather than focusing
just on operating effective and efficient internal systems. To compound the challenges,
these changes are taking place at the same time that administrations are implementing
major changes to the international tax rules, responding to the tax issues surrounding new
economic systems (including the digital and sharing economies) and taking measure to
further reduce the tax gap.
Globally connected
If administrations ever considered their national tax systems to be only a function of

domestic laws and interactions within their borders, the last decade has strongly dispelled
this view. Advances in transportation and telecommunications have facilitated changes in
trade, transactions, capital movements, labour and knowledge. Together these have changed
not only how taxpayers conduct themselves and their businesses, but also their expectations
of government and of tax administrations.
An increasingly digital, mobile and global taxpayer base is requiring tax administrations
to respond to issues that were once only the domain of its largest businesses. These changes
are prompting administrations to consider how they can best support this growing group
of taxpayers. In particular they are looking at how they can provide easier approaches to
compliance, including embedding tax requirements in the processes and applications that
taxpayers use on a day to day basis, providing greater tax certainty and reducing costs.
They are also increasingly co-operating across borders, sharing information and rulings,
updating tax treaties and joining forces to tackle the threats arising from base erosion and
profit shifting and tax evasion.
Technologically enabled
The exponential growth in the use of digital devices and the digitalisation of information
has led many tax administrations to commence developing a suite of new applications
to support tax activities such as paying, filing and enquiry. Third party software and
service providers are in many jurisdictions embedding tax requirements into the natural
systems taxpayers use to run their businesses, manage their bank accounts, or interact with
government services including education, health and welfare.
Many survey participants report significantly increasing their investment over the last
five years in developing new capabilities, including:
• digital technologies to increase reach and engagement.
• sophisticated tools to better manage and analyse data to distil insight and inform
action.
• service design approaches that develop solutions that work better for taxpayers and
the tax administration.
• agile and responsive approaches to project management and delivery.
Collaborative and integrated
Meeting taxpayers’ expectations of a modern tax administration requires greater

collaboration with third parties. While traditional business partners, including tax agents
and other intermediaries, continue to feature strongly in tax delivery plans, the emergence
30 – 1. The changing face of tax administration
of new businesses and services is allowing tax administrations in some instances to move
away from being the principal provider of service.
Tax administrations also report they are starting to extend co‑operative compliance
approaches successfully used in the large business areas into other tax segments. This
expansion is largely based on improvements in compliance risk management made possible
by access to a wider range of data, advanced analytics and risk assessment techniques. More
active engagement with industry associations, taxpayers and other government agencies is
also providing administrations with more insight into how to improve services and enhance
compliance, including through possible changes to tax policy. In this regard, a number of
administrations have used “open dialogues” with taxpayers, academics, business, tax advisors,
and other government officials to discuss what the future tax administration might look like.
Many tax administrations also report now having responsibility for a range of new
activities, some previously undertaken elsewhere in government and others formerly regarded
as incompatible with tax collection. These new activities see many tax administrations
managing population and valuation registers and collecting child support, loan repayments
and pension contributions. Undertaking such activities is requiring new skills and
capabilities, and in some instances new “operating models” for tax administrations.
Data and insight led
Traditionally the majority of data available to tax administrations was supplied by

taxpayers in forms, declarations and tax returns. For administrations managing this data,
the focus was often more about what to keep, how to keep it (including for security and
data protection reasons), and how to access it. The focus now is shifting to how that data
can be used most effectively. Lower storage costs coupled with advances in analytics
technologies have allowed administrations to not only source more third party data
in support of new approaches and products, but also enabled (or facilitated) the better
management of tax risks. This is allowing them to:
• consider replacing traditional periodic return filing by taxpayers with no-return or
pre-filled options based on greater transparency and access to data.
• differentiate service based on the perceived tax risk of a transaction, taxpayer or
event.
• respond to demands for services that support interactions with government as a
whole.
• support third parties to incorporate tax requirements into the systems taxpayers use
to operate their business or complete other personal activities;.
As a result, the approaches many administrations are now taking to data are increasingly
analogous to the approaches taken by large service providers in the private or commercial
sectors.
Better informed compliance management
The ability to draw internal and external data sources together into a single view of
the customer is supporting administrations in examining both the type and timing of
interventions that help taxpayers meet their tax obligations, including paying tax debts.
New technologies are also allowing administrations to move from analysing transactions
that have occurred through post-filing interventions (in particular audit) for some taxpayer
segments, to developing approaches and processes that support tax assessment closer to
the time a transactions or tax event occurs. This facilitates better compliance outcomes,
increases tax certainty and reduces burdens.
Enabled workforce
Modernising tax administration goes far beyond simply facilitating existing operations
with new capabilities or adding new technologies or methods such as digital work
management to existing products and business processes. It requires administrations to
identify the critical capabilities they need for success – many of which are different in nature
to their current capabilities.
At the same time the number of staff employed by tax administrations has been
reducing, and that pattern looks set to continue with continuing pressure to deliver more
with less. While some reductions in staff numbers may be off-set by the new capabilities
administrations will need, the specialist nature of many of these roles may lead to training
and recruitment challenges as part of wider change management programmes.
As well as changing roles for its staff, administrations will also need to develop new
enterprise capabilities and structures, including:
• governance and accountability approaches – that are more agile, flexible and
responsive.
• business delivery models – that are supporting outcomes through third parties and
in real-time.
• business structures and technology – that are adaptive and open.
• processes that support wider engagement with stakeholders and users – that are
more accessible, considering all facets of the tax system.
These issues have caused a number of tax commissioners to comment that while the
challenge of keeping pace with technology changes and its impact on their business is
significant, the greater challenge they face is how to achieve the major cultural change
that needs to occur inside their operations and across the community in order for them to
successfully provide a contemporary and modern tax administration.
And finally
Tax administration continues to change and the emergence of new technologies and
business approaches will only accelerate over the next decade. Cognitive computing,
blockchain technology, artificial intelligence and robotics are prominent examples
of technologies that some administrations are already using or exploring. These new
technologies offer tax administrations not only further opportunities to improve their
efficiency but, equally importantly, their effectiveness.
To fully realise the potential that business change and technology advances make
available, tax administrations need to embark on a significant journey of change,
re-invention and transformation. As administrations know only too well, transformational
change is not easy, but the rewards are high both for the government and taxpayer as well
as the wider economy.
2. Tax collection – 33
Chapter 2
Tax collection
The primary purpose of a tax administration is the collection of tax revenue on

behalf of citizens to fund the work of the government. Administrations, in serving the
public interest, look to collect the proper amount of tax due to the government at the
least economic cost, while conducting their operations in an efficient and effective
manner. Given most administrations rely on taxpayers meeting payment obligations
of their own accord (voluntary compliance); they perform their role as tax collectors
giving careful regard to the relationship of trust that needs to exist between them
and their customers.
Before examining in Chapters 3 to 7 how tax administrations go about the tasks
of tax collection, it is appropriate to look at their importance to governments and
economies in discharging their primary role. In this respect, this chapter provides
information on the aggregate net tax revenues collected as well as other key figures
related to activities of the administrations covered in this publication.
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli
authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights,
East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
34 – 2. Tax collection
Figure 2.1. Key figures related to the administrations covered in this publication, 2015
Net revenue collected (in EUR) 8 500 000 000 000
Tax debt at year-end (in EUR) 1 800 000 000 000
Collectable tax debt at year-end (in EUR) 800 000 000 000
Operational budget (in EUR) 73 000 000 000
Number of active PIT and CIT taxpayers 750 000 000
Telephone calls received 290 000 000
In-person inquiries 130 000 000
Audits/verifications conducted 58 000 000
Administrative reviews resolved 4 600 000
Staff employed 2 000 000
Number of complaints received 500 000
Number of regional/local offices 16 000
Jurisdictions covered by this publication 55
Note: These figures are based on the data included in the Annex. They
are minimum figures as not all administrations were able to provide
information for all data points.
Net collections by tax administrations averages 20% of jurisdiction GDP
The OECD generally seeks to publish internationally comparable data on the tax revenues
of OECD members for all levels of government. The term “taxes” is confined to compulsory,
unrequited payments to government. It is important to recognise that the tax ratios published
by the OECD depend just as much on the denominator (GDP) as the numerator (tax revenue),
and that the denominator is subject to revision for a variety of reasons.
As the information contained in the OECD Revenue Statistics publication reports
data at a jurisdiction and not an administration level, tax administrations were asked to
provide a range of information on their revenue collection activity. This information aptly
demonstrates the importance of tax administrations to the economies of their jurisdictions.
Net revenue collected by tax administrations participating in this report (see Annex B)
as a percentage of GDP in 2014 ranges from less than 10% to reach more than 30% in the
case of Denmark, Sweden, Hungary, Slovenia, Estonia, the Netherlands, Norway and Latvia.
Average net revenue collected by survey respondent administrations is approximately 20%
of GDP (see Figure 2.2).
Net collections by tax administrations averages 54% total jurisdiction revenue
Twenty-five jurisdictions report tax administration net revenue collections exceeding

more than 50% of total government revenue in 2014, making tax administrations the
principle government revenue collection agency in more than half of survey respondents
where data was available (see Figure 2.3).
Figure 2.2. Net revenue collected as a percent Figure 2.3. Net revenue collected as a percent
of gross domestic product, 2014 of total government revenue, 2014
Denmark Estonia
Sweden Latvia
Hungary Peru
Slovenia Sweden
Estonia
Netherlands Denmark
Norway Romania
Latvia Slovenia
Croatia Ireland
Belgium Hungary
Malta Netherlands
Finland Croatia
United Kingdom United Kingdom
Romania
Ireland Malta
Austria Turkey
Greece Australia
New Zealand Singapore
Portugal Norway
Italy Greece
Argentina Belgium
Luxembourg Costa Rica
Iceland
France South Africa
Turkey Portugal
Australia Luxembourg
South Africa Austria
Peru Israel
Israel Iceland
Canada Chile
Brazil Lithuania
Germany
United States
Bulgaria
Lithuania Finland
Spain Colombia
Mexico Italy
Cyprus Canada
Russia Brazil
United States Bulgaria
Slovak Republic Hong Kong (China)
Czech Republic
Spain
Colombia
Costa Rica Cyprus
Korea France
Poland Czech Republic
Morocco Russia
Malaysia Germany
Chile Korea
Hong Kong (China) Slovak Republic
Singapore
Indonesia
Japan
Switzerland Poland
Indonesia Switzerland
India Japan
0 10 20 30 40 50 0 10 20 30 40 50 60 70 80 90 100
Percent Percent
12 http://dx.doi.org/10.1787/888933545880 12 http://dx.doi.org/10.1787/888933545899
Source: Table A.1 Total net revenue collected by the Source: Table A.1 Total net revenue collected by the
tax administration as a percent of gross domestic tax administration as a percent of gross domestic
product and as a percent of total government revenue. product and as a percent of total government revenue.
Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the
Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey
recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found
within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European Union: The Republic of
Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information
in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
Personal income tax is the major tax type collected by just over one-quarter of the tax
administrations responding to this survey. Value added tax (26%), corporate income tax
(18%) and social security contributions (10%) comprise the other major revenue types as
reflected in Figure 2.4. In many jurisdictions social security contributions are not collected
by tax administrations and are therefore, underrepresented when looking at average net
revenue collections for all Tax Administration Series participants. Where collected, they
are often the predominant source of tax revenue (see Table A.2).
Figure 2.4. Average net revenue collections Figure 2.5. Tax administration staff usage by
by major revenue type, 2015 function, 2015
Other
operational
functions Support Registration/
Other
PIT 5% 18% services
19%
27% 14%
Processing
SSC Dispute 17%
10% 4%
Debt
collection
CIT 10%
18%
VAT
26% Audit
32%
Source: Table A.2 Net revenue collections by major Source: Table A.20 Staff usage by functions of the
revenue type, OECD Secretariat calculations. administration in percent of the total tax administration,
OECD Secretariat calculations.
Tax audit is the dominant administration function using just under one-third of staff
The significant variations in net revenue to GDP and the wide variety in the mix of
direct and indirect taxes mean that there can be quite different administrative workloads
and compliance issues in comparing jurisdictions. These variations have a number of
implications from a tax administration viewpoint, particularly in the context of international
comparisons. They are most noticeable in the wide range of staff by function as reported in
Chapter 7.
Total human resources are estimated at approximately 2 million staff consuming around
70% of annual budgets, which total more than EUR 73 billion per annum. On average
administrations report that almost one-third of their staff resources are engaged in tax
audit/verification. Table 2.1 compares the distribution of staff in administrations reporting
information in 2013 and 2015. While those supplying information slightly changed, the data
still provides an overall picture of where surveyed administrations are on average using their
resources. This information is commented on in detail in Chapter 7.
Table 2.1. Percent of tax administration staff usage by function, 2013 and 2015
Registration,
processing and Debt Other
Tax audit services management operations Support
2013 Average 34 28 12 9 17
2015 Average 32 31 10 9 18
Sources: For 2015 data: Table A.20 Staff usage by functions of the administration in percent of the total tax
administration, for 2013 data: Adapted from Table 5.7 in OECD (2015), Tax Administration 2015: Comparative
Information on OECD and Other Advanced and Emerging Economies, http://dx.doi.org/10.1787/tax_admin-2015-en.
Tax administrations covered in this survey have more than 750 million customers
Of the 750 million active taxpayers 1 more than three-quarters are registered for personal
income tax. The total number of active taxpayers is a conservative estimate as some
administrations were unable to provide all the details of their taxpayer registration base. The
detailed commentary on tax registration is contained in Chapter 6.
Figure 2.6. Taxpayer registrations by tax type, 2015
Employer
WHT VAT
3% 10%
CIT
9%
PIT
78%
12 http://dx.doi.org/10.1787/888933545956
Note: Taxpayers may have multiple registrations.

Sources: Tables A.75 to A.77 Taxpayer registration and
registration by tax type, OECD Secretariat calculations.
Tax administration is big business globally
The 55 administrations covered in this year’s publication report performance information

that, when aggregated, provides an estimate of the scale and scope of tax administration:
• Total tax debt is estimated at around EUR 1.8 trillion, of which around 45% or
EUR 800 billion is currently considered collectable.
• Customer contacts exceed 450 million annually, with around two-thirds taking place
by phone.
• The total number of tax disputes reported is approximately 4.6 million, with customer
complaints totalling slightly more than 500 000 per annum. These numbers are
relatively low considering the overall volume of contacts reported.
Further explanation and observations regarding this data is provided in the relevant
sections of Chapter 6 on operational performance.
Note
1. Active taxpayers are normally those for whom a tax consequence arises during the fiscal year
(tax liability or tax refund) or that for any other purpose are obliged to file a tax return.
References
OECD (2016), Revenue Statistics 2016, OECD Publishing, Paris, http://dx.doi.org/10.1787/

rev_stats-2016-en-fr.
OECD (2015), Tax Administration 2015: Comparative Information on OECD and Other
Advanced and Emerging Economies, OECD Publishing, Paris, http://dx.doi.org/10.1787/
tax_admin-2015-en.
3. Institutional arrangements of tax administrations – 39
Chapter 3
Institutional arrangements of tax administrations
This Chapter describes the increasing responsibilities being undertaken by many

tax administrations, the institutional structures adopted to administer these, and the
key organisational features that support tax administration operations.
40 – 3. Institutional arrangements of tax administrations
Introduction
This chapter looks at the increasing responsibilities being undertaken by many tax
administrations. It looks at the institutional structures adopted by different jurisdictions
and the key organisational features of tax administrations, including how these are
changing in the light of new technologies and business options.
Overall, the approaches of the tax administrations covered in this publication confirm
the following features as core elements of successful tax administration:
• Independence in exercising statutory tax collection powers.
• A common and stable legal framework for the administration of all taxes (as
opposed to an individual framework for each tax).
• A unified body for tax administration responsible for both direct and indirect
taxes.
• Sufficient autonomy for the tax administration in: organisation and planning, budget
management, performance management, resource allocation, and human resource
management.
• Clear roles, responsibilities and accountabilities for its operation that are translated
into organisational mission, vision and strategy.
• Nexus between its tax operations and other activities it is responsible for. This is
to ensure the delivery of other activities does not impair the effective and efficient
administration of tax laws.
Increasing responsibilities of tax administrations

With few exceptions, jurisdictions have unified the collection of direct and (most)
indirect taxes within a single body for tax administration. There is an increasing trend, as
also found in previous editions of the Tax Administration Series (TAS), to add other areas
of responsibility (including shared responsibility in some areas) to traditional tax roles.
While some of these new roles are relatively closely aligned to the core work of tax
administration, increasingly administrations report that they are being tasked with managing
wider programmes and activity. The allocation of these additional responsibilities in the main
is a reflection of the strong capabilities that exist within tax organisations, particularly in
registry, service delivery, customer interface, data management and compliance.
The most common reasons advanced for being allocated new roles include: the synergies
with existing administrative processes, particularly when introducing new policies or
re-designing services from the customer’s perspective; access to tax data, powers or core
capabilities of the tax administration; and economies of scale, particularly in delivery.
Confidence in the proven ability of tax administrations to deliver complex administrative
processes on a large scale also undoubtedly plays a significant part in decision making.
Figure 3.1 illustrates the most common roles reported by administrations which are:
• customs administration
• collection of non-tax debts e.g. student loans
• payment of benefits under various social or welfare programmes, some of which
are integrated with elements of the tax system
• collection of child support (e.g. overdue payments from non-custodial parents)
• administration of property valuation functions that, for some jurisdictions, is linked

to the administration of real property taxes.
Figure 3.1. Tax administrations – wider roles, 2015
25
20
No. of administrations
15
10
0
Customs Property Lotteries/gambling/ Welfare Child support Retirement Student loans Population
valuation gaming benefits savings register
12 http://dx.doi.org/10.1787/888933545975
Source: Table A.34 Major other roles and OECD Secretariat research.
Some of these new roles entail use of the tax legislation framework of the jurisdiction,
as well as the administrative process of the tax administration. Typically these may be to
provide economic benefits to taxpayers (e.g. welfare-type benefits) or to collect loans or
debts owing to government (e.g. student loans or child support). In other situations, the role/
function is less directly related to the tax system, for example oversight of certain gambling
activities or population registries.
Social security contribution (SSC) regimes have been established in the vast majority of
jurisdictions as a complementary source of government revenue to fund specific government
services (e.g. health, unemployment and pensions). SSCs are the largest single source of
government tax revenue in many OECD jurisdictions, particularly of those in Europe.
The majority of administrations participating in the survey report separate SSC
regimes and administer their collection through a separate social security agency (or a
number of such agencies), rather than through the main tax revenue body. In Germany,
Figure 3.2. Tax administrations – involvement in the collection of SSC, 2015
30
25
20
15
10
0
Verification of Provision of information Collection of SSC debts Other
taxpayer liabilities on non-compliance
Administrations involved Nature of activities undertaken
in the collection of SSC
12 http://dx.doi.org/10.1787/888933545994
Source: Table A.33 Social security contributions.
for example, the responsibility for tax administration is largely devolved to regional
(i.e. “Länder”) administrations, while a relatively small central body exercises a high level
co‑ordination role. Customs operations are administered separately (and centrally) while
the collection of SSCs is also carried out by separate social security agencies.
However, in 26 jurisdictions surveyed, the tax administration is involved to some
extent in the collection of SSC. Notwithstanding the dominance of the separate agency
approach to SSCs and tax collection, there has been a marked trend over the last two
decades towards integration. With Greece, Russia and the Slovak Republic reporting plans
to integrate the collection of SSCs, that trend is set to continue.
While there has been an increasing trend in the expansion of the roles of tax administrations
into other areas of public administration, it is too early to generalise from this. Some
governments will choose to pursue further integration of administrative functions, while others
may well continue to rely on specialised agencies with clearly defined roles and responsibilities.
As the trend for more unified approaches to provide government services continues in a number
of the jurisdictions, the classification of these roles as “non-tax” may, over time, not be a
meaningful distinction. Nevertheless, this expansion of responsibilities can potentially increase
risks to the core task of raising the tax revenue needed to fund public services and public goods,
and requires strong governance, risk management and appropriate resourcing.
Box 3.1. Institutional arrangements
In Italy, three separate bodies are tasked with the collection of taxes and duties: (1) the
Revenue Agency performs services related to the administration, and collection of the main taxes
and duties, including direct taxes, and VAT. It also performs a number of other tasks not related to
tax administration, including maintaining of property registers and management of the real estate
market; (2) the Customs and Monopolies Agency is responsible for administering excises, VAT
on imports and customs duties as well as for dealing with public gaming and tobacco; and (3) the
Italian Social Security Institute manages welfare benefits and retirements savings.
Since 2009 the Belgian government has been integrating different fiscal and non-fiscal
collection and recovery services operating within the FPS Finance. What commenced as an
amalgamation of the units at a headquarters level moved in the second stage to the integration of
collection staff, divided over tax collection and tax enforcement offices. The bringing together
of collections procedures, means and methods, that were similar across the FPS Finance, has
produced synergies through the collection of multiple debts in one action. This improvement of
the effectiveness and efficiency of debt recovery is leading to savings for both the government
and the debtor.
Source: Italy – Italian Revenue Agency; Belgium – General Administration for Collection and Recovery
of Taxes (2017).
Institutional arrangements for tax administrations
Tax institutional arrangements are typically grouped around four general categories:
• A single directorate or unit within the Ministry of Finance (MOF) or its equivalent.
• Multiple directorates or units within the MOF or its equivalent.
• A unified semi-autonomous body, where tax administration and support functions

are the responsibility of a Commissioner or Director General who reports to a
government minister.
• A unified semi-autonomous body with a board, where tax administration and
support functions are the responsibility of a Commissioner or Director General who
reports to an oversight body/board of management that includes external members.
There are some exceptions to the above categories. In Switzerland responsibility for
tax administration largely occurs at a sub-national level and the “cantons” undertake
collection activity on behalf of the federal government. In Italy tax administration is spread
across a number of separate bodies, with distinct roles and responsibilities. In Germany the
responsibility of collecting taxes is largely devolved to regional (i.e. Länder) administrations,
while a relatively small central body exercises a high level co‑ordination role.
Over the last five years, while a number of administrations have introduced advisory
boards to assist them in managing the tax systems, there has not been any discernible trend
towards or away from any of the above categories. The individual approach adopted seems
to be driven more by wider public sector accountabilities than tax specific approaches.
Figure 3.3 summarises survey respondents by category.
Figure 3.3. Institutional frameworks, 2015

Number of administrations
MDMIN
4
SDMIN Other
13 4
USBB – AB
5
USBB
10
USBB – DB
5
USB
24
12 http://dx.doi.org/10.1787/888933546013
USB – Unified semi-autonomous body; USBB – Unified semi-autonomous

body with board (AB – Advisory board; DB – Decision-making board);
SDMIN – Single directorate in ministry; MDMIN – Multiple directorates
in ministry.
Source: Table A.32 Institutional Arrangements.
Whether a jurisdiction administers tax collection through a MOF directorate or through

a semi-autonomous body, tax collection requires a number of specific statutory powers to
enable the organisation to perform its role. These responsibilities are most often conveyed
by legislation, or in a small number of cases, by delegation of direct regulation making
powers to the tax administration. The main statutory powers required are:
• Assessment of tax: The authority to raise an assessment or amend an assessment
for the various revenues administered and collected by the tax administration. This
is obviously fundamental to the collection of revenue by the tax administration and

may also allow a wide range of approaches, including the use of self-assessment
and pre-filled approaches to tax assessment.
• Tax law interpretation: The authority to provide interpretations, both in the form
of public and private rulings, of how tax laws will be interpreted, subject only to
review by judicial bodies. The exercise of this power in advance of tax filing can be
expected to assist taxpayers and the tax administration by clarifying the application
of the law and its administration.
• Enforcement: The authority to exercise, without referral to another body, certain
enforcement powers associated with administration of the laws (e.g. to obtain
information from taxpayers and third parties and to impose liens over property in
respect of unpaid debts).
• Penalties and interest: The authority to impose administrative sanctions (i.e. penalties
and interest) for acts of non-compliance and to remit such sanctions in appropriate
circumstances. In practice, effective use of this power can afford greater flexibility to
the revenue body in its treatment of taxpayers’ non-compliance.
Autonomy of operations
The last few years have seen an increase in the extent and rate of change in public
administration driven by technology and the use of data. This has enabled governments
to improve the delivery of services to citizens and business, and has increasingly provided
opportunities to reduce the compliance burden. The observations made in earlier editions
of the TAS concerning the importance of autonomy of tax administrations to delivering
improved performance and outcomes remain valid.
Autonomy can take on many forms, but at its core involves the government setting
objectives for the tax system (including tax legislation) as well as an accountability
framework, while providing tax administrations with flexibility in the following areas to
decide how to deliver those objectives:
• Budget expenditure management – including discretion to allocate/adjust budgeted
administrative funds across functions to take account of changed circumstances or
to meet new emerging priorities.
• Organisation – determining the internal organisational structure of the tax
administration operations, including geographical location of tax offices.
• Planning – responsibility for formulating strategic and operational plans.
• Performance standards – discretion to set (in association with central bodies)
administrative performance standards.
• Personnel recruitment, development and remuneration – the ability to set
qualification standards for categories of recruits, recruit and dismiss staff (in
accordance with public sector policies); negotiate remuneration levels in accordance
with broader public sector-wide arrangements; and establish and operate training
and development programmes.
• Information technology – authority to administer its own in-house IT systems, or
to outsource the provision of such services.
The range of powers given to a tax administration depends on a variety of factors.

These include the general arrangement of government powers, the state of development
of a jurisdiction’s public sector administration practices, as well as the institutional model
adopted for tax administration. For government, the return to granting greater autonomy
is the prospect of increased efficiency and effectiveness. With few exceptions, most tax
administrations report that they operate with a degree of autonomy that allows them to
appropriately discharge their administrative functions.
That said the inability of more than a third of the administrations surveyed to place
staff within a remuneration range (see Table A.59) could be an issue of growing importance
as administrations seek to recruit staff with skills beyond those traditionally engaged in
the work of tax administration, in particular in the area of data analytics. This issue is
discussed further in the human resource management section of Chapter 7.
Survey responses also indicate that a number of tax administrations have limited ability
to re-allocate budgeted funds across operational functions to meet new priorities, or to
design their own internal organisational structure, including their network of offices and
geographical footprint (see Table A.37).
Governance arrangements
Like all government bodies, tax administrations are ultimately accountable to the
citizens they serve. The framework within which this accountability operates varies between
jurisdictions and is a result of various factors, including the institutional arrangements
and government structures in place. The most common form of external governance
arrangement indicated by jurisdictions is the use of formal management boards, advisory
bodies and external oversight bodies. Tax administrations reported that such bodies:
execute general oversight; play a role in strategy development and planning; comment and
provide advice on major operational policy reviews; and are involved in the sign-off of
formal budgets and business plans. Importantly none appear to have a role in assisting the
Commissioner or Director General in exercising any statutory tax powers, nor do they have
access to taxpayer specific information.
There does not appear to be any consensus around board size but most jurisdictions
report that their management or advisory boards usually consist of both Ministry and revenue
body officials, while public boards include external representatives from various sectors.
While discussions are normally confidential, some jurisdictions report that decisions or
reviews carried out by the boards are often made public to ensure transparency to the wider
taxpayer community.
Box 3.2. Board arrangements
In Singapore, the Inland Revenue Authority of Singapore (IRAS) Board oversees IRAS and
ensures that it carries out its functions competently. This includes the review of major corporate
policies and the approval of financial statements, annual budget and major expenditures. The
Board is chaired by the Permanent Secretary of the Ministry of Finance, and has nine other
members (including the Commissioner of Inland Revenue/Chief Executive Officer of IRAS).
The Board has two committees: the Audit and Risk Committee, which reviews the adequacy and
compliance of accounting and financial policies and internal controls; and the Staff Committee
A, which approves key remuneration policies in IRAS, and the key appointments, promotion
and remuneration of senior executives.
Box 3.2. Board arrangements (continued)
In Russia, the Federal Tax Service (FTS) established a public board, which functions as a
consulting body that oversees tax administration. Major FTS initiatives are reviewed and assessed
by the board whose members include independent representatives from academia, the business
community, the media as well as public figures known for their professional accomplishments
and integrity. The public board, which meets at least quarterly, provides a forum where the
community exercises public control over FTS activities. Board decisions are public.
In Malaysia, the Inland Revenue Board of Malaysia direct tax entity (IRBD) became a
semi-autonomous revenue administration agency in 1996 and adopted corporate governance
structures. The Board of Directors supports the Commissioner on organisational, financial,
human resource and administration issues, subject to approval through the government’s central
agencies. While tax policy decisions remain under the jurisdiction and control of the Ministry
of Finance, IRBD and its Board now have increased autonomy to administer its finances and
human resources. In January 2015, the IRBD was granted self-financing status, allowing it to
be financed outside the government budget process through receipt of an agency fee from the
government. The agency fee is a percentage of annual direct tax collection; an approach that is
similar to that used in a number of revenue administrators in Asia, Africa and South America.
While government approval is still required for change, IRBD is able to respond more quickly
to changes in the business environment; and to more easily implement business improvement
and efficiency measures.
Sources: Singapore – Inland Revenue Authority of Singapore; Russia – Federal Tax Service Tax; Malaysia
– Inland Revenue Board of Malaysia (2017).
An important part of the wider governance of tax administrations comes from the set of
taxpayer rights. Ultimately, tax administrations administer the collection of taxes on behalf
and for the benefit of the public, operating on the basis of mutual trust and confidence.
This is essential to the operation of an efficient and modern administration which depends
heavily on voluntary compliance.
The vast majority of respondents have legislation or administrative procedures
governing taxpayers’ rights and corresponding obligations. There are pros and cons with
both approaches. While the administrative approach tends to be more flexible and service-
orientated, the codified system can be seen as more robust since it has the force of law.
OECD research show that the following basic taxpayer’s rights and obligations are reflected
in most implemented charters and/or laws.
Table 3.1. Taxpayer’s rights and obligations
Right Obligation
To be informed, assisted, and heard. To be honest.
Of appeal. To be co‑operative.
To pay no more than the correct amount of tax. To provide accurate information and documents on time.
Certainty. To keep records.
Privacy. To pay taxes on time.
Confidentiality and secrecy.
Figure 3.4. Taxpayer rights formally defined, Figure 3.5. Existence of special body for
2015 dealing with taxpayers’ complaints, 2015
No
No 7
10
Yes – Adm. Doc.

13 Yes – Law
32
Yes
48
Law refers to law or other statute; Adm. Doc. refers Source: Table A.124 Taxpayer rights and complaints.
to document(s) published by the administration,
i.e. not in any statute.
Source: Table A.124 Taxpayer rights and complaints.
There are differences in the scope of applicability of taxpayer’s rights and obligations.
For example, some jurisdictions only codify taxpayer’s rights, not their obligations, while
others apply specific charters to different taxes or only deal with taxpayer’s rights in case
of an audit. In June 2014, the US Internal Revenue Service (IRS) adopted a Taxpayer Bill
of Rights, which grouped existing rights in the tax code into ten fundamental rights. These
are available in six languages and are posted in public IRS offices as well as on its website.
Box 3.3. Taxpayers rights and obligations
In Mexico, the Office of Taxpayer Advocate which commenced operations in September

2011 is a public agency with technical and managerial autonomy specialising in tax matters.
The agency provides free, fast and simple advisory, advocacy and representation services
for complaints or claims against acts of the federal tax authorities which are deemed at
risk of contravening the rights of taxpayers. The Office operates independently of the Tax
Administration Service (SAT) and it is free to make reports on systemic issues requiring attention
by the SAT or government. While its recommendations are not binding on SAT, it can propose
corrective measures, interpreting tax rules at the request of the SAT, and make submissions to
propose amendments to the tax rules.
Source: Mexico – Tax Administration Service of Mexico (2017).
Policy advice
All but seven TAS participating jurisdictions (Costa Rica, Germany, Japan, Korea,
Luxembourg, Norway, United States) report that their tax administrations provide advice
on tax policy ahead of it being enacted (see Table A.35). The majority of jurisdictions
providing such advice report that this is provided jointly with the main policy institutions
advising the government, with about 40% of jurisdictions reporting that their advice is
limited to the operational implications of the proposed change. Only two administrations,
Brazil and New Zealand, describe themselves as the main provider of tax policy advice to
government.
The crucial issue is perhaps not which organisation is providing tax policy advice, but
rather on such advice being based on a robust policy development and feedback process
covering the various aspects of revenue collection. Tax administrations are in a unique
position to support policy development by making policy makers aware of the challenges of
implementation and changes in service provision and compliance management, including
the role of third-party providers. Policy makers on the other hand are well placed to consider
and advance new administrative options allowing higher levels of participation, reductions
in the compliance burden and designing out opportunities for non-compliance.
Organisational features
By the early 1990s tax administrations, almost without exception, had moved from
internal organisation based on tax types to a functional approach based around the
key tax functions of registration; assessment; customer service; audit and verification;
and collections. While this approach allowed greater standardisation of processes, the
experience of many administrations was that the approach did not optimise delivery of
compliance programmes across all taxpayer groups. They also reported the functional
approach inhibited end-to-end thinking and the development of systems and processes that
treated taxpayer interaction holistically.
The next two decades saw many administrations re-orientating their business models and
structures around the taxpayer. These segmented models, sacrificed some of the functional
advantages of having staff doing the same work grouped together in order to allow a more
systematic view of the needs and requirements of different groups of taxpayers. It also saw
the establishment of corporate functions for core supporting activities including research;
compliance; planning and resource management; service design; and analytics.
Almost at the same time, a number of administrations started to adapt this segmented
approach introducing hybrid models that contained aspects of all earlier models and
reflect more networked organisations. These approaches, many of which are unique to
the administration implementing them, frequently arose from the need to take a structural
response to:
• implementing new tax regimes or policies (e.g. value added tax (VAT) or social
programmes)
• introducing new technologies or work methods (e.g. developing digital services)
• managing emerging compliance risks (e.g. managing VAT carousel fraud or base
erosion and profit shifting)
• establishing centres of excellence outside the segmented model (e.g. debt collection).
The last decade has seen a resurgence of customer-oriented business models within
tax administrations, especially for those delivering wider government services, or taking a
“systems approach” of their operations. These new models, many of which are supported
by advanced analytics and the use of big data, are enabling more tailored approaches to be
developed as well as a general re-thinking of how tax compliance can be best assured at
lowest cost and least burden, including through the use of third parties.
The wider transformational approaches can be illustrated by the work being undertaken
by Inland Revenue in New Zealand. This involves a fundamental re-examination of every
aspect of its operations. The roadmap for the transformation process has four main stages:
(1) enabling secure digital services; (2) streamlining tax; (3) streamlining social policy; and
(4) completing the future revenue system. This approach, which will require changes to
legislation as well as processes, is intended to leverage technology to fit the future revenue
system seamlessly into taxpayers’ day-to-day life. Such fundamental rethinking of tax
processes, both internal and external facing, can lead to issues with legacy information
technology (IT) systems which may not be easy to adapt. Given the on-going nature of
change, many administrations report that their operating models and structures are no
longer seen as needing to endure, instead being seen as having a likely life span of three
to five years.
A number of tax administrations report looking at the options for replacing aspects of
their core systems with commercial of the shelf (COTS) applications. See Box 3.4 for an
explanation of the approach Finland is taking in this respect.
For a brief overview of the implementation issues managed by Republic of China
(hereafter “China”) in introducing its VAT reforms in 2016, see Box 3.5.
Box 3.4. Finland – replacing legacy tax systems with tax COTS application
Tax Finland (TF) has since 2013 been undertaking a major operations and application
renewal programme with the aim of redeveloping its tax processes, renewing its tax legislation
and replacing seventy current IT applications with one COTS (commercial off-the-shelf)
application. This programme, which will renew every aspect of the operations of the Finnish
tax system, will run through till 2019 in four stages, two of which have gone live as planned.
Stage three, which will transfer corporate income taxation, goes live in 2018; and stage
four, the largest of the stages will move personal income and asset taxation into the new
environment in 2019.
IT inflexibility and increasing costs as drivers for the change: In the late 2000s TF’s
IT maintenance costs were increasing and negatively influencing its ability to enhance its
systems. Development efforts targeting increased automation or provision of effective services
and operations were often limited due to inflexible application architecture and the time
needed to implement changes. It thus became apparent that to secure current delivery and
allow future flexibility, TF would need to replace its core systems. A comprehensive study
in 2010 identified three alternatives: evolving current applications; replacing applications
with “best-of-breed” components; or replacing the core system with a comprehensive COTS
solution. In 2011 TF commenced a comprehensive COTS product evaluation exercise that after
evaluating three possible options concluded that its tax requirements could be met by a COTS
product. After delays arising from challenges to the procurement process, TF commenced
implementation of its new COTS tax application (GenTax®) in 2014.
Simplification brings business benefits and saves costs, preparation saves time: TF
anticipates the largest benefits from the implementation of its COTS tax application will come
from simplification. Developing common processes for all tax types and having all the data and
tax processing in one application will improve work productivity; reduce systems maintenance
costs, and shorten implementation timeframes. TF’s did not describe the necessary
functionalities as traditional software requirements, but rather as business rules supported by
process diagrams and decision models. These were used to ensure everyone understood the
change goals. A strong effort has also been placed into simplifying approaches where possible.
Box 3.4. Finland – replacing legacy tax systems with tax COTS application
(continued)
Change and the customers: Existing e-services are being replaced by new services that
provide customers more visibility of their data as well as wider selection of online services.
Key stakeholders, including accounting companies, have worked closely with TF to support
the change and to educate and increase awareness.
Managing staff change is a key to success: The importance of change management
cannot be underestimated. The change programme not only provides staff with a new business
tool to support their tax work, but also changes what they do and how they do it. TF has
also invested heavily in helping manage staff change. Staff have not only received extensive
training on the new COTS processes and tools, but they have also had training to explain
the purpose of the change and the effects the new systems will have on their everyday work
life. Assessing change readiness and the attitude of tax staff are keys to providing targeted
communication, training or other actions needed to ensure the COTS renewal programme
achieves its overall goals.
Source: Finland – Tax Finland (2017).
Box 3.5. China – administrative challenges in implementing VAT reform
From 1 May 2016 China expanded its Business Tax (BT) to VAT Reform programme on
a national basis. This final stage of the reform covered more than 10 million legal persons and
more than 10 million natural persons in the construction, real-estate, financial and service
industry sectors. More than 2 trillion Yuan of business tax revenue was transferred to VAT. In
successfully implementing this major change, SAT:
Overcame unprecedented challenges arising from the short implementation timeframe
and its existing workload: With less than two months between proclamation of the reform
and its implementation, a high powered leadership team was drawn together. All the optimal
resources were mobilised to work at designated venues for a 100 days from top to bottom under
the command of the leadership team, which saw staff at SAT and provincial levels working
around-the-clock.
Successfully responded to the complex industry conditions and, in so doing,
strengthened the foundation of the tax administration process: The reform was complicated
by unique characteristics in each of the four sectors. With all sectors crucial to the national
economy and many of the people in these industries not having any practical understanding of
what the new VAT might mean for them or their business, SAT actively developed promotional
and guiding materials.
Dealt with more than 20 million taxpayer queries on the new regime: SAT added more
than 20 000 tax officials and over 15 500 service counters, and deployed more than 6 500
training teams to ensure taxpayers involved in the BT to VAT Reform pilot programme could
invoice customers as well as declare tax from the 1 May 2016 implementation date. These
measures saw more than 21.3 million taxpayer queries on the implications of the new VAT
Reform programme with SAT’s approach being to educate and upskill taxpayers.
Box 3.5. China – administrative challenges in implementing VAT reform

(continued)
Investing heavily in improving the capability of its people and technology: SAT
upgraded major parts of its IT system, and promoted the Golden Tax Project Phase III with
full effort, especially the development and implementation of a new VAT invoice management
system. This improved how taxation management through information was conducted and
guaranteed smooth implementation of the pilot programme.
The new VAT is an important building block in its fiscal and tax reforms, and lays a
foundation for changes to the relationship between central and local governments, the state and
its enterprises, and state and local tax administrations.
Source: China – State Administration of Taxation (2017).
Large Business and High Net Wealth Individuals

Two specific areas where tax administrations have found it advantageous to manage
specific groups of taxpayers on a segented basis are large business taxpayers, and High
Net Wealth Individuals (HNWI). The rationale for focusing administration resources on
managing these groups revolves around:
• Significance of tax compliance risks: due to the nature and type of transactions,
offshore activities, opportunity and strategies to minimise tax liabilities; and in the
case of Large Business, the differences between financial accounting profits and the
profits computed for tax purposes.
• Complexity of business and tax dealings: particularly the breadth of their business
interests and in the case of HNWI, the mix of private and tax affairs.
• Integrity of the tax system: the importance of being able to assure stakeholders
about the work undertaken with these groups of taxpayers.
Additionally, in the case of large taxpayers, a small number of taxpayers are typically
responsible for a disproportionate share of tax revenue collected. Data collected as part of
the 2016 TAS survey indicates that for most jurisdictions that were able to provide the data
between 35% and 50% of their total net revenue, including withholding payments on behalf
of employees, was received from taxpayers covered by their large taxpayer programmes
(see Tables A.27 and A.68).
While management of these groups of taxpayers is often undertaken as a programme,
a large number of survey participants report that these programmes were also structural
involving a Large Taxpayer Office or HNWI unit. The scope of the work of these units
varies considerably, ranging from undertaking traditional audit activity, through to “full
service” approaches that encompass co‑operative compliance approaches.
Administrations that have established specialist units report considerable benefits from
this approach. Obviously, the existence of such an approach does not of itself address the
risks mentioned above. Similar results can also be achieved through non-structural means.
What is critical is that the approach taken by the administration ensures the risks posed
by these segments are appropriately managed. This would as a minimum need to include:
• Developing an effective risk management capability.
• Ensuring effective international co‑operation at both strategic and operational levels,

including the sharing of information and expertise between tax administrations.
• Creating an appropriate policy process to respond to specific tax risks that emerge
from activities undertaken within these segments.
Figure 3.6. Large taxpayer offices/programmes, 2015
60
50
40
30
20
10
0
Yes
No
Economic
sector/activity
Turnover/revenue
Income
Taxes (assessed/paid)
Assets
Other
Registration
Return and payment

processing
Services
Audit
Collection of arrears
Dispute resolution
Existence of Main criteria for determining large taxpayers Functions carried out by
large taxpayer large taxpayer office/programme
office/
programme
12 http://dx.doi.org/10.1787/888933546070
Sources: Tables A.64 to A.66 Large taxpayer office/programme.
Figure 3.7. HNWI programmes, 2015
40
35
30
25
20
15
10
0
Yes No Assets/ Income Other Registration Return Services Audit Collection Dispute
wealth and payment of arrears resolution
processing
Existence of HNWI Main criteria for determining Functions carried out by HNWI unit
programme HNWI taxpayer
12 http://dx.doi.org/10.1787/888933546089
Source: Table A.69 High net wealth individuals (HNWIs) programme – Main criteria and functions carried out.
4. Tax compliance risk – 53
Chapter 4
Tax compliance risk
Tax administrations have traditionally relied extensively on audits of high-risk cases

to bring in additional revenue and to enhance the perception that non-compliance
is associated with significant risk. The last decade has seen a shift towards more
evidence-based approaches to compliance risk management, as documented in a range
of Forum on Tax Administration (FTA) publications. These approaches generally
involve allocating resources and structuring activities on the basis of risk patterns,
using a range of instruments to address drivers (rather than symptoms) of risk, and
evaluating the success of activities in terms of their impact on the overall compliance
environment.
This chapter describes how changes in technology, combined with more extensive use
of third party data and advanced analytical tools, are now ushering in another wave of
change to the way administrations determine report and manage tax compliance risk.
54 – 4. Tax compliance risk
Framework for compliance risk management
The term “compliance risk management” was first explored in-depth in the FTA
guidance note Compliance Risk Management: Managing and Improving Tax Compliance
(OECD, 2004). Based on the experience of leading tax administrations, the note looked
at how the use of modern risk management techniques could help tax administrations
develop more effective risk-mitigation strategies. This is against the background that
modern tax systems largely depend on voluntary compliance which cannot be assured by
individual interventions alone. As set out in Figure 4.1, the framework showed compliance
risk management as a cyclical process capable of enhancing the evidence base for risk
identification and compliance activities over time. It continues to serve as an effective
process more than a decade later.
Figure 4.1. Compliance risk management process
Operating context
Identify risks
Assess and prioritise risks

Monitor
performance Evaluate
against plan compliance
outcomes
Analyse compliance behaviour • Registration
(causes, options for treatment) • Filing
• Reporting
• Payment
Determine treatment strategies
Plan and implement strategies
Source: OECD (2004), “Compliance Risk Management: Managing and Improving

Tax Compliance” (guidance note), www.oecd.org/tax/forum-on-tax-administration/
publications-and-products/compliance/33818656.pdf.
The framework sets out the key steps in developing a more systemic understanding of
compliance risks, shifting the focus from the individual taxpayer to the broader compliance
environment. In turn this allows administrations to prioritise more effectively and to
consider where they should adapt their processes and develop new capabilities, including
in the area of communication and education. This opens up a range of new risk mitigation
strategies, including greater reliance on proactive and close to real-time approaches, as well
as tax policy and internal process change.
The emerging practice of compliance risk management
Subsequent FTA reports have explored aspects of this shift in perspective and provided tax
administrations with practical guidance and examples of best practice in the following areas:
• Influencing compliance behaviours: The FTA information note Understanding
and Influencing Taxpayers’ Compliance Behaviour (OECD, 2010) recognised the
shortcomings of standard economic models in explaining compliance behaviour,
which were not generally based on behaviours observed in practice. The note set
out five broad categories for influencing behaviour positively: opportunity, social
norms, fairness considerations, economic incentives, and deterrence.
• Shifting from reactive to proactive approaches: The 2010 information note
underscored a shift from reactive activities targeting symptoms to more proactive
approaches aimed at the causes of non-compliance. This was further explored in the
2013 information note Right from the start: Influencing the Compliance Environment
for Small and Medium Enterprises (OECD, 2012a). This looked at how administrative
systems and processes might be reshaped to “build-in compliance”, emphasising the
importance of considering whether tax policies might need to change to enable new
ways of working e.g. electronic filing, and working with stakeholders to strengthen
end-to-end processes.
• Collaborative and user-oriented approaches: The FTA report Together for Better
Outcomes: Engaging and Involving SME Taxpayers and Stakeholders (OECD,
2013) explored how administrations might involve taxpayers and other stakeholders
in developing better targeted services and interventions. This included working
with tax intermediaries and others who could help influence SME compliance.
While the compliance risk management model in Figure 4.1 dates back to 2004 and its
principles remain valid, what is changing are the:
• approaches used to identify, assess and prioritise risk, with many administrations
now making use of new technologies and advanced analytics
• information sources which are increasingly based on external data, particularly
unstructured data, as well as information supplied by other jurisdictions
• timing of interventions, more of which are now occurring in real-time or close to
real-time
• type of treatment, with simpler tasks increasingly becoming more automated
• application of methods, where new tools and models are allowing administrations
to manage “complete data sets” rather than using risk approaches to allocate scarce
resources to best cases.
Current compliance strategies
Most administrations report having formal risk management procedures in place, with
just over one-third of these making compliance risks public (see Table A.41). This is on
the basis that publication can enhance compliance strategies by increasing awareness and
acting as a deterrence; while at the same time reassuring the public that non-compliance
is being dealt with.
Tax administrations were asked to identify the relative priority attached to a number
of risk categories in their current compliance strategies. There was a high degree of
commonality, with highest priority areas seen as: value added tax (VAT) fraud, aggressive
tax avoidance schemes (including those leading to base erosion and profit shifting), the
shadow economy and transactions involving zero or near zero tax jurisdictions. Many
administrations also identified e-commerce, identity-fraud, and high net wealth individuals
(HNWIs) as medium to high priorities (see Table A.138).
The high priority attached to VAT fraud reflects both its importance as a major
source of revenue and the continued vulnerability of repayment mechanisms generally to
organised fraud. VAT fraud and other refund based fraud schemes are increasingly taking
new and sophisticated forms involving the use of technologies and at times considerable
resources on the part of the perpetrators. For example, Denmark has recently been the
victim of an elaborate refund fraud scheme regarding withheld dividends. This led to an
estimated DKK 12.3 billion loss of revenue over the period 2012-15. Tax administrations
are well-advised to have integrated approaches in place for managing refund or repayment
risks. The country examples in Box 4.1 illustrates how the Australian Tax Office is using
advanced analytics to manage claims for work-related expenses and how the Swedish Tax
Agency is working to manage refund risks across agencies.
Box 4.1. Integrated approach to managing risks
In 2016 the Swedish Tax Agency increased resources aimed at preventing fraud connected
to the payment system. This early intervention programme is intended to map, prevent and
stop attacks on direct and in-direct refunds/payments from the tax agency, including VAT, tax
credits and other tax account related payments. In co‑operation with other payment agencies
(for example the National Insurance Agency and Sweden’s Public Employment Agency) the
compliance activities will also target fraud connected to the welfare systems.
Analysis showed an increase in risks for systematic and organised fraud in this area. It
is increasingly common that such attacks occur across a variety of payment systems, both
across agencies and within the same agency. Such activity generally involves a combination of
different crimes affecting tax and welfare systems, including identity related crimes. As part
of the programme, there will be an evaluation of its effectiveness in managing risks and in how
synergies were exploited in the overall compliance activities.
In Australia, to support its work in managing claims for work-related expenses, the
Australian Tax Office (ATO) has developed an analytical model that risk assesses taxpayer
claims. In 2014-15, 8.4 million taxpayers claimed work-related expenses to the value of
AUD 21.3 billion. The model, Nearest Neighbour, enables the ATO to compare a taxpayer’s work-
related deduction claims against those in similar jobs and earning similar amounts of income to
determine how far they differ from the norm. In essence, this provides a personalised risk profile
that enables the ATO to identify higher than expected claims. While a larger claim might be
legitimate, it may result in the ATO clarifying the claims with the taxpayer and their employer.
The use of the model commenced as a pilot programme in 2014, issuing letters to 2000
taxpayers whose work-related expenses were higher than their peer group. The following
year the ATO observed a significant reduction in claims from this group compared to their
previous tax returns, especially for those where an amendment was made. Since the successful
completion of the pilot project, the Nearest Neighbour model has been used extensively by the
ATO to select higher-risk candidates for treatment. Currently, adjustment rates for tax returns
selected for audit using this methodology exceed 80%.
In 2016, the ATO extended the use of Nearest Neighbour to operate in real-time. In myTax
(the lodgement system for self-preparers), if work-related expense claims seem higher than
expected, taxpayers are prompted to check their claims before submitting their returns. The
ATO will introduce similar online analytics for tax agent clients for Tax Time 2017. Prompts for
tax agents will alert them if a client falls outside “normal” claim parameters and may require
their further attention. The Nearest Neighbour analysis is transforming the way the ATO
manages compliance, enabling greater emphasis on prevention and self-correction to encourage
willing participation.
Source: Sweden – Swedish Tax Agency; Australia – Australian Tax Office (2017).
Compliance interventions
Surveyed tax administrations were asked to identify the priority they attached to a menu
of six potential interventions included in compliance strategies. The relative ranking of the
six items (see Figure 4.2) indicates exchange of information is a clear priority, reflecting
the growing focus on risks associated with offshore non-compliance. The relatively low
ranking of leveraging compliance through tax intermediaries is perhaps surprising given
the importance of this relationship to many tax administrations.
Figure 4.2. Priority of compliance interventions, 2015
High Medium Low
Tax compliance by design
Exchange of information
Pre-assessment verification
Making third party data

visible to taxpayers
Leveraging compliance
through tax intermediaries
Co-operative compliance
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
12 http://dx.doi.org/10.1787/888933546108
Source: Table A.137 Key aspect of the compliance focus – Approaches.
Key segments
There are a number of segments that typically feature prominently in both the operating
structure and the compliance approaches and strategies of tax administrations. This section
briefly comments on four: large businesses, HNWIs, small and medium enterprises (SMEs),
and the shadow economy.
Managing Large Business Compliance

Almost all tax administrations report having in place a large business unit or a similar
form of programme. As mentioned in Chapter 3, this reflects the importance of large
business in terms of its contribution to the tax base and the complexity of large business tax
affairs. Large business units differ in terms of how they are organised and resourced, and
in the focus of their activities, which may reflect local circumstances and variations in the
large business population. In general such units administer affairs across all tax types and
obligations. Large business units are generally responsible for providing services and for
auditing, but it is fairly common that they also manage registrations, return and payment
processing, collection and management of arrears, and dispute resolution. The units are
frequently organised geographically or by economic sector (see Tables A.64 to A.67).
An increasing trend in the administration of large business compliance is the use of
co‑operative compliance programmes. These programmes involve a more transparent
relationship and more proactive approaches to resolving material tax risks. The concept
of co‑operative compliance has been the subject of several FTA reports, most recently
Co‑operative Tax Compliance: Building Better Tax Control Frameworks (OECD, 2016). Sixty
percent of survey participants report already having or being in the process of implementing
a co‑operative compliance programme for large business. Most often these programmes are
based on formal agreements with specific companies, although in some jurisdictions these
programmes are more informal. In a limited number of cases, the operation of a co‑operative
compliance programme is based on legal provisions. Among the requirements for entering
such arrangements, tax administrations most frequently cite commitment of the taxpayer to
effective management of their tax affairs, followed by the presence of a formal tax control
framework and the absence of pending issues or arrears (see Tables A.141 to A.143).
Box 4.2. Integrated risk assessment for large business
In Canada the Canada Revenue Agency (CRA) has implemented an Integrated Risk
Assessment System, which allows the agency to consider risks in the large business population
both at the economic entity level and at the legal entity level. This system links information
from CRA databases and various forms and returns. It then applies risk algorithms to the data
to risk score the entire large business population. Taxpayers considered high to medium risk
by the automated system are further analysed by experienced integrated Large Business audit
teams to determine an overall risk profile for each taxpayer. The risk profile determines the
audit approach taken. Those taxpayers considered high risk will be subject to a full compliance
audit. Taxpayers in the medium risk category may be subject to a full compliance or limited
scope audit. Taxpayers considered low risk may be subject to a compliance assurance review
to validate the low risk ranking. The approach allows the CRA to focus its audit resources on
high risk cases within the large business population while reducing the compliance burden for
businesses associated with low risk.
Source: Canada – Canada Revenue Agency (2017).
Managing HNWI compliance

One-third of survey participants report having units or programmes dedicated to the
management of the tax affairs of HNWIs. While most are generally focused on audit, two-
thirds include a service component. The service function may integrate activities such as
registration, returns and payments processing, debt management, and dispute resolution
(see Table A.69). The example in Box 4.3 illustrates how the Netherlands have organised its
dealings with the HNWI segment and adapted a range of principles from the management
of large business compliance to fit the needs of this important segment.
The establishment of dedicated HNWI units by tax administrations reflects the
recognition that a small number of taxpayers are typically responsible for a disproportionate
share of the wealth and assets held within the economy. The 2016 edition of the World
Wealth Report (Capgemini, 2016) estimates that the HNWI segment (defined in this report
as individuals with investable assets exceeding USD 1 million) has grown fourfold over two
decades. The report estimates that the growth of this segment across all regions will see the
wealth held by HNWIs projected to surpass USD 100 trillion by 2025. This concentration
of wealth and income, with its significant tax implications, is likely to see more tax
administrations establishing HNWI units and/or programmes in the coming years.
Box 4.3. Dedicated HNWI programme
In the Netherlands the Netherlands Tax and Customs Administration (NTCA) has since
May 2014 closely monitored the fiscal activity of HNWIs through a dedicated programme
undertaken by a specific department for this segment. The approach of dealing with HNWIs as a
designated group aligns well with the recommendations of the OECD in its 2009 report dealing
with HNWI compliance. This approach is not only acknowledged as appropriate and beneficial
for the tax administration itself, but also for the individuals whose affairs are managed through
the programme’s activities. The dedicated HNWI department is situated within the large business
segment of NTCA. An important reason for this is that practice shows that a large number of
HNWIs are strongly connected with large businesses. This arrangement improves administrative
effectiveness and efficiency and creates opportunities for a thorough and specialised fiscal
treatment by NTCA, allowing HNWIs to be managed using the same co‑operative compliance
model used for large businesses. NTCA has further plans to improve the operations and
responsiveness of its activity in the HNWI area through improved co‑operation with taxpayers
and their consultants.
Source: the Netherlands – Netherlands Tax and Customs Agency (2017).
Managing SME compliance

In most jurisdictions the SME sector is both a significant part of the tax base and employs
the largest number of people. It also poses particular challenges for tax administrations since;
in general, the SME sector has high turnover rates and varying financial literacy. It also has
greater exposure to the “cash economy” than larger businesses and can be impacted relatively
more heavily by compliance burden. It is perhaps surprising then, that while a significant
minority of administrations report having a dedicated SME programme in place, many do
not (see Table A.71).
An increasingly digital and mobile SME taxpayer base, especially one that is operating
more and more on a cross-border basis, poses new challenges to tax administrations. As a
result many tax administrations are, as part of their compliance management approach for this
segment exploring new ways to facilitate and promote SME tax compliance. In so doing many
are using the “right from the start” approach described in the OECD report (OECD, 2012a).
Managing the shadow economy
Since the global financial crisis, many tax administrations have strengthened their
efforts to analyse the shadow economy and identify ways to disrupt its structures. The
shadow or underground economy (as it is also known) covers a broad range of activity,
from non-declaration of second jobs to deliberate falsification of invoices and in some cases
also has links to organised crime.
The shadow economy was the subject of a comprehensive information note prepared
by the FTA in 2012 Reducing Opportunities for Tax Non-compliance in the Underground
Economy (OECD, 2012b). This note explored the key components of successful compliance
strategies, assessed the impact of digital payment technologies and reviewed the
methodology for estimating the size of the underground economy. The note encouraged
administrations to update their compliance strategies to ensure they reflected new
and growing risks, including through using the electronic records created by payment
systems to identify unreported business income. Much of this content is still relevant to
the management of the shadow economy today. The newly released report Technology
Tools to Tackle Tax Evasion and Tax Fraud (OECD, 2017), draws on the experience of 21
jurisdictions to highlight their key successes in using technology to help tackle tax evasion.
Electronic cash registers and electronic invoicing

Those participating in the shadow economy employ various techniques to avoid declaring
income and money flows. The two best known are sales suppression and false invoicing.
Sales suppression means the intentional under-reporting of sales in order to distort actual
tax liabilities. An established method to combat suppression of cash sales is the requirement
to use electronic cash registers. Such registers transmit sales information directly to the tax
administration or record the information on a secure device that can only be accessed by the tax
administration. Since the 1990s, several jurisdictions have implemented mandatory electronic
cash registers for retail businesses, many achieving considerable revenue increases as a result.
Sweden introduced the mandatory use of certified cash registers for traders in January 2010,
and supports implementation by carrying out unannounced inspections, undercover purchases
and customer verifications. The Swedish Tax Agency estimates that as of 2013, this approach
helped increase VAT and income tax revenues by EUR 300 million per year.
Box 4.4. Use of certified cash registers
In the Russian Federation (hereafter, “Russia”), the Federal Tax Service (FTS) in February
2017 started the transition to mandatory online cash registers. The introduction which will be
completed by July 2018 instantly uploads sales data to the FTS data processing centres. As
required by legislation, each receipt generated by online cash registers has a scannable QR-code
that enables customers to verify the transaction by comparing it to the information maintained
by tax authorities.
In Italy, the Revenue Agency in January 2017, initiated the optional use of electronic cash
registers for VAT operators that allow the storing of data electronically and transmission to the
Revenue Agency on a daily basis. Ahead of the launch, technical instructions were published
on the agency website in October 2016 to guide the operators in processing the acquired data.
Source: Russia – Federal Tax Service; Italy – Revenue Agency (2017).
The use of fraudulent invoices has obvious issues for VAT and income tax. In several
jurisdictions, technological solutions have helped launch electronic invoicing systems
which enable tax administrations to access invoices directly. Chile introduced its electronic
invoicing system in 2002, which became mandatory for all businesses in January 2014. A
phased roll-out is underway, with the major part of businesses scheduled to be using the
system by early 2017.
From the taxpayers’ perspective, it is important to note that the technological innovations
to combat sales suppression and false invoicing can also have positive effects. As well as
increasing tax certainty, it can lead to a reduction in compliance costs and significantly reduce
the likelihood of audit as well as supporting fair competition. In addition the Swedish electronic
invoicing system includes a simplified accounting system for businesses, which provides the
taxpayer with monthly financial statements and generates prefilled annual returns. In Italy,
businesses that use electronic invoices can benefit from quicker VAT refund processing.
Inter-agency co‑operation and innovation

Jurisdictions report implementing innovative and more targeted investigation techniques
to identify methods used within the shadow economy and actively prevent evasion. To foster
institutional learning and increase impact, tax administrations are actively co‑operating
with other government bodies. This “whole-of-government” approach enables better
treatment of risk at a “systems level”.
Box 4.5. Co‑operation and innovation
In Sweden, the Swedish Tax Agency, in co‑operation with the Trade Organisation for Taxis in
Sweden, introduced in May 2017 a mandatory transmission system for taximeters in the taxi industry.
This includes the obligation for taxi businesses to transmit data (digitally and wirelessly) from their
taximeters to a certified Accounting Centre for Taxi Businesses, supervised by the Swedish Transport
Agency. The Swedish Tax Agency can then request standardised and digitalised information from the
accounting centres. Sweden expects this transmission system to improve tax compliance and foster fair
competition within the taxi business.
In the United Kingdom, Her Majesty’s Revenue and Customs (HMRC) collects merchant acquirer
data, which includes credit and debit card information, to combat evasion by identifying incorrect
records and tax returns. To achieve this, the bulk data is analysed with regard to declared turnover in
relation to the entire sector. The analysis of merchant acquirer data enables the tax authority to identify
and follow up potential irregularities between real and declared sales. HMRC has also developed a
new approach to link incomplete merchant acquirer data with HMRC data. This has provided the
administration with significantly improved confidence levels in unmatched records identified, to
more effectively target businesses operating in the hidden economy. As of November 2016, HMRC
had examined 3 725 cases and collected an additional GBP 35 million as a result of this approach.
In New Zealand, Inland Revenue’s hidden economy work focuses on sectors where there are
greater risks of people not reporting cash revenue and tax-evasion behaviours, such as construction,
hospitality and those operating outside the tax system. Investigations into the hidden economy in
2015-16 found tax position differences of NZD166 million. The tax administration ran a successful
marketing campaign directed at tradespeople with the tagline “It’s just the odd under-the-table job here
and there.” Since 2012, New Zealand has seen the proportion of construction industry workers who
perform cash jobs fall from 29% to 19%.
In Peru, two important goals of the tax administration (SUNAT) are to broaden the tax base and
reduce tax evasion. In 2015 SUNAT research identified individuals who borrowed from the financial
system and matched this data against taxpayers registered in the tax administration. Any individuals
that had credit in the financial system and did not have a tax ID number, or no payments on their
behalf could be identified, was flagged as a potential tax evader. This was on the basis that to access
credit in the financial system individuals would need to have a relatively stable income stream in
order to pay off their credit obligations. Based on 2014 information, this research identified 1.8 million
“informal individuals”, representing 19.2% of the total client base (31% of these were small and micro
enterprises). Although it represented only 3.6% of the total amount of credit in the financial system,
the potential tax evasion related to the entire informal group was estimated to be 0.7% of GDP.
This kind of research was possible because legislation that protects banking secrecy covers only
financial deposits but does not include financial credits. The information collected is currently under
review by the operative unit in SUNAT and will be included as an input in designing and carrying out
inspection actions directed to individuals who are not usually reached by regular control programmes.
Source: Sweden – Swedish Tax Agency; United Kingdom – HM Revenue and Customs; New Zealand – Inland
Revenue; Peru – Superintendencia Nacional de Administración Tributaria (2017).
Sharing economy
The global sharing economy, which puts suppliers and customers in direct contact
through web or mobile based applications, presents an emerging tax risk. Because of the
private nature of payments, and the often global basis for payments, it can be challenging
to ensure tax compliance. To overcome this, tax administrations are increasingly reaching
out to other government agencies and other tax administrations to ensure comprehensive
exchanges of information relating to transactions between individuals based in different
jurisdictions. In Australia, for example, the Australian Tax Office (ATO) has access to
information on financial flows maintained by the Australian Transaction Reports and
Analysis Centre. This helps the ATO identify unregistered businesses operating in the
sharing economy (OECD, 2017).
With the sector being relatively new and expanding rapidly, not all taxpayers
participating in the sharing economy are aware of their obligations. In promoting tax
compliance many administrations are taking a service and education approach. These
include approaches described in the OECD publications Tax Compliance by Design (OECD,
2014), which encouraged administrations to adopt a systems approach to improve SME tax
compliance, and Right from the Start (OECD, 2012a). Several jurisdictions also report using
third party information and internet scraping technologies (data mining) to help identify
individuals and entities operating in the sharing economy. In the United Kingdom, HMRC
for example uses a product that collates and filters social media and other websites to
monitor trends in specific locations or business sectors.
Tax gap measurements, random audits and robust monitoring of risk
The use of tax gap measurements is becoming more common, especially for VAT, as
jurisdictions increasingly see the benefits of having high level estimates of non-compliance
within the tax system. Top-down methodologies that use national accounts data represent
a relatively low-cost means of producing such estimates. These approaches are often
associated, though, with a fairly high degree of uncertainty and therefore are of limited
operational use. Bottom-up methodologies that include information from random audits,
on the other hand, can provide a more accurate picture of lost revenue across segments and
tax types.
Almost one half of the 55 surveyed administrations report producing periodic tax
gap estimates for one or more of the main tax types, with the production of estimates of
VAT the most prevalent (see Figure 4.3). The majority of administrations that produce
assessments do so for all three major tax types, with around half of those making their
estimates publicly available. This practice seems well aligned with the trend discussed
above in relation to transparency about compliance risks, strategies and results.
It is generally acknowledged that the combination of top-down and bottom-up figures
provide the most solid basis for drawing conclusions on the health of the tax system over
time. It is important to observe, however, that the data from both methodologies is often
available with a delay of several years. Therefore these lagging indicators need to be
supplemented with a robust set of leading indicators (for instance the incidence of timely
and accurate filing and payment across segments and tax types). This is important for
monitoring current risk trends, assisting operational decision-making and evaluating the
success of treatment strategies. This edition of the Tax Administration Series does not
include data that can form the basis for an assessment of current practices, but previous
FTA work does suggest scope for improved operational measures.
Figure 4.3. Use of tax gap methodology, 2015
25
20
15
10
0
Produce Publish Produce Publish Produce Publish Produce Publish
Personal income tax Corporate income tax Value added tax Other
12 http://dx.doi.org/10.1787/888933546127
Source: Table A.139 Tax gap approaches.
Random audits
Slightly less than two thirds of participating tax administrations report having random
audit programmes in place (see Table A.140). These are generally intended to provide a
more accurate understanding of compliance risks, measure the impact of audits and other
compliance activities on taxpayer behaviour, and enhance risk-profiling systems. About
one-third of the jurisdictions with established random audit programmes report also using
the data to produce tax gap estimates. Those administrations that do not use random audit
programmes often cite the significant burden on the taxpayers, particularly low-risk taxpayers
who would otherwise not be audited.
Leveraging third-party data

The benefits of third-party data in enhancing tax compliance and service delivery
are widely recognised. It is therefore no surprise that the great majority of participating
tax administrations report they are expanding their collection of data from third-parties
including online trading, asset leasing, payments to subcontractors, and VAT invoices.
That said as illustrated by the Figure 4.4 there is still a strong focus and concentration on
the collection and use of traditional data sources. These include data on wage and salary
information from employers as well as data from, financial institutions, property sales,
other government agencies, and information exchanged with other jurisdictions.
Tax administrations generally report sharing data (subject to specific provisions) with
other government bodies and other jurisdictions. While data sharing with employers,
financial institutions or third parties is increasing as some administrations look to improve
withholding systems, it is still not common (see Table A.145).
With the bulk of third party data coming from organisations that have withheld personal
income tax from individuals, tax administrations have been active in establishing processes
to improve outcomes and simplify compliance for salary and wage earners. As a result
some administrations now report being able pre-fill 100% of the data for selected groups of
taxpayers. The practice is most widespread and successful in the Nordic tax administrations
where it has led to impressive compliance rates and low administrative costs for personal
income tax, which in these jurisdictions represent a very significant share of the tax base.
Figure 4.4. Use of third party data, 2015
Employer wage and salary information

50
Other Financial institutions
40
30
VAT invoices Other government agencies
20
10
Prescribed contractors 0
with reports of payments International exchange
made to sub-contractors
Asset leasing Insurance companies
Online trading Immovable property sales

12 http://dx.doi.org/10.1787/888933546146
Source: Table A.144 Use of third party data.
Increasingly the spread of digital payments, electronic invoicing and connected devices
(like online cash-registers and point-of-sale solutions) is generating data that can be used
by tax administrations. Taken together data on sales and on payments complement each
other to form a picture of potentially taxable transactions. The transformative potential of
these data sources can be seen in the case of Russia where the Federal Tax Service (which
already processes more than 1 billion electronic invoices every quarter) will receive real-
time data from online cash-registers at 2.5 million sales points based on legislation in effect
as of February 2017.
How tax administrations position themselves to influence and leverage this environment
and the data it produces will be a key transformative theme over the next decade.
Voluntary disclosure mechanisms
Voluntary disclosure mechanisms can be an important part of compliance programmes

when used as part of a broad approach to facilitating compliance outcomes. Such
programmes offer non-compliant taxpayers the opportunity and incentive to proactively
put their tax affairs in order. As well as being less resource-intensive than investigations,
they can also potentially generate significant insights into the reasons for evasion (including
accidental) and the structures used to facilitate deliberate evasion.
Box 4.6. Voluntary disclosure programme
In Australia, where taxpayers recognise a mistake or omission in a previously lodged tax

return or activity statement, the ATO encourages them to disclose this and work with it to fix
the problem.
In March 2014, Project DO IT (Disclose Offshore Income Today) was launched, offering
taxpayers an incentive to come forward voluntarily before the end of the year and disclose
unreported foreign income or capital gains and related deductions claimed incorrectly. Taxpayers
disclosing their offshore assets were: generally only assessed for the previous four years; liable for
Box 4.6. Voluntary disclosure programme (continued)
a maximum shortfall penalty of just 10% and full shortfall interest charges; and not investigated
by the ATO or referred for criminal investigation on the basis of their disclosures. Taxpayers
with undisclosed offshore income or assets that did not come forward before the deadline are still
encouraged to come forward and discuss their situation.
At 30 June 2015, the ATO had received over 5 800 disclosures with over AUD 5 billion
in assets declared and over AUD 600 million of omitted income disclosed, leading to
AUD 127 million in collections. The ATO anticipates significant future tax collections based on
the assets and income brought into the tax system under the project. Intelligence from the project
will also help to detect and deal with inappropriate offshore arrangements, including those who
chose not to voluntarily disclose income.
Source: Australia – Australian Tax Office (2017).
References
Capgemini (2016), World Wealth Report 2016, www.worldwealthreport.com.

OECD (2017), “Technology Tools to Tackle Tax Evasion and Tax Fraud”, OECD, Paris,
www.oecd.org/tax/crime/technology-tools-to-tackle-tax-evasion-and-tax-fraud.pdf.
OECD (2016), Co‑operative Tax Compliance: Building Better Tax Control Frameworks,
OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264253384-en.
OECD (2014), Tax Compliance by Design: Achieving Improved SME Tax Compliance
by Adopting a System Perspective, OECD Publishing, Paris, http://dx.doi.
org/10.1787/9789264223219-en.
OECD (2013), Together for Better Outcomes: Engaging and Involving SME Taxpayers and
Stakeholders, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264200838-en.
OECD (2012a), “Right from the start: Influencing the Compliance Environment for
Small and Medium Enterprises” (information note), OECD, Paris, www.oecd.org/tax/
forum-on-tax-administration/publications-and-products/compliance/right-from-the-
start-influencing-the-compliance-environment-for-smes.pdf.
OECD (2012b), “Reducing Opportunities for Tax Non-compliance in the Underground
Economy” (information note), OECD, Paris, www.oecd.org/tax/forum-on-tax-
administration/publications-and-products/compliance/49427993.pdf.
OECD (2010), “Understanding and Influencing Taxpayers’ Compliance Behaviour”
(information note), OECD, Paris, www.oecd.org/tax/forum-on-tax-administration/
OECD (2004), “Compliance Risk Management: Managing and Improving Tax Compliance”
(guidance note), OECD, Paris, www.oecd.org/tax/forum-on-tax-administration/
5. The changing role of tax service providers – 67
Chapter 5
The changing role of tax service providers
Traditional tax intermediaries such as tax agents, bookkeepers and the accountancy
professions continue to play a significant role in the operation of the tax system
of many jurisdictions. These intermediaries often support taxpayers in complying
with their tax obligations, as well as undertaking other services. They have a long-
established role in many jurisdictions of working with administrations to improve
how the tax system functions technically and as an end-to-end process.
As new technology has enabled new types of supporting services, including online
accounting and automated filing, tax administrations are increasingly having to
consider how they can best interact and engage with a wider range of tax service
providers.
This chapter explores the changing role of tax service providers and the nature
of the working relationship with the tax administration. It also comments on how
administrations are responding to the challenges and opportunities presented by the
new business models and technologies.
68 – 5. The changing role of tax service providers
Introduction
Traditionally tax administrations have relied heavily on tax intermediaries to fill

an important role in the tax system. These intermediaries, which include bookkeepers,
accountancy and advisory professionals as well as tax agents, assist taxpayers to understand
and meet their tax obligations. Many administrations have invested in establishing
supportive relationships with these groups at an industry level. This is on the basis that they
are well placed to not only influence and support taxpayers’ compliance efforts, but also
because the services they provide can have a significant impact on the workloads of tax
administrations. This is particularly the case as regards filing and payment.
Over the last three decades or more, tax administrations have established services and
processes to support the role of the tax agents. These include differential return filing dates,
dedicated services – particularly within contact centres – and formal or ad hoc mechanisms
for consultation, collaboration or escalation of administrative issues. As administrations
have looked to take a more customer-centric or segmented view of tax processes and
systems, many have sought to expand these tax agent relationships. This includes involving
them in strategic discussions about how tax administration is changing and what this means
for them.
At the same time, the landscape is also shifting for the provision of tax services.
Technology has enabled new types of services, including online accounting and automatic
filing or other tax-related obligations as a “by-product” of using accounting software. This
has brought new businesses and new operators into the tax world along with new service
concepts and new patterns in customer interaction. These prompted the Forum on Tax
Administration (FTA) to publish Rethinking tax services: the changing role of tax service
providers in SME tax compliance (OECD, 2016a). That report provided an overview of the
relevant technological and business developments. It also explored how these developments
can influence small and medium enterprises (SMEs), tax service providers and tax
administrations – and the way that they co-operate.
The role of tax service providers
Tax service providers operate in many jurisdictions, conducting a range of tasks that
aid the functioning of the tax system. These include providing taxpayers with advice on
the application of tax laws, assisting them in the preparation of returns, and representing
them in their dealings with the tax administration, often involving tax audit and disputes.
While it is generally taxpayers who initiate and make the arrangements for tax services
from providers, the providers remain an important potential partner that can assist
administrations in improving compliance rates, meeting service demands, and lowering
the administrative burden and cost of tax administration.
Tax administrations have long recognised the potential benefits of establishing formal
arrangements with tax service providers. The 2013 report Together for Better Outcomes:
Engaging and Involving SME Taxpayers and Stakeholders (OECD, 2013) pointed to a
move from somewhat formalistic engagement mechanisms towards deeper and more
genuine forms of collaboration and co-creation based on a shared agenda. For instance, tax
administrations and tax service providers may co-create information and guidance that tax
service providers may then deliver on behalf of the tax administration.
While the report acknowledged these developments, it also pointed out the potential
for more systematic, far-reaching and ultimately transformative approaches. The advent
of new technologies and service providers brings new urgency to this agenda. As tax
compliance is increasingly mediated by third parties, technologies, and data in the broader
tax ecosystem, tax administrations need to adopt strategies for leveraging and influencing
these developments. Such strategies are likely to take the form of partnerships, with the
tax administration taking more of a facilitator role rather than just acting as a traditional
regulator.
The positive contribution such developments can make to the overall functioning
of the tax system was also explored in the 2008 FTA report Study into the Role of Tax
Intermediaries (OECD, 2008). The report conceived and recommended the concept of
“enhanced relationships” involving tax intermediaries, taxpayers and the tax administration.
Interestingly, almost ten years on, three-quarters of survey participating administrations
report offering “specialised services” to tax service providers based on such as relationship
(see Table A.123).
Box 5.1. Working with tax service providers
In the Netherlands tax service providers play an important role in assisting SMEs to
meet their tax obligations. The tax service provider will often be the primary advisor to the
business offering a broad range of financial and business advice. The technological and service
innovations in society have brought changes to the tax service provider “eco-system”, with
new entrants offering new services often integrated into the taxpayers’ natural systems. The
Netherlands Tax and Customs Administration meet regularly with representatives of tax service
providers. These meetings allow discussion on developments within the tax administration,
including updating on hot topics and the operation of the tax system generally. It also provides a
forum that enhances mutual understanding and co‑operation. These meetings increasingly are
taking a more systems view of the tax interactions of SMEs.
Source: the Netherlands – Netherlands Tax and Customs Administration (2017).
Despite the proven benefits tax service providers offer in many jurisdictions, most tax
administrations appear to have limited information on the operational workload of this group.
Of the 55 tax administrations participating in the survey, most were unable to provide data
on the number of returns prepared by tax service providers, with only 18 administrations
for value added tax, 20 administrations for personal income tax and 21 administrations for
corporate income tax gathering this information (see Table A.94). Without such information,
it is not possible for the administration to properly monitor the performance of tax service
providers, contrast their performance with the population as a whole, or have data to use for
dialogue with (and perhaps regulation of) the tax service industry.
Regulation of tax service providers
Table 5.1 reports that just under two-thirds of the 42 administrations offering specialised
services reported the existence of laws or regulations prescribing the registration and/or
operations of tax service providers.
The level of involvement of tax administrations in the registration and regulation
of tax service providers varies considerably. In some jurisdictions tax service providers
are entirely self-regulated, generally based on frameworks set out by professional bodies
representing all or part of the industry. Such frameworks often include strict professional
and ethical standards. In other jurisdictions, the government or the tax administration
itself takes a more active role. This typically involves a registration process that allocates a
unique identifier that must be used in its dealings with the tax administration.
Table 5.1. Services and registration of tax service providers, 2015
Registration
Specialised services Prescribed in law or requirement with the Online registration
offered regulation tax administration possible
No. of administrations 42 27 22 15
Source: Table A.123 Tax intermediaries.
As tax administrations move towards more collaborative approaches to benefit from

the knowledge, resources, reach and credibility of tax service providers, it is to be expected
that there will be changes to regulatory approaches. This may include, for example, the
introduction of methods for differentiating service providers based on the quality and
accuracy of the services and products they provide. Similarly, there is likely to be an
increasing need for standard-setting and regulation of new technologies to ensure that
parties can rely on them and their supporting processes.
Services offered to tax service providers
Figure 5.1 outlines the range of specialised services offered to tax service providers by
42 of the surveyed administrations.
Two-thirds of administrations offering specialised services report having a relationship
manager function to liaise with tax service providers and address their specific needs. One
half reports routinely surveying satisfaction with the services provided, with almost two-
thirds of these publishing the results (see Table A.120). Administrations report that survey
data is used for management and business development. It merits mention – given the
important role tax intermediaries play in supporting tax administrations and facilitating tax
compliance – that up to a quarter of administrations that have tax service providers appear
not to have introduced dedicated or specialised services to support these intermediaries
(see Table A.123). This may be an area of opportunity for those tax administrations.
Figure 5.1. Specialised services provided to tax service providers, 2015
35
30
25
20
15
10
0
Online access to Relationship Updates on Dedicated website Differentiated Dedicated enquiry
clients’ tax information managers tax policy and section filing arrangements service
administration issues for clients’ returns
12 http://dx.doi.org/10.1787/888933546165
Source: Table A.123 Tax intermediaries.
New actors and technologies entering the market

The changing tax environment has two main aspects:
• A dramatic shift in the tax service provider market. The market for bookkeeping,
accounting and payroll software has changed dramatically over the last five years.
Accounting software used to be regarded as expensive and unaffordable for all but
the largest of SMEs. However new business models offering flexible and scalable
plans at low cost are allowing even the smallest businesses to benefit. Improved ease
of use with more intuitive interfaces and better functionality (for instance issuing
and tracking of invoices or the automatic categorisation of costs) has also driven
up-take particularly with smaller SMEs. The trend is particularly pronounced in
advanced economies with high technology penetration. For example, the Danish
Tax Administration reports that more than half of the business population now
use cloud-based accounting software to manage their bookkeeping and tax affairs.
At the same time, traditional systems targeting the higher end of the market are
becoming increasingly sophisticated, offering greater transparency, more certainty
and better integration with business processes.
• New technologies and approaches which are presenting administrations with new
opportunities and new business relationships. These include digital payment systems,
electronic invoicing, as well as potentially trust-enhancing technologies such as
digital cash registers and devices that track sales, production or consumption at
different stages of the value chain. The likelihood is that this change will only deepen
and accelerate in coming years as these technologies mature and regulators look to
help enable their potential. For example, a number of jurisdictions have begun to
consider the possible uses in tax administration for blockchain, the technology behind
Bitcoin, which offers the prospect of tamper-proof records, invoices and contracts.
New tax administration business models
The above-mentioned developments offer tax administrations a range of exciting

new opportunities to leverage “smart devices” and data sources. This has the potential to
significantly enhance upstream verification, increase the overall transparency of the tax
system, and provide targeted services and interventions prior to or during the filing process.
The data collected can also help identify changing economic activity. The implications as well
as the opportunities arising from these developments have been explored in a range of FTA
publications. For example, the report Compliance by Design: Improving SME compliance by
adopting a system perspective (OECD, 2014) examines how tax administrations can leverage
data and technologies in the broader tax ecosystem. While it is possible to imagine “hybrid”
approaches, the report highlights two alternate strategies for doing so:
• The centralised data approach is focused on access to metadata and data that can
be used for verification and other purposes. For example the extensive use of data
from electronic invoicing and online cash registers for matching by the Federal Tax
Service in Russia;
• The trusted chain approach is focused on strengthening the end-to-end process
where data flows from individual transactions to the final tax “return”. This can
allow a high degree of reassurance that the return can be relied upon. The work
with certification of point-of-sales solutions and book-keeping software in the
Netherlands is an example of how tax administrations may work with tax service
providers to create a trusted chain.
Beyond strengthening the end-to-end process from transaction to taxation, which

is ambitious in itself, some tax administrations are now developing options for pushing
information, services and business rules out into the ecosystem. This can involve
integrating tax information, guidance and other functionality in the bookkeeping software.
Such integration can enable any issues to be identified prior to or during the filing process
potentially reducing the need for post filing audits (see OECD, 2016b). The example
in Box 5.2 illustrates how Her Majesty’s Revenue and Customs (HMRC) is publishing
application programming interfaces (APIs) to support the development of third-party
software within the context of its wider digital strategy.
Box 5.2. Exposing business rules and APIs
In the United Kingdom, HMRC is investing GBP 1.3 billion into a programme to make
tax administration easier, quicker and simpler. This programme is already well underway.
Transforming HMRC into a digital tax administration is allowing it to reduce the burden of tax
compliance for taxpayers. Small businesses and individuals can now use digital tax accounts
for a growing range of tax transactions, giving a personalised and increasingly real-time user
experience. The ambition is to show exactly what is owed and to make the tax system easier
to comply with. Ultimately digital tax accounts will replace annual tax returns in their current
format. A key strand of HMRC’s strategy is the requirement for most businesses to maintain
their records digitally and to update HMRC quarterly. This will improve the levels of voluntary
compliance, reduce amounts lost through error, and provide the environment for business to
grow and thrive. The overall digital strategy is supported by published APIs to enable taxpayers,
their agents and commercial software to transact with HMRC, encouraging the development of
third party products.
Source: United Kingdom – HM Revenue and Customs (2017).
The focus on strengthening end-to-end processes and influencing the broader tax
ecosystem has naturally led to increased collaboration with software developers. Box 5.3
illustrates how New Zealand and Denmark have collaborated with software developers to
integrate functionality in third-party software.
Box 5.3. Collaboration with software developers
In New Zealand, Inland Revenue concluded a successful pilot project in 2015 that allowed
businesses to submit Goods and Service Tax (GST) returns through the accounting software of
two providers that cover 75% of the SME accounting services market. In a survey of 422 pilot
participants, 64% said the new service reduced their costs and 76% said it made it easier for
them to ensure they were submitting correct information. Many suggestions also came forward
in the trial (including from Inland Revenue) as to how to fix mistakes in tax returns online and
to set up online payment plans to clear debt. The software providers released the GST filing
service to all clients in mid-2016. Inland Revenue is now looking at digital options for Pay-as-
your-earn and social payments.
Box 5.3. Collaboration with software developers (continued)
In Denmark, the Danish Tax Administration (SKAT) is collaborating with software

developers to embed tax-related guidance and functionality in third-party accounting software
solutions targeting small business. The long-term ambition is that transaction data flowing from
banks to accounting systems should form the basis for a semi-automated process that integrates
with SKAT’s business processes. The first product of the collaboration will be released early
in 2017 in the form of a comprehensive yet user-friendly bookkeeping guide accessible directly
from third-party accounting software. Functionality for reporting and paying value added tax,
which is the main obligation of most small businesses, is expected for release later in 2017.
Sources: New Zealand – Inland Revenue; Denmark – Danish Tax Administration (2017).
As tax administrations continue the journey to redefine their role and develop deeper
partnerships across the broader tax ecosystem, they may find value in the implementation
advice for engagement and involvement strategies contained in the Together for Better
Outcomes publication (OECD, 2013), summarised in Box 5.4.
Box 5.4. Advice for implementation for Engagement and Involvement

approaches
Start with what you have: Revenue bodies are already using E&I approaches in a variety
of ways. To make further progress, it is advisable to build on the existing resources and
capabilities, but think about scaling as opportunities arise and as the case for E&I approaches
gradually become more firmly established and accepted.
Be genuine and consistent: Revenue bodies sometimes face scepticism about the sincerity
of their desire to engage and involve taxpayers and stakeholders. Trust and legitimacy is
enhanced as this scepticism is overcome. The opposite may happen, however, if the revenue
body is perceived to not be sincere or to hold hidden agendas.
Be open and flexible: Engaging and involving taxpayers and stakeholders involves an
element of unpredictability, as their views and perspectives will often challenge revenue body
assumptions and challenge traditional processes. It is therefore important to be sufficiently
open and flexible to pick up and act upon new insights, which will often lead to better
outcomes and solutions.
Avoid overpromising and under-delivering: E&I approaches can sometimes generate
expectations among taxpayers and stakeholders that can be difficult to meet. It is therefore
important to carefully manage expectations by being clear on purpose, trade-offs and
limitations.
Work back from outcomes: Performance metrics and incentive structures relying
excessively on outputs can be a barrier to the take-up of innovative approaches. Working back
from desired outcomes can, on the other hand, stimulate innovation and change. Consider how
your organisation can benefit from focusing on its ultimate outcomes and how this can be
reflected in metrics and incentives.
Box 5.4. Advice for implementation for Engagement and Involvement approaches
(continued)
Celebrate successes and learn from failures: The benefits of a successful E&I initiative
can often be intuitively understood. Celebrate successes to anchor learning generate further
momentum for change. Accept, on the other hand, that innovative approaches sometimes
involve a degree of calculated risk-taking and embrace the occasional failure as a learning
opportunity.
Be patient and persistent: Revenue bodies may identify some quick wins, but as with
other new approaches, it is necessary to “sow before harvesting”. Commitment and investment
is required to develop capabilities and manage change. Building trust and developing
relationships with external stakeholders also takes time and effort. A long-term perspective is
therefore important.
Source: OECD (2013), Together for Better Outcomes: Engaging and Involving SME Taxpayers and
Stakeholders, http://dx.doi.org/10.1787/9789264200838-en.
References
OECD (2016a), Rethinking Tax Services: The Changing Role of Tax Service Providers in SME
Tax Compliance, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264256200-en.
OECD (2016b), Technologies for Better Tax Administration: A practical guide for Revenue
Bodies, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264256439-en.
org/10.1787/9789264223219-en.
OECD (2013), Together for Better Outcomes: Engaging and Involving SME Taxpayers and
Stakeholders, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264200838-en.
OECD (2008), Study into the Role of Tax Intermediaries, OECD Publishing, Paris, http://
dx.doi.org/10.1787/9789264041813-en.
6. Performance of tax administrations – 75
Chapter 6
Performance of tax administrations
This chapter summarises operational performance data for key areas of tax
administration. In so doing it examines each of the major functions of the tax system:
• An integrated registration process for taxpayers;
• Effective and low cost processing (assessment) of tax returns and tax payments;
• Timely and effective support and services to help taxpayers fulfil their obligations;
• Effective and timely verification interventions that confirm the accuracy of
reported information;
• Effective and efficient interventions to collect overdue payments and returns;
and
• Access to timely and cost effective tax disputes processes.
This chapter concludes that overall performance by tax administrations remains
strong. It also notes the significant challenges that lie ahead in utilising new
technologies and business approaches to continue to decrease burdens and enhance
compliance. This chapter also highlights a number of areas where administrations
are invited to consider opportunities to improve performance and reporting.
76 – 6. Performance of tax administrations
Introduction
This chapter provides an overview of reported operational data of the 55 tax administrations
participating in this publication. It examines the major functions of the tax system as set out
in Figure 6.1, and provides performance information and commentary on: the integrated
registration process for taxpayers; effective and low cost processing (assessment) of tax returns
and tax payments; effective and timely support and services to help taxpayers fulfil their
obligations; effective and timely verification interventions that confirm the accuracy of reported
information; effective and efficient interventions to collect overdue payments and returns; and
access to timely and cost effective tax disputes processes.
High level observations on the functions of tax administrations participating in the
survey are:
• Registration: most administrations report improved information on their potential
taxpayer base. More on-line registration processes are available, increasingly
connecting across government.
• Assessment: growth in using e-channels to file or pay is patchy. Relative levels
of on-time paying and filing are low on average. Many jurisdictions still report
managing large paper-driven processes.
• Services: telephone remains the major means of taxpayer inquiry. While a large
number of administrations report high volumes of in-person inquiry. Some
administrations are increasingly handling contacts through the use of contemporary
services to improve and support self-service.
• Verification: electronic audit methods and the use of third party data are changing
the way work is sequenced and performed. New compliance risk models are
allowing a growing number of administrations to assess risk and make any necessary
interventions closer to the transaction or “tax event”.
• Collection: the upward trend in collectable tax debt reported in the 2015 edition has
stalled, with more than half the administrations that provided information reporting
decreases in the level of their collectable tax debt between 2014 and 2015.
• Disputes: many administrations have been active in improving processes and
timeliness. The availability of management information is also improving although
longer time series are required to identify overall trends.
Figure 6.1. Overview of core tax administration functions
TAXPAYER SERVICE AND EDUCATION

• Proactive and reactive service • Self-service
• Taxpayer education • Web based services
REGISTRATION ASSESSMENT VERIFICATION COLLECTION DISPUTES

• Registration • Processing • Audit • Outstanding • Number of
process returns • Data matching returns tax disputes
• Maintenance of • Processing • Tax investigation • Outstanding • Resolution
register payments payments via courts
• Non-file checks
(sometimes
referred to as
delinquent)
SUPPORTED BY:
• Compliance risk management • Data management
• Data analytics • Technology
Registration
A comprehensive system of registration and taxpayer identification is critical for the
effective operation of the tax system. It is the basis for supporting self-assessment, value-
added and withholding regimes, as well as third party reporting and matching. While
the majority of administrations are responsible for the system of registration within their
jurisdictions, they report that registration processes are increasingly being initiated outside
of the tax administration through other government services. The active management of
“tax registers” remains a priority area for tax administrations, with two-thirds reporting
formal programmes in place to improve the quality of the tax register in the current year.
This section briefly comments on four issues of significance in tax registration: levels
of registration, joined-up processes across government, identity management, and identity
across borders.
Levels of registration
The fundamental importance of an effective tax registration system cannot be under-
estimated. Tax administrations need strong processes to both manage those taxpayers that are
“part of the system” and to help them identify those yet to join. Further, they need to be able to
monitor and determine actions and interventions in support of both individuals and corporate
bodies to establish any liability to tax, even in systems where filing is not mandatory.
Figure 6.2 provides information on the rate of registered personal taxpayers as a
percentage of the total citizen population. The rate would seem highest among those
jurisdictions that report using the tax system for purposes other than just tax collection, this
includes the management of social programmes.
Figure 6.2. Registration of active personal income taxpayers as percentage of

citizen population, 2015
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12 http://dx.doi.org/10.1787/888933546184
Notes: Percentage for Bulgaria relates to the year 2014.
Source: Table A.5 Registration of personal income taxpayers.
Joined-up processes across government

Tax administrations still handle most of the registration for businesses (including value
added tax – VAT) and for individuals. With governments looking to improve delivery of
services to citizens, often by joining up processes, many administrations report moves to
make tax registration part of other actions taxpayers undertake, such as registering for tax
at the same time as registering a company or registering the birth of a child; and/or moves
to use the tax number to allow taxpayers to access government services.
In making registration processes easier to access or in providing for the use of the tax
identity number to access other services, it is important to not lose sight of the pivotal
role that registration and tax identity numbers play in underpinning the tax system.
Administrations would do well to ensure they assess the impacts any such changes may
have on filing, payment, collection and reporting behaviour as well as the extent to which
they improve access and lower administrative burdens.
In looking at how taxpayers can register, 46 of 51 administrations reported they
provide more than one channel for taxpayers to use. Interestingly 70% now report that it
is possible for individuals to register on-line, or through a mobile app. The majority for
administrations report that other agencies – mainly other government agencies – may also
be responsible for registration activities. Ninety percent of survey respondents indicated it
is possible for taxpayers to register for multiple tax types at the same time (see Tables A.75
and A.78).
Box 6.1. Registration and identification
In Japan, in order to improve the fairness of the social security and tax system and to make
interacting with government easier, all individuals and corporations now have a unique identifier
from October 2015, known as “my number”. My Number, issued to individuals by municipal
offices and to corporations by the National Tax Agency (NTA), is required on declaration forms
and statutory statements. The NTA expects that aggregation and matching of declarations and
statements will also improve the accuracy and efficiency of the social security and tax system.
In Mexico the Tax Administration Service (SAT) has strengthened registration processes
for taxpayers added to the Federal Taxpayers Registry (RFC). Citizens can now enrol on-line
using a unique national registration code that contains identification data certified by the
National Population Registry. This number is also used to access other public services such as
social security. After completing the on-line registration process, the taxpayer completes the
process at a SAT office using identity documents and biometric information. Recent changes
have allowed employers to ascertain whether new employees have been registered. Where the
employee has not registered this can now be done for them by their employer (provided that the
employers has registered) without the need for to visit a SAT office.
In Italy, the revenue agency is working on a whole-of-government digital agenda that
includes developing a single ID sign-in for all government, municipal and public service portals.
In Denmark, all businesses and individuals over 15 receive digital post from all public
authorities in one mailbox, provided by government on a secure public platform. All private
information from tax to health data must be sent through this channel. Individuals and
business are obliged to open their secure mailbox and are prompted to do so through e-mail
and/or text messages (optional) notifying them of new mail. A new version of the mailbox to
be implemented in 2020 is now being planned. It will include the ability for each authority to
include the mailbox interface in their digital services.
Box 6.1. Registration and identification (continued)
In New Zealand Inland Revenue worked with the agency responsible for birth registrations
to develop an improved service where parents can apply and receive a tax number for their new-
born child in a single process while completing the registration of the birth. This streamlined
approach is in contrast to the previous process which involved the purchase of a birth certificate
and the completion of multiple forms. This initiative has seen an increase of parents applying
for their child’s tax number before their fifth birthday from approximately 50% in 2012, to 94%
in the current year, improving the timeliness of receipt of family tax credits.
Source: Japan – National Tax Agency; Mexico – Tax Administration Service; Denmark – Danish Tax
Administration; Italy – Revenue Agency; New Zealand – Inland Revenue (2017).
Identity management
All tax administrations, whether required to by law or as a matter of sound business
practice, put considerable effort into ensuring the security of taxpayer information. In
addition to internal processes to prevent unlawful attempts to obtain information and to
ensure taxpayers’ rights are protected, all administrations have processes to ensure the
person they are dealing with is in fact the taxpayer. Increasingly these approaches, which
in many instances have now extended to multi-step authentication, are making use of
biometric information, unique to the taxpayer.
Box 6.2. Security and authentication
In Denmark and Singapore, individuals and business are provided national digital IDs
allowing them to access a range of public and private digital services, including tax and
banking. This serves to mitigate identity theft problems and simplify access to services. In
Singapore, in addition to the digital ID and password (Singpass), second factor authentication
is required for access to all sensitive government services, such as tax filing. Citizens can
choose second factor authentication by using a physical token or via their mobile. The platform
is being extended to companies and intermediaries this year, significantly strengthening the
security of government e-transactions.
In India, the Central Board of Direct Taxes is leveraging federated identity authentication
services to establish the identity of the taxpayer. These services are provided by government
agencies or trusted private entities such as banks or depositories that are centrally regulated. In
the first year itself around 17% of taxpayers filed their returns using such authentication with
8% of taxpayers filing using digital signatures.
In New Zealand, Inland Revenue’s voice biometrics introduced in 2011 provides secure
verification enabling increased self-service and reduced manual support. Voice biometrics
matches a stored voiceprint against the caller’s voice. Registration for this service involves a
manual authentication process and then a recording to secure the voice print. While providing
a more secure system, by moving customers to self-service functions including IVR options it
has resulted in savings of between 50 to 150 seconds per call, an increase in phone self-service
levels and stronger support for new self-service offerings.
Source: Denmark – Danish Tax Administration; Singapore – Inland Revenue Authority of Singapore;
India – Central Board of Direct Taxes; New Zealand – Inland Revenue (2017).
Tax administrations face similar challenges to other organisations in dealing with

individuals or organisations that may misuse personal information to impersonate taxpayers
in order to commit fraud. The on-going and, in many cases, organised nature of this activity
is requiring administrations to devote considerable effort to dealing with tax-related identity
theft. Details stolen in this way can be used to fraudulently obtain tax or VAT refunds or to
access tax credits.
Box 6.3. Identity protection
In the United States, the Internal Revenue Service (IRS) Identity Protection Personal
Identification Number (IP PIN) is a six-digit number assigned to eligible taxpayers to prevent
misuse of their Social Security number (SSN) on fraudulent federal income tax returns.
Obtaining an IP PIN requires identification verification and immediate access to the taxpayer’s
email account and mobile phone. The IRS will then provide new IP PINs each year by post.
An IP PIN helps the IRS verify a taxpayer’s identity and accept the taxpayer’s electronic
or paper tax return. Having an IP PIN prevents filing of a tax return by anyone other than the
taxpayer. Any return e-filed with an incorrect or missing IP PIN will be rejected by the IRS
system until submitted with the correct IP PIN or a paper version is filed. If a paper return is filed
with an incorrect or missing IP PIN, the IRS delays processing any refund. If the IRS assigns an
IP PIN, it must be used to confirm the individual’s identity on the current federal tax return and
any delinquent tax returns filed during the current calendar year. An IP PIN is only useful on
specific IRS forms.
Source: United States – Internal Revenue Service (2017).
Identity across borders

Once the domain of multi-national businesses or those involved in international trade,
increasingly small and medium enterprises (SMEs) and individual taxpayers are now
earning income sourced outside their country of residence. Tax administrations are facing
a raft of issues in supporting and responding to this growth in cross border activity, not
the least of which being how they manage taxpayer identity and information flows across
borders. Two international measures aimed at helping administrations better address the
issues of managing identity and information flows across borders are:
• Within the European Union (EU) the European Commission has moved to enhance
trust in electronic transactions in the EU’s internal market by providing a common
foundation for secure electronic interaction between citizens, businesses and public
authorities. The Electronic Identification and Authentication Services (eIDAS)
approach, which was introduced in 2014, is aimed at increasing the confidence
taxpayers and tax administrations can have in dealing with information flows and
being able to manage identity and registration issues across borders. EU Member
States mutually recognise each other’s electronic identification (eID) systems when
accessing online services. This cross-border recognition makes eID from any EU
Member State interoperable between all other Member States. This makes business
transactions easier, faster and cheaper.
• The new global standard on Automatic Exchange of Information (AEOI) – the
Common Reporting Standard (CRS) – together with the US Financial Account Tax
Compliance Act (FATCA) provides for the exchange of non-resident financial account
information with the tax authorities in the account holders’ country of residence.
Participating jurisdictions that implement the CRS and FATCA send and receive
pre-agreed information each year, without having to send a specific request. It is
expected that the CRS and FATCA will enable the discovery of formerly undetected
tax evasion. It will enable governments to recover tax revenue lost to non-compliant
taxpayers, and will further strengthen international efforts to increase transparency
and co‑operation. A large number of jurisdictions have announced their plans to
implement the new CRS. Around 50 jurisdictions will work towards having their
first information exchanges by September 2017 with many more to follow in 2018.
Box 6.4. Cross border identity management
In Spain, the State Tax Administration uses a common platform for electronic identification,
authentication and signature. The Cl@ve system allows electronic administration applications
to define the desired level of quality assurance of authentication, based on the data they process
and the security classification of the system. The system uses private codes (username-and-
password systems) and electronic certificates (including the Electronic ID), supported by
one-time-use PIN code sent via SMS. In order to use this identification system, the individual
must register providing the necessary personal details. The PIN identification system allows
individuals to submit personal income tax returns or examine pre-populated returns, or
to enquire on the status of a refund claim. Going forward the system will incorporate the
identification approaches of other EU Member States as they are integrated into the cross-border
system of examination of electronic identities provided for in the European legislation.
In Portugal the Autoridade Tributária e Aduaneira (AT) has introduced a new digital service
for obtaining Investment Tax Codes as part of its simplification initiatives. This regime, initiated
at the end of 2009, created a tax regime for non-regular residents in order to support qualified
professionals in high value-added activities working in Portugal. The regime also covered
beneficiaries of overseas-based pensions. From August 2016, applications for registration are
electronic and made exclusively through the AT website. The new process has significantly
reduced the elapsed time for handling registrations, increasing taxpayer satisfaction and reducing
administration costs.
Source: Spain – State Tax Administration Agency; Portugal – Autoridade Tribuária e Aduaneira (2017).
Assessment
The tax assessment function includes all activities related to processing tax returns,
including issuing assessments, refunds, notices and statements. It also includes processing
and banking of payments. These “processing” activities, as they are referred to in many
administrations, continue to be an area of significant change and focus as administrations
look to take cost out of high volume processes.
Pursuing higher levels of electronic filing and payment by taxpayers is enabling
administrations to reduce their costs and to improve the services they provide to
taxpayers. This function is also heavily involved in managing an expanding range of data
that administrations are collecting electronically from a growing number of third party
organisations. As well as updating information on the use of e-channels for filing and
paying, this section will:
• outline administrations’ efforts to provide pre-filled returns for individual taxpayers,
including the expansion of this approach by some into “no-return regimes”
• discuss the level of on-time return filing and payment by administrations

• comment on the changing capability as tax administrations move from operating
data capture activities to becoming data managers, in an effort to make more
effective use of their data assets.
Use of e-channels for filing and paying

Table 6.1 provides summary information from jurisdictions that provided details of
channels used by taxpayers to file and pay. This shows that while four-out-of-five business
taxpayers (corporate and VAT) filed their returns electronically, this figure drops to just
two-out-of-three for personal income tax return filers (on-line and deemed submission).
Table 6.1. Return filing rates by channel (in percent)
Corporate income tax (CIT) Personal income tax (PIT) Value added tax (VAT)
– 35 jurisdictions – 35 jurisdictions – 33 jurisdictions
Year Paper On-line Paper On-line Deemed Paper On-line
2014 22 77 33 55 9 15 85
2015 19 80 30 57 9 13 87
Source: Table A.8 Return filing channels.
When looking at the payment of tax in Table 6.2, although the number of
administrations reporting information is small, almost 12% of taxpayers still pay in-person
at the tax administration office rather than using on-line or agency services of the
administration.
Table 6.2. Payment rates by channel (for CIT, PIT and VAT)
2014 2015
Channel type No. of jurisdictions % No. of jurisdictions %
On-line 15 39.8 15 41.9
Via agency 15 44.5 15 43.1
In Person 15 11.8 15 12.0
Source: Table A.10 Payment channels.
Given the volume of returns filed using paper as well as in-person payments, most
administrations report taking steps to actively encourage more taxpayers to use electronic
platforms. This will not only lower administration costs but also reduce taxpayer burden.
Pre-filled returns
One of the significant innovations in tax return process design over the last two
decades has been the development of pre-filled tax returns, primarily for personal
income taxpayers. The pre-filled approach involves administrations “pre-populating” the
taxpayer’s return or on-line account with information it has collected from third parties.
The pre-filled return can be reviewed by the taxpayer and either filed “on-line” or in paper
form. As the extent of pre-population is generally determined by the range of electronic
data sources available to the administration, it is critical to this approach that the legislative
framework provides extensive and timely third party reporting covering all relevant
taxpayer information. Advocates of pre-filling initially encouraged its use with individual
tax regimes that allowed relatively few deductions and credits, and these only where they
could be verified with third party data sources. Advances in rules based technologies and
analytics now mean that the approach can now be considered more widely.
The pre-filled regime adopted by 11 jurisdictions (Belgium, Denmark, Finland,
Hungary, Iceland, Lithuania, Malaysia, Malta, Norway, Singapore and Slovenia) further
extends this approach to “deem acceptance” of the prepared return after the expiry of a
notice period (see Table A.96). In their most advanced form, complete pre-filled returns
are being generated for large proportions of the individual tax base. Many administrations
report strategies to extend the range of data sources used to improve coverage of the regime
and the quality of the pre-filled return. Of those jurisdictions that issue pre-filled returns,
Estonia, Finland, Iceland, Lithuania, Norway, Peru, Portugal, South Africa and Sweden,
all report coverage rates that approximate 100% for personal income taxpayers they expect
to file a return (see Table A.6).
Figure 6.3 displays information provided by the thirty seven jurisdictions that in 2015
reported using pre-filled returns.
Figure 6.3. Categories of third party information used in pre-filled returns, 2015
40
35
30
25
20
15
10
0
Yes No Salary and wages Pension Interest Dividends Capital gains/losses
Use of pre-filling Categories of third party information used
12 http://dx.doi.org/10.1787/888933546203
Source: Table A.93 Return pre-filling categories.
With more data becoming available through the Common Reporting Standard it will
be interesting to see how administrations look to use that information. Box 6.5 briefly
describes how the IRS will use FATCA data.
Box 6.5. Foreign Account Tax Compliance Act (FATCA) Data
Overall, compliance is higher where there is third-party information reporting and/or

withholding. For example, the IRS has found a 93% compliance rate in reporting income subject
to substantial information reporting but only a 37% compliance rate in reporting income subject
to little or no withholding.
Box 6.5. Foreign Account Tax Compliance Act (FATCA) Data (continued)
FATCA is an important development in combatting tax evasion by US persons holding

foreign accounts and offshore assets. FATCA generally requires that foreign financial institutions
(FFIs) and certain other non-financial foreign entities report foreign assets held by their US
account holders or be subject to withholding on withholding on certain US sourced payments
made to them. Under FATCA, to avoid being withheld upon, FFIs may register with the IRS
and agree to report certain information about their US accounts. Additionally, US citizens or
individual residents, certain domestic entities, and a very limited number of non-residents who
own certain foreign financial accounts or other offshore assets must report those assets on their
income tax returns. The enactment of FATCA, and the commensurate increase in awareness
about reporting obligations has also had a significant impact on the number of taxpayers filing
Foreign Bank Account Reporting (FBAR) disclosures. For example, in 2007, approximately
322 000 FBAR disclosures were filed. By 2015, following the first year of FATCA reporting by
foreign financial institutions, FinCEN (the United States’ Financial Intelligence Unit) received a
record high 1 163 229 FBAR disclosures.
This third party reporting is expected to result in new approaches for identification and
assessment of compliance risks. The third party reporting also supports existing IRS tax
compliance programmes, which will provide for greater tax compliance and further hinder
opportunities for offshore evasion.
Source: United States – Internal Revenue Service (2017).
On-time return filing

Even allowing for changes occurring because of pre-filled or no-return regimes, the
filing of a tax return is still the principal means by which a tax liability is established and
becomes payable. As a result, the on-time filing rate is seen as an effective measure of the
health of the tax system as well as the performance of the tax administration itself.
Table 6.3. Average on-time filing rates by tax type
2014 2015
Tax type No. of jurisdictions % No. of jurisdictions %
PIT 39 86.4 36 85.6
CIT 40 81.5 35 78.7
Employer Withholding (WHT) 24 88.3 27 83.1
VAT – monthly filers 34 88.3 33 86.6
Source: Tables A.6 On-time return filing performance (PIT, CIT, Employer WHT) and pre-filling and A.7
On-time return filing performance (VAT).
Table 6.3 summarises on-time return filing for those administrations able to supply
information by tax type. Apart from corporate income tax where rates are surprisingly
lower than the averages of other tax types, the data is remarkably consistent. A broader
examination reveals two issues of note:
• Firstly, while there are clusters of similar performance for those administrations
that operate similar systems (for example the use of extensive pre-filled regimes or
those from similar geographic areas), there are notable outliers. Brazil, for example,
has on-time filing rates in excess of 95% across all four return types and as such
stands out amongst not only tax administrations in the Americas but also across
most survey participants. Conversely there are a small number of administrations
whose performance in one or more return types is significantly below the averages
in the table.
• Secondly, overall on-time filing rates that average between 78% and 90% may be
lower than desirable and an area of concern given that most respondents operate tax
systems that rely on voluntary compliance by taxpayers.
Figure 6.4. PIT and CIT on-time filing rates, 2015
PIT CIT
100
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12 http://dx.doi.org/10.1787/888933546222
Note: PIT percentages for Bulgaria, Malaysia, Sweden and the United Kingdom, and CIT percentages for
Denmark, Iceland, Korea, Malaysia, Sweden and the United Kingdom relate to the year 2014.
Source: Table A.6 On-time return filing performance (PIT, CIT, Employer WHT) and pre-filling.
Figure 6.5. VAT on-time filing rates – VAT monthly filers vs. VAT annual filers, 2015
Monthly filers Annual filers

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12 http://dx.doi.org/10.1787/888933546241
Note: Percentages for VAT monthly filers for China, Indonesia and Morocco relate to the year 2014.
Source: Table A.7 On-time return filing performance (VAT).
On-time payment
Payment of tax constitutes one of the most common interactions between taxpayers and
tax administrations, especially for businesses that are typically required to regularly remit
a variety of payments covering both their own tax liabilities and those of their employees.
Administrations continue to make progress in increasing the range of e-payment options
available to taxpayers and to increase their use. This progress not only lowers the cost to
the administration, it can increase on-time payments and reduce the number of payment
arrears cases by providing improved access and a better payment experience.
For this edition of the Tax Administration Series (TAS), tax administrations were asked
to provide details of on-time filing for the four major return types: PIT, CIT, Employer
WHT and VAT. Less than half the administrations covered by our survey could provide
this information and where they could a number advised there may well be issues with their
estimates of those “required” to pay and file. The analysis and robustness of the conclusions
drawn therefore need to be considered with care. That said, Table 6.4 shows:
• businesses are more likely to pay on-time than file on-time; while individuals are
as likely to file on-time as they are to pay on time
• the on-time payment performance is more consistent with fewer outliers that the
on-time filing
• while on-time filing and payments rates are similar (and low) for PIT taxpayers,
the payment rates for CIT, Employer WHT and VAT are on average 8% higher than
filing rates
• while average on-time payments rates in 2015 for “business” taxpayers (CIT, Employer
WHT and VAT) of between 91% and 95% appear high, lifting these rates will continue
to be an area of focus for administrations given the amounts of revenue involved.
Table 6.4. Average on-time payment rates by tax type
2014 2015
Tax type No. of jurisdictions % No. of jurisdictions %
PIT 20 84.3 22 84.1
CIT 22 92.2 25 91.9
Employer WHT 17 94.0 19 95.1
VAT 23 90.7 23 92.4
Source: Table A.9 On-time payment performance.
Whereas on-time filing rates provide a good measure of the health of the tax system
and the operation of the tax administration, the use of on-time payment rates for this
purpose are not as straight forward. In addition to the desire to pay, taxpayers need to have
the financial means to do so.
It is a concern that many administrations were unable to report volume data for on-time
filing and/or payment. While this information has not been previously requested in the
TAS survey, it is important for administrations to know how many taxpayers are meeting
their payment and filing obligations of their own accord. Given most have designed tax
processes around voluntary compliance principles and that the cost of dealing with default
increases markedly once voluntary actions by the taxpayer have passed, administrations
are encouraged to improve the quality of information in this area.
Figure 6.6. Range in on-time payment performance by tax type, 2015
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12 http://dx.doi.org/10.1787/888933546260
Note: On-time payments are expressed as a percentage of estimated payments expected by due date and can
therefore be above 100%. The figure shows for each jurisdiction the range in on-time payment performances
across the four tax types: PIT, CIT, Employer WHT and VAT.
Source: Table A.9 On-time payment performance.
Data management
Tax administrations have always been data rich organisations. Past editions of the
series have commented extensively on their efforts to receive more data digitally. In many
administrations work is now underway to convert non-digital data received from taxpayers,
third parties, other agencies or from its own staff, into digital forms that are more accessible
and tractable. This coincides with the advent of more affordable storage, including cloud
options, greater access to an increasing amount of external data, and sophisticated advanced
analytics techniques. Against this background, many tax administrations report they are
re-thinking the management and governance of data in order to extract greater business
value from their data assets.
In so-doing some report developing new data models to support traditional, largely
structured data, as well as new unstructured data sets. They also report redesigning systems
and approaches to ensure that more data sources are available for managing customer
interactions and compliance risk processes. In this regard, just under half of administrations
in this series report using automated risk profiling as part of the return and payment
processing operations (see Table A.113). Where these automated activities are in operation
administrations report they are increasingly occurring in real-time or near real-time. This
allows them to support analytical processes that are prioritising work, supporting the delivery
of contemporary services and improving business reporting. It is also ensuring processes
allow the effective utilisation of data received from other tax administrations and that they
pass on quality data to treaty partners.
These changes have led many to comment that in this regard the tax administration’s
“business” is becoming more analogous to contemporary data management, bringing with
it demands for new capabilities, skills, and governance arrangements.
Box 6.6. Data management and storage
In Russia, the Federal Tax Service (FTS) in 2015 operationalised its federal data processing
system. The approach is based on a private cloud using network access to a shared virtualised
resource. Data processing centres provide a reliable high-performance platform allowing FTS to
consolidate and centralise all available data. Operating a single warehouse for all available tax
data allows for improved data quality and provision of more effective information services to
taxpayers. It has also allowed FTS to streamline cross-agency data exchange in the framework
of whole-of-government approach to public services.
Source: Russia – Federal Tax Service (2017).
Taxpayer service
The timely and efficient provision of service is a critical part of tax systems based on
voluntary compliance. The taxpayer service function proactively and reactively provides
information and services to taxpayers. This includes responding to enquiries on the
application of tax laws and providing public and in many cases private rulings as well as
statutory determinations on the administration’s view of the law.
Over the last two decades many tax administrations have found it advantageous in
considering service provision to adopt a more holistic view of the tax system and of the
taxpayer’s interaction. This customer centric approach is helping many improve taxpayer
access to the information and support they require to meet their obligations and/or claim
their entitlements. Administrations working “with” the taxpayer to develop systems and
processes report increased levels of participation, taxpayer trust and confidence in the tax
system as a whole.
In considering their approach to service and investment choices, administrations find
themselves operating on three broad fronts. Firstly, they must operate existing channels
efficiently and in the process encourage more taxpayers to use lower cost channels (without
a reduction in the quality of service). Secondly, they must develop new contemporary
services that taxpayers are increasingly expecting to use in managing their tax affairs.
While thirdly, they must expand their service approach to support delivery of wider
government objectives and plans, many of which involve proactive approaches or more
“joined-up delivery”.
Against this backdrop it is not surprising there is a high degree of commonality in
the topics included by the 50 administrations that reported having a taxpayer service and
assistance strategy (see Table A.114). The highest priority areas, which are discussed in
this section, are:
• better managing service demand
• supporting taxpayers by providing more self-service options that also reduce the
tax compliance burden
• providing an improved tax rulings service (crucial to improve tax certainty)
• increasing taxpayer satisfaction
• compliance by design.
Managing service demand

In 2012, the Forum on Tax Administration (FTA) published Working smarter in revenue
administration (OECD, 2012) which highlighted the demand management processes
administrations had in place. It set out many of the steps they were taking to understand the
root causes of service demand and how they were using this to either reduce demand or to
shift it to more cost-efficient channels. The study drew attention to the need to strengthen
the governance arrangements for managing service demand and encouraged administrations
to improve reporting and measurement so as to better understand the root causes of demand.
Table 6.5. Service demand by channel
Channel type No. of jurisdictions 2014 2015 Change

Telephone 38 294.9 m 290.4 m -1.5%
In-person 27 129.3 m 126.7 m -2.0%
Paper 20 24.3 m 24.0 m -1.2%
Email 25 12.2 m 14.9 m +22.1%
Note: The table only includes jurisdictions for which data was available for 2014 and 2015.
Sources: Tables A.116 to A.119 Service demand channels and performance.
While some progress has been made in the area of governance, much is still to be
done to improve measurement and reporting of demand. As reported in the 2015 edition of
the TAS, the vast majority of administrations are still unable to provide data for taxpayer
contacts across telephone, paper, email, and in-person contact channels. Not only does this
affect the ability to undertake any meaningful analysis of channel use, it raises questions
about whether many administrations have all the data and information they require to
effectively manage their service demands.
That said some observations of service performance can be made from the data
included in Tables A.116 to A.119:
• Information provided by 38 administrations attributes 13.9% of their total tax staff
numbers to handling registration and provision of taxpayer service.1
• Taxpayer contact volumes are large and still resource intensive despite the significant
investment made in telephone technology and on-line portals. The phone channel
remains the channel most taxpayers use to contact the tax administration in most
jurisdictions (see Figure 6.7).
• Less than half of survey participants provided average resolution time for telephone
(6 minutes in 2015 2) and only about a fifth had similar information for in-person
visits (11 minutes in 2015).
• Use of email by administrations and importantly taxpayers is increasing, with six
administrations (Brazil, Costa Rica, Hungary, New Zealand, Singapore, and the
Slovak Republic) reporting receiving more email contacts than paper.
• Despite initiatives in a number of administrations to scale back their office network,
the volume of in person inquiries remains high.
• An interesting “clustering” pattern emerges when looking at the dominant service
channels through a geographic lens, as illustrated in Figure 6.7.
Figure 6.7. Dominant contact channel, 2015
Phone dominant In-person dominant
Phone dominant In-person dominant
Asia-Pacific (AUS, HKG, NZL,

Northern Europe (DNK, EST, FIN, LVA,
SGP)
NOR, SWE)
Latin America (BRA, CHL,
COL, MEX, PER)
Latin Europe (ESP,
FRA, ITA, PRT)
Latin
Central and Eastern Europe (AUT, MLT, North America America Eastern Europe Asia-Pacific
NLD, RUS) (USA, CAN) (CRI) (HUN) (MYS) Africa (ZAR)
Source: OECD Secretariat analysis based on Tables A.116 to A.119.
While most administrations report extensive use of their portal and web services,
further work is required to improve the survey instrument to better define key terms and
identify useful performance data. Tracking web pages viewed, or screens accessed does not
in itself present information that is of use in comparing service performance.
Box 6.7. Managing demand
Strategic approach to channel shift – In 2015, Ireland began implementation of its new
customer strategy. A major part of this strategy sought to move customers, particularly its
900 000 business and 2.3 million personal taxpayers, from traditional contact channels to more
efficient on-line services. Irish Revenue launched a new single point of access to all online
services for personal taxpayers, rolling out new services for: tax clearance, secure payments,
and registration for job and pensions. It also introduced an appointment service in a number
of offices, and enhanced its phones service. Following an intensive promotion, Irish Revenue
reported a 12% shift of taxpayers to online transactions for the six months to June 2016
compared to the same period in 2015; and a significant lift in call handling performance. 91%
of all personal taxpayer calls (that comprise 70% of all calls) were answered within 3 minutes,
while 88% of taxpayers calling to make an appointment were able to have their problems
resolved without the need for an in person visit.
Reducing Face-to-face contacts – In France, the Directorate Générale des Finances
Publiques (DGFiP) began a pilot Contact Centre in August 2014 to deal with personal income
tax queries. The Centre reduced the need for local contacts or in-person visits by the taxpayer.
In March 2015, a second centre expanded the capacity. Results have been impressive with the
centres processing 436 000 calls and 55 000 e-mails in 2015 with answer rates of 77% and 92%,
respectively. The DGFiP consider the centres were responsible for reductions of between 40%%
and 60% in the number of calls and e-mails fielded by local tax departments and have helped to
significantly reduce in-person visits in the locations covered by the pilot. The DGFiP has since
commissioned further centres and increased resourcing to the two existing centres. The goal is
to provide coverage for 22% of France’s tax households in 2017.
Box 6.7. Managing demand (continued)
Mandating use of e-channel – In Spain, it is now mandatory for all companies to deal with
the tax administration through electronic channels. Because of changes made with effect from
2 October 2016, only natural persons can now deal with the agency in-person. The law changes
also means all notifications by the tax administration itself, must be by electronic means.
Using contact analysis – Since 2009, the United States has been gathering information on
in-bound calls using Contact Analysis, a speech-analytics software tool. The IRS uses this tool
to analyse recorded taxpayer calls to identify areas for improvement and ways to reduce the
costs of providing taxpayer service. The tool is able to search recordings for specific words or
phrases. The IRS recently used the tool to help it analyse taxpayer inquiries regarding FATCA.
By identifying common topics and updating the public website it was able to proactively supply
information to taxpayers, reducing taxpayer burden and the number of in-bound calls it would
otherwise have had to deal with.
Skills based routing – In 2011 Inland Revenue in New Zealand implemented a natural
language speech recognition system that enabled increased self-service and reduced manual
support. The deployment enabled customers to state the reason for their call and upon recognition
be routed to the most appropriately skilled agent. This skills based approach meant the overall
rate of transferred calls reduced from over 30% to approximately 8% of calls.
Sources: Ireland – Office of the Irish Revenue Commissioners; France – La direction générale des Finances
publiques; Spain – State Tax Administration Agency; United States – Internal Revenue Service; New
Zealand – Inland Revenue. (2017).
Supporting self-service
In 2014 the OECD published Increasing taxpayers’ use of self-service channels (OECD,
2014a). This report highlighted the pressures of declining budgets and rising taxpayer
expectations faced by many administrations and proposed a framework for the evolution
of tax digital self-service that promoted:
• monitoring and analysis to understand demand
• using user-design to create new digital services
• working with third party providers, embedding self-service elements, or using
mandating or incentives to promote take-up
• directing taxpayers to preferred channels through communication and education
• developing metrics to allow self-service impacts to be assessed.
The report served as a pre-curser to the 2016 report Technologies for Better Tax
Administration (OECD, 2016a), which explored how technology could help administrations
better address tax compliance and service delivery, primarily through the use of big data,
smart portal solutions and natural systems. The report stressed that alongside investment
in technology, administrations needed to improve their understanding of customers and
the wider “eco-system” in which they operate, and with how the tax system interacts with
that. The report encouraged administrations to be more responsive and agile in delivering
contemporary services and to look for opportunities to either embed tax requirements
into third party systems or to use data and analytics to “move compliance upstream.”
This phrase reflects the desire for compliance with tax obligations to occur as close to
the transaction or tax event as possible, or to allow compliance where it naturally occurs
for the taxpayer. The digital maturity model released in the report has since been used by
26 administrations to assess their operations. The results of this exercise will be released
in autumn 2017.
In its 2016 report Advanced Analytics for Better Tax Administration (OECD, 2016b) the
FTA outlined how tax administrations were extracting greater value from a wide variety of
data sources. This is allowing them to better understand taxpayers and their requirements
and to identify and tailor responses, including proactive services or system design changes,
to more effectively prevent and treat compliance risks.
Box 6.8. Supporting self-service
Provision of digital services – In Canada, the Canada Revenue Agency (CRA) has, since
the launch of its first secure online portal for individuals in 2003, leveraged technological
developments to expand its digital self-services. From those first limited generic services, the
CRA today offers more than 40 digital services that allow a taxpayer to obtain personal tax
information, such as their tax refund or balance owing, and to undertake important transactions
such as paying taxed owed. Deposits can also be made individual accounts, enhancing the
responsiveness of the tax system and convenience to the taxpayer. In 2006, it introduced a portal
that allowed authorised representatives to perform tasks on behalf of an individual, and a range
of applications that expanded digital services access to businesses. Transaction volumes and use
have expanded rapidly – from 1.8 million successful logins in 2005 to more than 13.5 million
across all three services in 2015. In February 2015, the CRA launched its online mail service to
individuals. This allows the 4.5 million Canadians who to date have signed up for the service to
receive an email notification when correspondence is available for viewing through their secure
portal rather than by paper. The CRA has now commenced developing strategic partnerships
with other government departments to leverage infrastructure and best practices to improve
digital services for Canadians.
Taxpayer personal accounts – In Russia, the online personal account of individual
taxpayer’s displays information about all personal income sources as well as all movable
property and real estate in ownership of the account holder. It also allows taxpayers to make
online payments of property taxes, file income tax returns and claim tax refunds. Taxpayers
have access to an online tool for providing feedback of their disagreement about their property
positions directly to a local tax office where the property is located and local taxes are
paid. A local tax office makes an assessment of validity of such claims. As a result, the tax
administration is receiving fewer complaints about the quality of data and taxpayers are more
confident in using online payment tools. There are currently over 25 million users of the online
personal account by individual taxpayers and the number is steadily rising.
Source: Canada – Canada Revenue Agency; Russia – Federal Tax Service (2017).
After initially being slow to exploit the opportunities presented by the growth of digital
devices and data, tax administrations have been working hard to increase their web-based
and true digital services they provide. As a result most administrations now report offering
an expanding range of web based services, including the ability to register, file and pay
on-line, and tools that include calculators and email. While most offer a digital mailbox,
currently only two-thirds of administrations provide an integrated taxpayer account (see
Table A.122). Some report exploring with third party providers how they can support
embedded software or other arrangements that allow taxpayers a greater array of in-system
support or other self-service options. In other approaches – the Australian Tax Office
(ATO) and the Inland Revenue Authority of Singapore both report using virtual or digital
assistants to help respond to taxpayer enquires. The ATO assistant “Alex” understands
common conversational language and can clarify and respond to questions.
Since the launch of the first mobile apps by a small number of tax administrations
in 2011, tax apps have become an increasingly common part of the service offerings of
many tax administrations. In most cases early apps simply made services designed for
web-environments available via mobile devices. Administrations are now reporting the
development of services specifically to operate on mobile devices. These are allowing
taxpayers to file, pay and enquire “on-the-go”. These approaches that are both easy to
use and integrated with other systems taxpayers use in their everyday lives is making tax
compliance easier, as well as lowering costs for tax administrations and improving their
business efficiency.
Box 6.9. Mobile app and tax
In Australia, the ATO has continued to enhance the functionality of its mobile app, which it
launched in July 2013 to support individuals, small business and self-managed superannuation
fund clients. The app offers a variety of tools and features, including key dates, enabling
clients to add reminders to their calendar, report concerns (including whistle-blowing) and a
tax withholding calculator. Individuals and sole traders can use the same voiceprint they use to
access phone based services to access secure ATO online services on their mobile device. In
2015, the myDeductions tool was added to the app, allowing users to record tax deductions on
the go. Using the camera on their device people can capture receipts and use location services
to record work-related car trips for vehicle deductions, eliminating the need for paper records.
From July 2016, taxpayers will be able to upload these deductions to their tax return. Features
and updates are built using iterative design and are delivered in smaller releases. Features are
continually tested with users and feedback incorporated into each release.
In Chile, there are more than 27 million mobile devices (58.5 for every 100 inhabitants)
connected to the internet. The Servicio de Impuestos Internos (SII) launched its first App
for smart mobile devices in 2016. This app, which in its first day was among the five most
downloaded in Chile, allows verification of the TIN of taxpayers and access mobile web-
services. In the first quarter of 2017 the SII launched a new app, enabling the filing of income
tax returns. This app had even better results in terms of download than the former. In 2016 the
SII mobile web service received approximately 2.7 million visitors, which included requests and
the issuance of electronic documents, filing of VAT and income tax returns, amongst others.
In Korea, the tax administration is providing mobile services using Android and iOS
operating systems. Mobile apps allow taxpayers to deal with many aspects of their tax affairs
such as receiving information on filing and payment schedules as well as useful tax information.
For small-sized entrepreneurs, smart phones allow the filing of pre-filled tax returns online.
Entrepreneurs can also view the details of digital tax invoices issued and information about
business partners. Individuals use mobile apps for deduction of expenses for tax settlement at
the end of the year.
In Denmark the impetus for the development of digital services came from customer
research that pointed to significant opportunities to improve how small business access and use
information. To undertake this development the Danish Tax Administration (SKAT) reinforced
its user experience and service design capability and applied agile methodology to overhaul
website content and develop functions users wanted. This included a calculator for transport
deductions and a simple web-app interface for filing and paying VAT. While it is still too early
to assess the results, the experience so far has been positive.
Box 6.9. Mobile app and tax (continued)
In Peru, the Peruvian administration (SUNAT) launched its first mobile app in February
2015. The device, available for both iOS and Android, provided 24/7 tablet and cell phone access
to a range of services to facilitate tax compliance. These included those services mostly used
by taxpayers, namely: invoice issuing, database queries, access to a virtual tax guide, access
to administrative information and the ability to report tax evaders. This mobile app supported
the national framework of e-government as well as SUNAT´s own strategic objectives. More
customer orientated features were added during 2016 with new features to be incorporated in
2017 including registration for individuals supported by biometric identification. Considering
there are more than 7 million Peruvians with smart devices and the award winning App SUNAT
currently has just over one hundred thousand users, continued development is certain.
Source: Australia – Australian Tax Office; Chile – Servicio de Impuestos Internos; Korea: National
Tax Service; Denmark – Denmark – Danish Tax Administration; Peru – Superintendencia Nacional de
Administración Tributaria SUNAT (2017).
Most tax administrations that have a tax app report they have undertaken the
development themselves, or in collaboration with a contracted third party. As a rule they
have also built specific purpose “tax apps” rather than bundling tax requirements into other
apps provided by third parties, for example banks, software developers, or return preparers.
Projects like those at Her Majesty’s Revenue and Customs (HMRC, see Box 5.2) or by New
Zealand (see Box 5.3) offer new possibilities, including helping administrations to become
more agile and responsive in helping to bring new services to market. Both administrations
are looking to publish application programming interfaces (APIs) to enable taxpayers,
agents and commercial software developers to transact with them differently, and in so
doing encouraging the development of a wide variety of potential third party products.
Providing rulings
Consistent with taxpayers’ right to be informed and assisted, it is now common practice
for administrations to provide taxpayers with advice on how they will interpret the laws
they administer. Rulings are an important area where administrations can not only provide
effective service but also assist in improving the certainty of the tax system by advising
taxpayers how it will interpret the tax law in particular situations:
• A public ruling is a published statement of how an administration will interpret
provisions of the tax law in particular situations. They are generally published to
clarify application of the law, especially where a large number of taxpayers may be
impacted by particular provisions and/or where a provision has caused confusion
or uncertainty. Typically, a public ruling is binding on the tax administration if the
ruling applies to the taxpayer and the taxpayer relies upon it.
• A private ruling relates to a specific request from a taxpayer (or their tax
representative) seeking greater certainty as to how the law would be applied by the
tax administration in relation to a proposed or completed transaction(s). The objective
of private rulings is to provide additional support and certainty to taxpayers on the
tax consequences of more complex transactions.
While all jurisdictions reported operating a rulings system, ten of 55 reported they
do not issue public rulings. Interestingly one-fifth of administrations that report issuing
public rulings report that these rulings were not binding upon them. All administrations
except for Mexico and Turkey report issuing private taxpayer rulings. Private rulings are
not binding on the tax administration in six of the jurisdictions surveyed (see Table A.115).
Two-thirds of tax administrations providing private rulings reported the existence of
time limits, either imposed under the law or applied administratively for the making of
rulings. The time limits applied vary widely, ranging from two weeks up to one year. Half
of administrations report the ability to apply a fee for the provision of a ruling for some/all
of the taxes administered by them.
Increasing taxpayer satisfaction

Tax administrations have been conducting taxpayer satisfaction surveys for more
than 30 years. In 2015, 78% of participating administrations indicated that they measured
taxpayer satisfaction across at least one of: individuals, business or tax intermediary
segments. With 94% of administrations indicating that improving customer satisfaction
is a high priority for their administration (see Table A.114), it does raise the question as to
how those, not formally measuring taxpayer satisfaction, will assess their performance. For
those that do measure satisfaction across one or all of the three segments, approximately
two-thirds report having their survey externally administered, with a similar number
making the survey results public.
Table 6.6. Taxpayer satisfaction surveys by taxpayer segment, 2015
Internally Externally
Survey conducted administered administered Results published
No. of No. of No. of No. of
Segment jurisdictions % jurisdictions % jurisdictions % jurisdictions %
Individuals 42 76.4 36 85.7 27 64.3 26 61.9
Business 40 72.7 34 85.0 27 67.5 24 60.0
Tax Agents 27 49.1 23 85.2 17 63.0 17 63.0
Note: A number of administrations conduct several surveys for each taxpayer segment which are administered
internally as well as externally.
Source: Table A.120 Taxpayer satisfaction.
Compliance by design
As reported, many administrations have made significant progress in the redesign
of processes, and in some cases policy, by adopting a holistic view of the tax system and
taxpayers’ interaction with it. Administrations undertaking this approach report not only
improved taxpayer access to the information and support they require, but it has, through
working “with” taxpayer and industry groups, increased levels of taxpayer trust and
confidence in the tax system, and reduced taxpayer burden. Box 6.10 provides examples of
user engagement and involvement in design processes in Singapore and Finland.
Box 6.10. User design and engagement
In Singapore, the Inland Revenue Authority of Singapore (IRAS) organised the first “Tax
Hackathon” in September 2016. The aim was to co-create taxpayer-centred experiences for the
SMEs, self-employed and individuals. To ensure that the opportunity areas were practical and
relevant to the current experiences of taxpayers, IRAS conducted several rounds of focus group
discussions with both external and internal stakeholders. Around 70 participants collaborated
with IRAS to brainstorm and build working prototypes relating to the opportunity areas.
Over three days, the event developed 19 creative and innovative working prototypes such as
record-keeping and expense tracking mobile apps, personal tax dashboards and “chatbots”. The
outcomes showcased the power of co-creation with the coming together of start-ups, developers,
designers, tax and accounting professionals, industry experts, students and IRAS staff.
In Finland, Tax Finland will support the development of its MyTax customer portal with
a range of user-centred tools and services. To do this it will apply “compliance by design” and
“customer experience management” as guiding principles. It will also bring together advanced
analytic techniques, design thinking, user-centred design methods and user testing skills. To
support this approach it is introducing these disciplines to other development areas. It has begun
promoting an awareness of service design and its benefits throughout the organisation (including
idea and hypothesis testing through early and low-level prototyping and experimentation). It is
also planning to establish a professional capability in design thinking and user design to enhance
the usability and accessibility of its products and services.
Sources: Singapore – Inland Revenue Authority of Singapore; Finland – Tax Finland (2017).
Verification
The verification function in tax administration has various names, but used here it
encompasses those functions that assess the accuracy and completeness of taxpayer reported
information. This function employs on average one-third of tax administration staff and
verifies that tax obligations have been met, mainly still through the conducting desk or field
based “tax audits.” The undertaking of these and other “compliance actions” is critical in
supporting voluntary compliance. This section comments on the following topical issues:
case selection, information and access powers, coverage and results, collection of audit
assessed debt, as well as work on tax and crime.
Case selection
The most common case selection criteria used by the 53 administrations that provided
information on their verification function are set out in Figure 6.8. Of interest are the:
number of external data sources now being used, including how much data is now sourced
away from returns and forms filed by the taxpayer; and increasing sophistication of
processes administrations are using to determine interventions. One-half of administrations
now report the use of predictive risk based analytical models to identify cases (see
Table A.167). Although not shown in the Figure, two-thirds of administrations now
weight risk to include whether taxpayers are involved in base erosion and profit shifting or
aggressive tax planning issues.
Figure 6.8. Most common verification case selection criteria, 2015
53
52
51
No. of adminsitrations
50
49
48
47
46
45
44
Third party Information Economic Taxpayer Taxpayer Risk profiling – Significant Audits as a
information cross checking sector category behaviour business rules changes to result of
taxpayer international EOI
12 http://dx.doi.org/10.1787/888933546279
Source: Tables A.164 to A.166 Verification/audit case selection.
Information and access powers

The legislative framework in place regarding tax administrations generally includes
provisions that enable officials to acquire information required for tax purposes from taxpayers
and other parties and to be able to access to books and records. All 55 administrations report
having the four powers to obtain information set out in Figure 6.9.
Figure 6.9. Information and access powers, 2015
Obtain information
Obtain information
60
Require records on request Request 3rd party information
50
40
30
Without assistance
Extend powers to 3rd parties Information – government

20
agencies
10
0
Serve search warrants Enter taxpayers’ business

without assistance premises
Request a search warrant Seize taxpayers’ documents

without assistance
Enter taxpayers’ dwellings Without consent or warrant
12 http://dx.doi.org/10.1787/888933546298
Source: Table A.133 Information gathering powers.
When it comes to the exercising of powers “without consent or warrant”, the picture
is not as clear. Almost two-third of administrations report the ability to enter business
premises; just over 50% the power to seize documents; but only 13 of 55 have the power,
without consent or warrant, to enter the dwelling of the taxpayer. Some powers are varied
where part of the dwelling is used for business purposes.
Just over 50% report that they can request a search warrant, without assistance, while just
less than 50% can serve the search warrant themselves. When it comes to agency situations,
surprisingly just over a half of administrations report that their legislation permits the
Director General or Commissioner to extend information and access powers to third parties.
Box 6.11. Information and Access powers
In Australia the use of formal information gathering notices is necessary where third parties,
such as financial institutions, provide private tax-related information to the ATO. This is also
the case in some investigations and audit cases to establish relevant facts and evidence. In most
circumstances, the ATO works with taxpayers and third parties to obtain the relevant information
without having to exercise its formal powers. The ATO has published its access and information
gathering manual that contains the policies and procedures relating to use of powers. In 2015,
legislation was passed to consolidate and repeal many of the ATO’s access and information
gathering powers. The consolidation enabled the ATO officers to issue a single notice instead
of “composite” or multiple notices to the same taxpayer covering each of the different taxes
applicable. As a result, the client experience has improved, as the notices and the explanatory
covering letters are more streamlined and easier to understand.
Coverage and results

The type of “compliance actions” undertaken by tax administrations to determine
whether taxpayers have properly reported their tax liability is changing. In the past,
administrations used risk based models to help them identify which cases in a population
or segment should be subject to verification. The introduction of sophisticated analytical
models are allowing administrations to better identify returns, claims or transactions which
might require further review or be fraudulent (OECD, 2016b). Further these models, many
of which can operate in real-time, are now allowing administrations to conduct automated
reviews on all returns or transactions of a particular type.
Box 6.12. VAT real time risk model
In Ireland the Revenue authorities have expanded their risk management scope by
incorporating real time risk analysis in their compliance and collection programmes. The new
VAT real time risk approach, which was introduced to assess VAT risk and identify suspicious
VAT returns by making better use of internal available data, is an example of a rules based
approach that is improving prevention and detection of non-compliance. The VAT rules applied
include primary controls as well as taxpayer specific data such as return and payment history,
company status, and return and payment compliance for other taxes. Once the rules are applied, a
risk score is produced, which is used to categorise cases as either green (low risk) with any VAT
refund due being paid; orange (medium risk); or red (high risk) with intervention required by a
staff member and any refund claimed being held until fully investigated. The success of this risk
based approach highlights the importance of data analysis and risk management. In 2015, in excess
of 58 000 red risk VAT cases were examined resulting in an indirect yield of EUR 168 million.
Source: Ireland – Office of the Irish Revenue Commissioners (2017).
Some administrations are reporting the use of “automated machine actions” using
rules-based approaches to treat some defined risks (e.g. automatically denying a claim,
issuing a letter or matching a transaction). This “robotic” activity is replacing some of
the audit actions or steps previously performed by people. While tax audits (including
comprehensive, issue or desk audits) are still the primary verification activities, these rules
based approaches are providing administrations with more effective and efficient ways to
undertake some verification work.
These new approaches do, however raise the question of how to reflect “automated actions”
in the performance information that administrations report. To include all checking would be to
distort coverage, adjustment and yield rates. However where it replaces previously undertaken
manual actions it would seem appropriate to both record the volume and reflect more accurately
what administrations are now doing in this area, and to reflect the substantially reduced cost
per audit. It is apparent from the data supplied that administrations are already taking different
approaches to reporting. While this matter will be addressed for the next survey, care needs
to be taken in using verification information contained in the tables which may not readily be
comparable. That said there are some very general observations that can be made:
• While most administrations track verification by tax-type, a small number do not
and instead measure audit results by audit-type. Regardless of approach, average
adjustment rates are similar.
• Typically as coverage rates increase, the incidence of adjustment falls.
• Coverage rates across revenue types vary so markedly that further in-depth
analysis would be required before any meaningful comparison can be made.
From the information reported on adjustment by audit type, while ratios fluctuate,
comprehensive audits in general are most likely to produce an adjustment, with desk audits
the least. Anecdotal evidence suggests that for those using electronic audit methods informed
by advanced analytics, adjustment ratios are both higher and tend to converge, although this
is influenced by how total actions are counted.
Figure 6.10. PIT audit coverage and adjustment rates, 2015
No. of PIT audits completed per 100 active PIT taxpayers PIT audits with adjustment as a percent of audits completed
24 17 16 12 8 2
2 100
1.8 90
1.6 80
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1.4 70
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12 http://dx.doi.org/10.1787/888933546317
Note: For Bulgaria the number of PIT audits completed per 100 active PIT taxpayers relate to the year 2014.
Source: Tables A.15 Verification/audit – Activity per active taxpayers by tax type, and A.16 Verification/
audit – Adjustment ratio by audit type.
Figure 6.11. CIT audit coverage and adjustment rates, 2015
No. of CIT audits completed per 100 active CIT taxpayers CIT audits with adjustment as a percent of audits completed
32 20
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16 80
14 70
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12 http://dx.doi.org/10.1787/888933546336
Note: For Canada and Japan the number of CIT audits completed relates to the total number of CIT taxpayers.
Figure 6.12. VAT audit coverage and adjustment rates, 2015
No. of VAT audits completed per 100 active VAT taxpayers VAT audits with adjustment as a percent of audits completed
54 50 35
20 100
18 90
16 80
14 70
No. of audits
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12 http://dx.doi.org/10.1787/888933546355
Note: For Belgium and Canada the number of VAT audits completed relates to the total number of VAT
taxpayers.
While up to half of the administrations could provide data on verification adjustments

for one of the five segments surveyed, only three administrations, Argentina, South Africa
and the United States, could provide comprehensive data across all segments.
Box 6.13. Innovation in VAT
In Russia, the FTS has implemented a system that allows it to monitor VAT compliance and
the “creation of value added” on a nationwide basis. The approach is based on automatic cross-
matching of all VAT paid with all VAT claimed across all transacting parties. All incoming
data is processed and analysed mostly in real time, with only an eight hour delay across the
country. The system allows FTS to zoom-in on transactions or VAT taxpayers and automatically
identify related tax risks. It can then initiate a VAT tax audit that is assigned to inspectors. The
system also allows it to monitor and measure performance of regional and local offices and of
tax inspectors.
Implementation of the system became viable following amendments into the tax code that
introduced mandatory digital filing of all VAT tax returns, VAT invoices and digital grand
ledgers, and of the construction of new IT infrastructure concentrated around Data Processing
Centres. FTS Data Processing Centres are capable of collecting, storing and analysing large
amounts of data to provide a single platform for all tax administration business. 2016 results show
an increase in VAT collection over 2015 of 8.5%, while in 2015 and 2014 the increase amounted
to 12.4% and 16.8% respectively.
Source: Russia – Federal Tax Service (2017).
Figure 6.13. Verification adjustment ratio by audit type, 2015
Comprehensive audits Issue-oriented audits Desk audits

100
90
80
70
60
50
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12 http://dx.doi.org/10.1787/888933546374
Source: Table A.16 Verification/audit – Adjustment ratio by audit type.
Table 6.7 summarises verification adjustment by segment. Given the sample size,
the results need to be treated with care. However it is surprising to see the relative order
of average adjustments rates, with the High Net Wealth Individual (HNWI) segment
having the lowest rate of adjustment 2015. This is only one dimension and needs to be put
alongside other data to evaluate performance in respect of this critical segment – including
the size of adjustments which been excluded from the table as this information is reported
in local currency. It may though at least raise the question of how some countries select
HNWI cases for review.
Table 6.7. Verification adjustment rate by segment, 2015
Segment type No. of jurisdictions Adjustment rate

Large taxpayers 27 56.26
SMEs 21 58.68
Employers 14 65.14
HNWIs 11 51.31
Other individuals 13 59.63
Source: Tables A.153 to A.157 Audit activity by segment.
Collection of verification assessed debt

As part of gathering segmented information on performance, administrations were
asked to report the amount of tax assessed as a result of verification where that information
was actually collected. The sample size is again too small to draw strong conclusions,
including any assessment of the average percentage of tax assessed that is actually collected.
Administrations are encouraged to improve their tracking and reporting of the collection
of tax assessed as a result of audit. An example of established processes for measuring tax
assessed through verification is that undertaken in Spain by the State Tax Administration
Agency (AT). While their data is confidential and therefore not included in the tables, AT
has for the last decade utilised formal co‑operation between tax audit and tax recovery
services to ensure the collection of the taxpayer’s debts, with processes commencing before
formal assessments are made in order to reduce the collection risk.
Table 6.8. Administrations that track the collection of verification debt, 2015
Large Other
taxpayers SME Employers HNWI Individuals
Argentina ü ü ü ü ü
Australia ü ü ü ü
Costa Rica ü ü
Croatia ü
Greece ü ü
Hungary ü ü ü ü
Italy ü ü ü
Lithuania ü ü ü ü
Mexico ü ü ü ü
Morocco ü ü
Peru ü ü ü ü
Romania ü
Russia ü
South Africa ü ü ü ü ü
United Kingdom ü ü
United States ü ü ü ü ü
TOTAL 15 10 4 11 9
Jurisdictions reporting results 26 22 13 14 14
Source: Tables A.153 to A.157 Audit activity by segment.
Tax and crime

Tax crime occurs when people intentionally avoid paying tax or claim money they are
not entitled to. Table 6.9 summarises arrangements for managing tax crime cases in the
37 tax administrations that report having a role in such investigations. Just over half of
these administrations perform the whole investigation activity, with the balance playing a
range of roles in prosecuting the case to conclusion.
Table 6.9. Participation in tax and crime work
No. of administrations that participate Management arrangement in situations

in criminal tax investigations where the administration participates partially
Cases managed Cases managed jointly Cases managed
exclusively by other by administration and exclusively by
Whole participation Partial participation agency another agency administration
20 17 6 6 5
Source: Table A.135 Tax crimes.
Criminal activities are dynamic and adapt to take advantage of new opportunities for
financial gain, frequently outpacing the legislative changes designed to combat them. Finding
better ways to fight tax crime is a high priority. Along with money laundering, corruption,
terrorist financing, and other financial crimes it can threaten the strategic, political and
economic interests of jurisdictions. Countering these activities requires improved transparency
and greater efforts to harness the capacity of different government agencies to collectively
deter, detect and prosecute these crimes through a whole of government approach. Box 6.14
provides examples of activity in three survey administrations.
Box 6.14. Tax and crime
In the Netherlands the Fiscal Information and Investigation Service (FIOD) is the criminal
investigation service of the Netherlands Tax and Customs Administration (NTCA). The FIOD
role is to combat fiscal, financial-economic and commodity fraud as well as corruption and
violations of integrity in the “financial world”. It works closely with the Public Prosecution
Service whose legislation authorises its investigations. This relationship allows consideration of
using criminal law to prosecute cases in advance of the deployment of civil or supervisory powers
and actions. FIOD works closely with other agencies and authorities. It is also increasingly using
more sophisticated tools and techniques to analyse data and identify relevant information both
within the Netherlands and outside its borders. By actively engaging citizens as well as the media,
FIOD has been able to enhance the social impact of fighting financial crime.
In Austria a central registry has been established for all bank accounts held in Austrian
financial institutions. The register contains the names of account holders, the account number
and the name of the credit institutions, but not the balance of each account. As of October 2016
the register can be accessed by the tax administration for fiscal and fiscal penal purposes and
by justice (courts, prosecutors) for penal purposes. The tax administration intends to access the
register so as to assist in audit and tax collection cases. This measure was accompanied by the
requirement to report to the tax administration capital flows of EUR 50 000 or more from bank
accounts or securities accounts of private persons by financial institutions.
Box 6.14. Tax and crime (continued)
In the United Kingdom HMRC’s approach is to use its whole compliance “toolkit” to tackle
rule breakers, deter potential rule breakers, and reassure the compliant majority that action is
being taken. HMRC has more than 16 000 civil investigators and is also a law enforcement
agency, with comprehensive surveillance powers and powers of arrest. It works closely with
all UK prosecuting authorities and with other law enforcement agencies to ensure a joined up
approach across the whole of the UK Fraud landscape. Most tax evasion is dealt with through
civil processes. HMRC has the ability to levy civil penalties that are broadly equivalent to
fines levied by the criminal cases. Tax evasion is identified through the Evasion Referral
Process. When deciding whether to investigate criminally, HMRC considers the nature and
scale of the fraud and the availability of evidence. If a case is not considered appropriate for
criminal investigation, it will be considered for civil investigation under Code of Practice 9,
and the taxpayer is given the opportunity to make a full disclosure or face potential criminal
investigation. This disclosure facility, with the underpinning of a criminal sanctions regime, is
among HMRC’s most powerful civil investigation tools and is used only by specialist teams.
Source: The Netherlands – Netherlands Tax and Customs Administration; Austria – Federal Ministry of
Finance; The United Kingdom – Her Majesty’s Revenue and Customs (2017).
As illustrated in Table 6.10, the resourcing and caseloads of tax and crime work show a
remarkable consistency between years, when comparing the results of the administrations
able to report information across both years.
Table 6.10. Summary of tax and crime work
No. of Full-time Cases referred for

equivalents in programme Cases on hand prosecution Cases prosecuted
No. of jurisdictions 26 24 27 23
2014 12 330 17 216 11 218 5 710
2015 12 395 17 269 11 686 5 831
Note: With respect to the number of cases, Poland has been excluded from this summary given the
distortionary effect of the large number of cases referred for prosecution and prosecuted.
Source: Table A.135 Tax crimes.
Collections
The collections function involves taking action against those who do not file a return
on-time, and/or make a payment when it is due. All but four of the administrations (Chile,
Iceland, Italy and Sweden) participating in the survey report having the prime responsibility
for the collection of outstanding debt and as well as overdue returns (see Table A.35).
Information provided by 42 of these administrations attributes 10.8% of their total tax staff
numbers to the collection function (see Table A.20).3 Even with the growth in “pre-filled
or no return” approaches over the last decade, the filing of a tax return or declaration still
remains the principal means by which a taxpayers liability is established in the majority of
jurisdictions participating in this publication.
While more than three quarters of administrations reported that they “mostly or partially
achieved” their outstanding return collection targets (see Table A.38), only six provided
performance information across all return types and years. Accordingly the data table has
not been included in the annex, and no comment on the return collection performance of
administrations is possible. Although given that reported on-time filing rates averaged
only between 78% and 90% in 2015 (see Table 6.3) it is highly likely that the volume of
outstanding returns has on average decreased.
In looking at debt collection, the 2014 report Working smarter in tax debt management
(OECD, 2014b) provided an overview of the modern tax debt collection function,
describing the essential features as:
• Advanced Analytics – that makes it possible to use all the information tax
administrations have about taxpayers to accurately target debtors with the right
intervention at the right time.
• Treatment Strategies – the collection function needs a range of interventions,
from those designed to prevent people becoming indebted, through to measures to
support taxpayers in the making payment of debt and tough enforcement measures
where appropriate.
• Outbound call centres – which make it possible to efficiently pursue a large number
of debts.
• Organisation – debt collection is a specialist function and is usually organised as
such. The right performance measures and a continuous improvement approach help
drive desired outcomes.
• Debtors Who Have Gone Abroad – the proper and timely use of international
assistance is crucial, particularly the “Assistance in Collection Articles” in agreements
between jurisdictions.
This section of the report comments on tax administration performance in managing
the collection of outstanding debt and on the information and access powers administrations
have in this regard, It then provides an update on advanced analytics and treatment
strategies, preventive approaches to debt being incurred and cross border collection.
Performance in collecting outstanding debt

The range of actions undertaken by tax administrations to collect outstanding tax arrears
continues to evolve. Advances in predictive modelling and experimental techniques as
reported in the OECD report on Advanced Analytics for Better Tax Administration (OECD,
2016b) are helping many administrations better match interventions with taxpayer specific
risk. The use of a range of intervention approaches is helping prevent debt from arising
as well dealing with the collection of tax arrears. Outbound calling is now seen common
practice and not just best practice, and administrations are starting to more actively use more
of the collection powers granted to them by government.
Total outstanding tax debt remains very large, in the region of EUR 1.8 trillion (see
Figure 2.1). Total tax debt as a percentage of total net revenue has, however, reduced over
the last five years in 27 of 38 administrations able to report data for the 2011 to 2015
period. For survey and comparative analysis purposes, “total debt” is defined as the total
amount of tax that is overdue for payment at the end of the fiscal year and includes any
interest and penalties. The term includes tax debts whose collection has been deferred
(e.g. as a result of payment arrangements). The average debt to net revenue ratio of 31.76%
in 2015 is heavily influenced by the very large debt figures of Brazil, Chile, Greece, India,
Italy 4 and Peru, and to a lesser extent Cyprus, Malta 5 and Romania. If these jurisdictions
are removed the average reduces to around 12.3% of net revenue.
Figure 6.14. Total year-end tax debt as a percent of total net revenue, 2011-15
2015 2011 2013

257
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12 http://dx.doi.org/10.1787/888933546393
Source: Table A.175 Total year-end tax debt, 2011-15.
Looking at collectable debt across the 2011 to 2015 period, almost three-quarters of
the administration’s able to report data over that period (19 of 27 administrations) show
reductions in collectable debt as a percentage of net revenue collected. “Collectable debt”
is the total debt figure less any disputed amounts or debts which for other reasons are
unable to be collected, but where write off action has not yet occurred (also referred to as
“uncollectable debt”).
Figure 6.15. Movement in total year-end collectable tax debt, 2011-15
107
25
20
Change in percentage points
15
10
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12 http://dx.doi.org/10.1787/888933546412
Source: Table A.176 Total year-end collectable tax debt, 2011-15.
In looking at the number of debt cases, volumes as a percentage of opening cases have
increased between 2014 and 2015 in almost two-thirds of the administrations that reported
both opening and closing inventory.
Figure 6.16. Movement in tax debt cases between 2014 year-beginning and 2015 year-end
80
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12 http://dx.doi.org/10.1787/888933546431
Source: Table A.129 Tax debt – Non-collectable tax debt and tax debt cases.
Most tax administrations have processes that prioritise the collection of “new debt”.
This is based on reasoning that this debt is more likely to be paid by the taxpayer, and
that timely interventions are more likely to influence future behaviour, ideally seeing the
taxpayer either paying on time or making contact with the administration in the event
of any future inability to pay. While approximately half of the administrations surveyed
were able to provide some information on the age of debt by tax type, only 21 provided
information across all major tax types.
Table A.14 raise some interesting observations about the mixed relative performance of
administrations in different revenue types that might benefit from further inquiry or study to
understand the underlying causes or factors. For example, (1) while only 28% of Australia’s
VAT debt is over 12 months old, in Cyprus, Peru and Portugal more than 90% of their VAT
debt in 2015 is older than 12 months; (2) the portion of CIT debt over 12 months in the United
Kingdom is approximately one-third that of most other jurisdictions; and (3) the proportion
of PIT debt over 12 months old in two-thirds of jurisdictions ranges between 70 and 100% of
total PIT debt. Of course the answers may well be to do with the make-up of tax debt older
than 12 months (see Figure 6.17) or the volume of non-collectable debt in these categories,
something again that would reward further study.
Despite the best efforts of administrations and taxpayers, there will always be instances
where tax due and payable cannot be paid. Most jurisdictions provide the Director General
or Commissioner with the power to write-off tax due and payable in certain circumstances
generally governed by law, regulation or departmental policy or operating instructions.
General situations reported where administrations may undertake write-off action include:
(1) where it is prudent to do so as part of accepting an arrangement that maximises
the overall recovery of tax arrears, (2) where it is more efficient to do so than using
administration resources to secure a larger repayment, (3) where the recovery would place a
taxpayer in “serious hardship”, (4) where a corporate entity is struck-off, or (5) as part of the
administration accepting a creditor compromise or voluntary administration.
Figure 6.17. Make-up of tax debt older than 12 months (CIT, PIT, VAT), 2015
VAT PIT CIT

100%
90%
80%
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50%
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12 http://dx.doi.org/10.1787/888933546450
Source: Tables A.130 and A.131 Tax-debt by tax type.
Information and access powers

The legislative framework includes provisions that enable tax officials to undertake
certain actions in relation to the management of debt, the collection of amounts overdue
and the enforcement of actions that can be taken against delinquent debtors. Figures 6.18 to
6.20 summarise this information for the all 55 jurisdictions in the series, looking at those
powers they use to assist in managing, collecting and enforcing the debt.
Powers to assist in managing debt

Most administrations report the frequent use of powers that allow them to offset tax
debts against overpayments from other tax types; formulate payment arrangements; and
require tax clearances for businesses that contract with government.
Figure 6.18. Powers to assist managing debt, 2015
Power does not exist Power never used Infrequently used power Frequently used power
100%
90%
80%
Percent of countries
70%
60%
50%
40%
30%
20%
10%
0%
Offset tax debts Formulate Require a Grant extensions Remit interest Offer reduced Offer reduced
against other payment tax clearance of time to pay and penalties penalties interest payments
tax overpayments arrangements when bidding tax debt to taxpayers to taxpayers
for government generally generally
contracts
12 http://dx.doi.org/10.1787/888933546469
Source: Table A.125 to A.127 Debt collection powers.
Surprisingly however, one third of administrations report infrequent use of the powers
they have to remit interest and penalties or grant extension of time for payment. Accordingly
administrations may wish to reflect on whether there is opportunity to improve their
effectiveness in this regard. While jurisdictions are evenly divided on policies that would
allow their tax administration to offer reduced penalties and interest to taxpayers, generally,
between 40% and 55% of those with these powers report that they do not use them or use
them only infrequently.
Powers to assist collection

Administrations report extensive use of third party collection via banks and employers
and in the use of garnishee orders over salaries and property. Approximately one-third of
administrations report non-use or infrequent use of powers to collect disputed taxes while a
case is under judicial or administrative review. One-third of administrations report they do
not have the power to withhold government payments due to delinquent debtors or the ability
to use treaties or other agreements to have other jurisdictions undertake collection activity.
These jurisdictions may wish to consider these approaches given the success reported by
jurisdictions that have these powers.
Figure 6.19. Powers to assist collection, 2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Collect taxes owed Garnishee salaries Collect disputed tax Collect disputed tax Withhold Collect tax debts
via third parties or other property while dispute case while dispute case government through agreements
is under judicial review is under payments to with other tax
administrative review a tax debtor administrations
12 http://dx.doi.org/10.1787/888933546488
Powers to assist enforcement of debt

Generally jurisdictions reported lower use of enforcement powers than those for
managing and collecting debts with 40% of administrations reporting infrequent use across
all powers in this area. Administrations are invited to consider whether their enforcement
effectiveness may be improved by extending the use of some of these powers. While some
administrations may consider powers to temporarily close a business, restrict travel, or deny a
delinquent taxpayer access to services as unsuitable for use in their jurisdiction, these may be
powers others may consider useful to add to their armoury. With one half of administrations
having the power to publish the names of tax debtors (with appropriate criteria and controls),
and two-thirds reporting success in the frequent use of these powers, these may also be areas
jurisdictions that cannot currently take such actions may like to consider.
Figure 6.20. Powers to assist enforcement of debt, 2015

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Obtain a lien Initiate Impose liability on Publish names Temporarily close Deny delinquent Impose
over a taxpayer’s bankruptcy company directors of debtor a business or taxpayers access restrictions on
assets or liquidation for certain taxpayers withdraw to certain overseas travel
actions company tax debts a licence government services
12 http://dx.doi.org/10.1787/888933546507
Advanced analytics and treatment strategies

Tax administrations have used advanced analytics to inform the management of
overdue tax returns and collection of tax arrears for more than a decade. This work has
mainly used prescriptive techniques to determine how to communicate most effectively
with taxpayers in default. In recent years however, administrations have begun to use
predictive techniques to identify proactive and responsive actions to assist taxpayers to
meet their obligations, or to determine the best intervention to secure a payment or a return
when overdue. Box 6.15 describes once such use of predictive techniques in Belgium.
Box 6.15. Predictive modelling
In Belgium, the Federal Public Service (FPS) Finance has developed a predictive model
to detect the likely risk of business failure of legal entities and self-employed persons over the
coming twelve months. It uses a predictive model to assign each company or self-employed
person active in Belgium a credit score. The model runs on a database containing around 1000
variables originating both from internal sources of the FPS Finance and external data from other
governmental agencies. The model differs from those used in the private sector as the data used
to feed the model is drawn from the past fiscal behaviour of the taxpayer especially relating to
Withholding tax and VAT of which non-payment is one of the first warning signs of business
failure.
The model informs tax collectors on the solvency risk and hence the risk of default and
assists decision making process to enable early recovery action to be taken, in line with the
predicted risk of bankruptcy.
Source: Belgium – Federal Public Service, Finance (2017).
The report, Advanced Analytics for Better Tax Administration (OECD, 2016b) describes
some of the successful approaches being used. These include modelling the risk that an
individual or company will fail to pay as well as models that attempt to assess the likelihood
of insolvency or other payment problems. Predictive analytics approaches have led to the
sending of SMS messages to individuals considered a payment risk and determination of the
best sequencing of interventions for particular groups of taxpayers.
In an effort to improve their efficiency the State Tax Administration Agency of Spain
has developed IT applications that allow it to undertake bulk actions on debtors. These
programmes gather debtors with similar characteristics and automatically issues attachment
orders over selected assets. Similar approaches undertaken by Portugal and Peru are
described in Box 6.16.
Box 6.16. Automated enforcement
In Portugal the Autoridade Tributária e Aduaneira (AT) has since 2005 implemented a range
of electronic systems to support its enforcement and recovery procedures. These approaches
allow it to manage the procedures in an integrated and automated model. The enforcement
and recovery procedures are based on internet and web technology that communicates mostly
by automated triggers with taxpayers, debtors and external bodies. This allows the electronic
acknowledgement of debt, the automatic issuing of notifications, and the commencement of
enforcement procedures. Such procedures include the automatic seizure and attachment, the
sending of reminder notices and the publication of tax debtor information on its website. The
system can also prevent debtors from competing in tender procedures to provide goods or
services to public bodies. The electronic system also segments tax debtors, collecting information
on the debtor into a “single view”. This can bring together information on assets, key customers,
suppliers, auditing procedures, administrative and judicial litigation, as well as relationships with
other taxpayers and key contacts. These initiatives have helped AT continue to reduce its tax debt
book significantly over the last decade.
In Peru, the e-notification system implemented in November 2015 by the Peruvian tax
administration (SUNAT) has improved administrative acts undertaken by SUNAT in support of
payment and collection activity. Previous approaches were characterised by a high dependence on
physical notifications, a process high in cost and low in effectiveness. The e-notification system
was implemented as part of SUNAT´s strategic objective to facilitate voluntary tax compliance,
as well as to increase levels of tax debt recovery. The full implementation involved legislative
change and the acquisition of software solutions for customer and content management that were
scalable, secure and efficient. New versions of the Taxpayer Electronic Mailbox and SUNAT
mobile app (App SUNAT) were launched to facilitate taxpayer´s access to notifications. The
new system has generated improvements in tax compliance, and administrative costs as well
as improving transparency and communication. Since full implementation more than 900 000
taxpayers across Peru have received notifications of administrative acts through this channel.
More than 2 million Payment Orders and 856 000 Enforced Collection Resolutions have been
issued electronically, reducing the notification time from 8 days to only 2 hours. The number
of customer complaints has decreased by 60% while tax collection from e-notifications has
increased by 9.4%. SUNAT estimate administrative savings at around USD 7.8 million.
Source: Portugal – Autoridade Tributária e Aduaneira; Peru – Superintendencia Nacional de Administración

Tributaria SUNAT (2017).
Preventive approaches
To maintain high levels of voluntary compliance and confidence in the tax system
administrations must ensure that their debt collection approaches are both “fit for purpose”
and in accord with community expectations of how the system will be administered. This
means not only taking firm action against taxpayers that habitually non-comply, but also
using “softer” more service-orientated approaches where taxpayers are willing to do the
right thing but may not succeed. Increasingly, tax administrations are taking an end-to-end or
systems view of their processes and researching the reasons why returns may not been filed
or payments made. They are also using information about the taxpayer previous history, to
identify patterns and/or anomalies.
Armed with this information as well as other social, economic, industry or psychological
factors that influence behaviour, many administrations have systematically overhauled
their collection approaches. They have redesigned processes, added new payment channels
and methods, and embarked on education campaigns, and trialled a variety of approaches
aimed at changing “taxpayer behaviour,” They have also incorporated advanced analytical
techniques to help identify how and importantly when they should intervene across that
broader system. Such interventions may take place well before a return or payment might
be due. Box 6.17 describes how one administration is using such approaches.
Box 6.17. Education and communication
In Australia, the ATO uses targeted education and communication to help taxpayers
understand their tax payment obligations and encourage them to comply. The aim is to increase
on time payment of tax and encourage those who did not pay on time to address the resulting
tax debt as soon as possible, using self-help options where appropriate. With small businesses
accounting for a large part of overall volume of tax debt cases, the ATO has a focus both on
assisting businesses to prevent debt arising (including the provision of cash flow management
tools) as well as providing self-help tools to assist taxpayers self-managing tax debts that do
arise. The ATO runs social media and promotional campaigns to help taxpayers meet their tax
obligations. The ATO website provides a range of online content to support and assist business
owners to avoid debt by better managing their business, as well as encouraging them to contact
the ATO if they are having difficulty paying…
Cross-border collection
As mentioned earlier, jurisdictions are divided over the use of powers to collect tax debts
through tax treaties or agreements with other jurisdictions, with one-third reporting frequent
use of this power, a second third using it infrequently or not at all, and the remaining third
not having this power. With the effects of globalisation in tax set to continue, and in all
likelihood increase, it may be timely for those administrations that do not have this power
given the success reported by jurisdictions that do, to consider this approach.
Box 6.18. Cross border collection activity
In New Zealand, Inland Revenue used customer insight and intelligence-led analytics to
support the collection of outstanding amounts of arrears from student loan borrowers and people
liable to pay child support that were living outside New Zealand. The three tiered approach
involved working with private sector collection agencies in Australia and the United Kingdom that
helped trace debtors, undertake collection activity and provide legal services. As such it was able
to secure payment from a group of hard-to-find taxpayers. Secondly by improving information
exchange with the Australian Taxation Office to help contact student loan borrowers in Australia
it was then able to work with them about their obligations. Finally a proactive marketing and
advertising campaign allowed it to reach hard-to-find student loan borrowers living overseas.
Source: New Zealand – Inland Revenue (2017).
Disputes
Effective access to tax dispute processes are an essential feature of a good tax system.
They safeguard taxpayer rights and ensure appropriate checks and balances exist on the
exercising of tax powers by administrations. All survey respondents, with the exception of
Colombia and Costa Rica, report the existence of a forum or fora, for formal resolution of
disputes. One-third of countries report having an Ombudsman service in addition to other
dispute resolution processes (see Table A.169).
Box 6.19. Appeal and review processes
In Denmark while the Tax Appeals Agency, the National Tax Tribunal (NTT) and the
appeals boards are organised under the Danish Ministry of Taxation (Skatteministeriet), they
are independent in relation to SKAT. With effect from 1 January 2016 it is now only possible
to have an appeal heard by one of the administrative appeals bodies. To further improve access
and operation the procedural rules applying to these bodies have been harmonised and made
as uniform as possible. An appeal fee is charged in all appeal cases, with the exception of debt
collection cases and cases regarding access to documents. There is a possibility of getting a
refund of costs for expert assistance in connection with the hearing of a case by an appeals
body. It is also possible to have the decisions made by the administrative appeals bodies
judicially reviewed.
Source: Denmark – Danish Tax Administration (2017).
All jurisdictions report administrative review procedures operating in their jurisdiction.

Eighty-seven percent of administrations report that administrative reviews can be conducted
by the administration itself, with approximately two-thirds requiring the taxpayer to seek
administrative review before their case can be reviewed by an external judicial body (see
Table A.168). All but eight administrations (Costa Rica, Cyprus, Finland, Hungary, Italy,
Slovak Republic, Slovenia and Switzerland) report that they have formal performance
standards for the resolution of dispute cases using administrative review, with 85% reporting
this standard as being “mostly met” (see Table A.38).
While tax administrations cannot generally control the timing of judicial processes,
it is important to have sound reporting and monitoring of the tax dispute process to allow
adjustments to be made where necessary. Since the 2015 TAS report, many administrations
have been active in improving the level of management information available. As a
result this report contains performance information on approximately two-thirds of
administrations.
Figure 6.21 highlights the wide differences between jurisdictions in the use of
administrative review arrangements. While longer term trend data is not yet available, the
data from the 34 countries able to provide information for both years included in Table A.170
is remarkably consistent.
Figure 6.22 displays the changes in the number of review cases between the start of
the 2014 year and the end of 2015, plotting information against the survey average for the
32 administrations able to provide volume information. This data will benefit from an
extended time series that future surveys will make possible.
Figure 6.21. Number of administrative review cases initiated per 1 000 active PIT & CIT
taxpayers, 2015
59 83 24 42
20
No. of cases initiated per 1 000 active taxpayers
18
16
14
12 TAS
average
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12 http://dx.doi.org/10.1787/888933546526
Note: For Luxembourg the figure relates to the total number of PIT and CIT taxpayers. For Bulgaria, Germany
and Spain the figures relate to the year 2014.
Source: Table A.18 Dispute resolution – Administrative review cases.
Figure 6.22. Changes in the number of administrative review cases at year-end, 2013 to 2015
168 251
100
80
60
40 TAS
Movement in %
average
20
0
-20
-40
-60
-80
)
st a
Au lia
B a
lg l
Ca ria
da
ec Cr ile
pu a
Es lic
Fin nia
Fr d
Ko Gre e
(C e
do ry
Ire sia
nd
Ja ly
La n
al a
M sia
Ne or co
Ne her cco
Ze ds
No nd
ay
Po Peru
ak m l
pu a
ite Slo blic
ng ia
m
Hu hina
Bu razi
ov Ro uga
Au tin
ri
Re ti
M tvi
Re ani
c
ng ec
pa
n
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Ki n
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b
an
rw
ra
w lan
Ch
M i
h oa
st
a
na
ay
ne
la
la
a
ex
to
d ve
t o
n
al
rt
ge
Ar
ng
Cz
Un
Sl
Ho
12 http://dx.doi.org/10.1787/888933546545
Source: Table A.18 Dispute resolution – Administrative review cases.
Differences of viewpoints between taxpayers and the tax administration on the correct
amount of tax owed, including the facts relied upon or the interpretation of the law, are a
normal part of tax administration. Reported information shows that where disputes do arise
most are resolved between the various parties without the need for litigation. Figure 6.23
reports the performance of administrations for cases decided upon by the courts. As this is
the first time that tax litigation data has been summarised in this way, further reporting is
required before any conclusions can be reached.
Figure 6.23. Percentage of cases resolved in favour of the tax administration, 2015
100
90
80 TAS
average
70
60
Percent
50
40
30
20
10
0
In In a)
Es ark
Au ina
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Ca aria
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pu ia
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ov
ng
Cz
Sl
Ho
12 http://dx.doi.org/10.1787/888933546564
Note: For India and Romania the figures relate to the year 2014. For South Africa, the underlying data
includes cases finalised in the magistrate courts and in other ways, e.g. settlement, withdrawal or concession.
Source: Table A.19 Dispute resolution – Cases under litigation in relation to cases under administrative
review, and success ratios.
Box 6.20. Settling large tax disputes
In the United Kingdom, HMRC’s published Litigation and Settlement Strategy sets out how
tax disputes are resolved under civil procedures. It applies equally to small and large taxpayers.
It makes clear that in any dispute with a taxpayer HMRC will only settle the figure of tax due by
agreement where the agreement brings in the amount HMRC believes to be right under the law.
If the right amount cannot be agreed, the dispute goes to litigation at the Tribunal.
HMRC’s governance arrangements for taking decisions during tax disputes are set out in
the published Code of Governance for resolving tax disputes. Decisions in large and sensitive
disputes go to the Tax Dispute Resolution Board made up of senior tax professionals from
across HMRC, which scrutinises and refers cases to three Commissioners, including the Tax
Assurance Commissioner, with a recommendation to inform the Commissioners’ decision. The
Tax Assurance Commissioner has an explicit challenge role in decision making on cases. The
Tax Assurance Commissioner is not responsible for HMRC’s large business work and does not
engage with taxpayers on their specific liabilities, nor does he manage caseworkers. As a result
the Tax Assurance Commissioner is well-placed to provide this challenge role when key decisions
are taken in large tax disputes.
Source: United Kingdom – Her Majesty’s Revenue and Customs (2017).
It needs to be borne in mind that litigation is an important element in how jurisprudence

develops. It is therefore necessary for administrations to strike a balance between only
taking cases they know they can win (which a consistent measure of close to 100% success
rate might suggest), and those cases that support the interpretation of the law, even though
these cases may have a low success rate. Success rates of less than 30% might suggest
administrations might consider greater use of “test case” approaches, or the use of alternative
dispute processes, where these exist.
If the tax system is to provide certainty to taxpayers (and tax administrations) it is also
important that dispute cases are handled in a timely manner. While no explicit information
on the age of cases was gathered two general observations can be made:
• Seventeen of the 32 administrations that were able to report data for 2014 and 2015
for both the number of cases at year-end and the number of cases resolved during
the fiscal year reported an increase in the number of cases on-hand.
• With the volume of cases decided during the year across most of those jurisdictions
also increasing, the increase mentioned in point 1 must result in the volume of
dispute cases rising.
It may be beneficial for administrations, if they have not already done so, to review
their general performance in this area.
Notes
1. Note that the percentage is the average for the 38 administrations that were able to provide the
breakdown of full-time equivalents by function across all functions (see Table A.20).
2. Note that the average excludes the average resolution time for Chile which would otherwise
distort the overall average.
3. Note that this excludes data for Chile, Iceland, Italy and Sweden as they do not have the prime
responsibility of the collection of outstanding debt.
4. The total tax debt includes considerable amounts of debt dating back to the year 2000. The debt
is regarded as “bad debt” for several reasons, including cessation of business and death of debtor.
The debt remains on the agency’s books as cancellation procedures have been suspended by
specific laws. Net of these “bad debts”, the ratio for Italy would be substantially lower.
5. A significant proportion of the arrears are related to estimated assessments which are also issued
to taxpayers who have left Malta without informing the tax administration. This issue, alongside
the fact that the Maltese administration does not have a policy of writing off unrecoverable tax
debt, leads to high levels of undisputed tax debt and high balances of tax arrears. In respect of
direct taxation, the administration reports direct tax collection rates around 98% of the declared
tax. Other tax types show similar rates.
References
OECD (2016a), Technologies for Better Tax Administration: A Practical Guide for Revenue
OECD (2016b), Advanced Analytics for Better Tax Administration: Putting Data to Work,
OECD (2014a), Increasing Taxpayers’ Use of Self-service Channels, OECD Publishing,

Paris, http://dx.doi.org/10.1787/9789264223288-en.
OECD (2014b), Working Smarter in tax Debt Management, OECD Publishing, Paris. http://
dx.doi.org/10.1787/9789264223257-en.
OECD (2012), “Working smarter in revenue administration – Using demand management
strategies to meet service delivery goals” (information note), OECD, Paris, www.oecd.
org/tax/forum-on-tax-administration/publications-and-products/49428187.pdf.
7. Budget and human resources – 119
Chapter 7
Budget and human resources
This chapter describes tax administrations operating budgets. In so doing it comments

on improvements in productivity and innovation that are helping many administrations
manage the significant on-going financial pressure they face; and in some cases
allowing them to fund the development new capabilities.
It provides information on tax administrations’ workforce and sets out challenges
administrations are managing in increasing their capability while managing a
workforce that in general terms is reducing in size and on average getting older.
120 – 7. Budget and human resources
Introduction
The role and nature of tax administration in many jurisdictions is changing. As tax
administrations address the challenge of modernising systems and approaches to deliver
more contemporary services and integrate new responsibilities, many report that they
are also managing significant budget and human resource constraints. The changes,
discussed in earlier chapters, go far beyond simply enhancing existing operations with new
capabilities or adding new technologies to existing products and business processes. Tax
administrations have to determine the critical capabilities they need to be successful, many
of which are very different in nature and volume to the capabilities they now have. They
also need a clear plan and approach to take them there.
Budgetary pressure
The overall level of resources devoted to tax administration is an important and

topical issue for most governments, external observers, and of course tax administrations
themselves. While the budgetary approaches differ, in most jurisdictions the budget
allocated is tied to the delivery of performance outputs which are outlined in an annual
business plan (see Table A.39). In a small number of jurisdictions (Argentina, Bulgaria,
Italy, Peru and Spain), the annual budget of the tax administration or part of it is based on
a “percentage-of-revenue-collected” formula (see Table A.52).
When looking at the budget figures as a whole, more than three-quarters of tax
administrations in the survey report an increase of their overall budget between the years
2014 and 2015 (see Table A.49). The picture changes dramatically however, when compared to
jurisdiction gross domestic products. Against this measure almost 60% of the administrations
Figure 7.1. Salary cost as a percent of total operating budget, 2015
100
90
80
70
TAS average
Percent
60
50
40
30
20
Ic ga a)
Be ust lia
lg r ia
Bu Bra m
Calgar il
na ia
C da
Coolo hine
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a ia
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De pu rus
Esma ic
F lan a
ng Gerran d
Ko Gma ce
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e ry
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Ko n
Lu Li La rea
m a ia
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rw d
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Po la u
rt nd
ng us l
So Sl ap sia
ut ov ore
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Sw SwSp ica
itz edain
n
Und K Tuland
d do y
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es
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a
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n i
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do nd
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a
iu
at
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r
R
s
Au
Cz
Un
Ho
12 http://dx.doi.org/10.1787/888933546583
Source: Table A.25 Salary and IT cost ratios.
faced, in relative terms, declining overall budgets. This situation becomes starker when
noting that most budget increases are linked to new responsibilities, programmes or the
delivery of additional outputs and are not provided to cover increased operating costs.
The largest reported component of tax administration operating budgets is for the
employment of staff, with salary alone accounting for an average 70% of operating budgets
annually (see Figure 7.1).
Productivity and innovation
To meet the expectations of government and taxpayers for an efficient and effective tax
system, tax administrations have long focused on business improvement and innovation.
The Forum on Tax Administration (FTA) over the years has facilitated a number of studies
aimed at assisting administrations to improve the cost-effectiveness of their operations.
This publication, which is now in its fifteenth year, and other OECD publications like the
“working smarter series” (OECD, 2012) produced between 2012 and 2014 have provided
administrations with a range of strategies and frameworks, backed by examples, to support
their efforts to reduce costs and increase the effectiveness of compliance and service
activities.
This publication contains more than seventy examples of innovation from participating
tax administrations. These include measures to increase the use of electronic services,
delivery of new identity approaches, new uses of advanced analytics to manage risk and
personalise service, as well as the introduction of new technologies, digital services and
business transformations initiatives.
Box 7.1. Tax administration economy and efficiency measures
In Australia the Australian Tax Office (ATO) is transforming how their clients experience
the tax and superannuation systems by providing contemporary and tailored services that make
it easier for people to comply with their obligations. As part of this transformation the ATO is
expanding its current Lean methodology and the “fail fast” principle to deploy a Scaled Agile
Framework. The integration of this framework with agile methods is enabling the ATO to
increase its delivery of analytics and behavioural insights to gain a greater understanding of
payment behaviours. Applying these insights to better tailor services and interactions with clients
improves the efficiency of the system by reducing the number of unnecessary interactions clients
experience while engaging with the tax system.
Examples include: improving online services to enable individuals and sole traders to view,
lodge and pay online; increasing access to online automated phone service payment plan facilities
for a greater range of clients; continuing to automate preventative SMS payment reminders for
those clients likely to pay late or not at all; adding a business performance check tool as part of
the ATO app to allow business operators to quickly check the financial health of their business;
and redesigning letters to include behavioural insight principles that encourage people to take
timely action to manage their tax obligations and make potential consequences clearer for debt
clients that choose not to engage with the ATO.
In Finland, Tax Finland (TF) introduced Robotic Process Automation (RPA) technology
which allows configuration of computer software to capture and interpret existing applications
for: processing a transaction; manipulating data; triggering responses; and/or communicating
with other digital systems. These applications or robots undertake defined activity in the same
Box 7.1. Tax administration economy and efficiency measures (continued)
manner as a human. RPA is a feasible and cost-effective solution when the managed data is in
a digital and structured format; the user is required to access multiple applications; and where
tasks are repetitive, high volume and rule-based.
Following a feasibility study into the use of RPA which identified over 100 processes that
could be options, TF selected 38 that it considered were best suited to test the RPA process. The
use of RPA for these activities offered TF the potential to reduce the workload of these tasks
by 52 person years of effort. Importantly it also offered the opportunity to improve the quality
of this work and to reduce errors. TF have now completed the development of its first demo’s
robots using processes in tax audit work. The robot applications are being used to undertake
data quality checks and to assemble data from different sources. The approach allows TF to
also gather data from sources that are useful but are currently too time consuming for its tax
auditors to collect. Based on the feasibility study results, TF will now undertake a proof-of-
concept with a number of major processes utilising a range of different robot technologies.
Sources: Australia – Australian Tax Office; Finland – Tax Finland (2017).
Figure 7.2 summarises the approaches to innovation reported by tax administrations.

Even though a significant number do not have formal structures in place to nurture
innovation, a large numbers of administrations report engaging with customers and
stakeholders in the design and testing phases of projects. A small majority report the use of
agile project management methodologies, something which many acknowledge is helping
to improve their speed of project delivery.
Figure 7.2. Administration’s approaches to innovation, 2015
45
40
35
30
25
20
15
10
5
0
Use of agile Formal structure to End-user testing of Formal processes involving
project management nurture innovation exists new digital and e-services stakeholders in the design of
methodology established services exist
12 http://dx.doi.org/10.1787/888933546602
Source: Table A.44 Information technology solutions and innovation.
Information technology
Information technology (IT) expenditure is second only to salary cost in all administrations
surveyed. Reported levels of IT expenditure do though vary enormously between
administrations. For those administrations able to provide IT-related cost, more than 50%
reported an annual operating IT budget exceeding 10% of the administration’s total operating
budget in 2015 (see Table A.25). While some of this variation can be explained by the
different sourcing and business approaches, some cannot and point, at least on the surface, to
investment levels that maybe too low to support the rapidly changing services administrations
are increasingly being called upon to provide.
Most tax administrations still report in-house development of be-spoke IT solutions,
although more are now reporting shared arrangements between themselves and external
suppliers and developers (see Figure 7.3). The number of administrations reporting the use
of commercial-of-the-shelf (COTS) solutions for their core infrastructure is less common
(see Figure 7.4). While custom-built solutions by their nature tend to be regarded as “fit
for purpose”; administrations are increasingly reporting being challenged by the cost
and time-frames for making systems changes, especially in supporting the provision of
contemporary services. Box 3.4 in Chapter 3 provides the experiences to date of Tax
Finland as they replace their bespoke core legacy systems with a new COTS solution.
Interestingly in comparing the data provided by participating administrations for 2014
and 2015, two-thirds saw a decrease in their relative staff cost while two-thirds saw an
increase in their relative IT expenditure (see Table A.25). This trend is likely to continue
although staff costs may also increase in some areas as more specialist IT and data analytic
skills, highly valued in the wider market, are sourced.
Figure 7.3. Development of primary IT Figure 7.4. IT from external/both: Product

solutions, 2015 type, 2015
In-house
25%
Both
Both
41%
51%
Custom-built
54%
External
24%
COTS
5%
Source: A.44 Information technology solutions and Source: A.44 Information technology solutions and
innovation. innovation.
Outsourcing
More tax administrations are reporting outsourcing arrangements to support
business delivery and manage costs and improve efficiency. Using third parties to deliver
services required for the conduct of tax administration operations is nothing new. Many
administrations have previously reported arrangements for outsourcing IT, tax payment
collection and processing and debt collection for some time.
Box 7.2. Outsourcing debt collection, 2015
In the United Kingdom, Her Majesty’s Revenue and Customs (HMRC) has used private
sector Debt Collection Agencies (DCAs) to supplement its in-house debt recovery capability since
2009. The panel of DCAs originally used under that arrangement was replaced in September 2015
by a government wide private sector debt recovery strategy. The Debt Market Integrator (DMI)
is a Cabinet Office led project to create a single route to debt market services for government.
HMRC initially intended to use two services: pre enforcement debt collection (telephone, letters,
SMS and time to pay arrangements), and analytics (reviewing data & maintaining surveillance
on debtors).
This has since been expanded and further services are being procured through this route.
Shortly, HMRC will introduce personal visits to a customer’s home address for some debts
above a specific value. This is pre-enforcement activity, as set out above. The visits are designed
to give customers who have not engaged with HMRC or DCAs previously, the opportunity
for a face-to-face discussion about their debt, including the payment options available. DCAs
employed through the DMI are subjected to rigorous checks to ensure they meet HMRC’s
standards of security and customer service. They are also open to robust audit and assurance
checks by both HMRC and the DMI provider to ensure performance standards are maintained.
This means that the private sector agencies operate under close supervision, according to the
same rules and standards as HMRC itself. DCAs continue to be paid commission only on
successful recoveries (payment by results), so no payment is made where there is no recovery.
An emerging trend in the last five years has seen the establishment of “shared services”
approaches across government, or arrangements between a tax administration and other
government bodies. These moves to create centres of expertise reduce duplication and
create economies of scale. They also allow governments to utilise excess capacity, lower
total delivery costs, and increase resilience and flexibility, allowing agencies to more easily
scale-up or down based on demand. In Canada, for example, all face-to-face contact is now
managed by all-of-government sites, rather than tax specific sites. While in New Zealand,
Inland Revenue provides accounting services to another government agency with work also
underway to see how various government agencies can make better use of their individual
call centre assets by working together to manage non-aligned call peak periods across
agencies (OECD, 2015: page 193).
Figure 7.5 reports those common administrative functions or operations that are fully
or partially outsourced. Not surprisingly, the majority of participating tax administrations
have fully or partially outsourced IT services (76% of the administrations), security
services (73%), training of personnel (69%) and cash/banking services (67%). There is a
large gap between these four functions and the other commonly outsourced functions, with
approximately one-third of administrations using third party providers for data processing,
legal services and payroll services, recruitment of personnel and procurement services.
While the private sector is often the preferred option for security and cash/banking
services, other parts of the government are typically used for payroll services, personnel
recruitment and procurement services. Further information on outsourced functions
appears in Tables A.42 and A.43.
Figure 7.5. Most common administrative functions/operations fully or partially outsourced,

2015
Both Private Government

45
40
35
30
25
20
15
10
5
0
IT services Security Training of Cash/banking Data Legal Payroll Personnel Procurement
services personnel services processing services services recruitment services
12 http://dx.doi.org/10.1787/888933546659
Source: Tables A.42 and A.43 Outsourcing of tax administration functions.
Workforce
The administrations included in this report employ approximately two million staff (see
Table A.53) making the effective and efficient management of workforce critical to good tax
administration. Having a competent, professional, productive and adaptable workforce is at
the heart of most administrations human resource (HR) planning. With staff costs averaging
70% of operating budgets, any budget change invariably impacts on staff numbers. With
many administrations reporting major business change, tax workforces are subject to further
reduction.
The “double pressure” created from reduced budgets and technology change is a
significant management issue for most administrations. The challenge is compounded
for some which, due to contract restrictions or government mandates, find it difficult to
strategically down-size their operations other than through the non-replacement of staff
essentially leaving of their own accord.
Figure 7.6. Double pressure on workforce
Budgetary pressure
Workforce
• Salary cost reduction?
• New skills needed?
• Hiring/firing/training?
• Impact on motivation and satisfaction?
Transformation pressure
Further, with administrations needing to acquire new competencies or specialist

capabilities different in nature to those they currently employ, there is some doubt as to
whether some of the major practices used to date in managing change will be as effective
going forward.
Staff usage by function

Figure 7.7 provides average allocation of staff resources across seven functional
groupings used to categorise tax administration operations. Tax administrations were
asked to provide the break-down for staff working on tax related roles only. However some
administrations which have, a number of significant roles that are highly integrated, were
only able to provide the break-down for all their functions including those which are not
tax related. Figure 7.7 accounts for this by displaying the overall averages for both groups.
Interestingly the differences between the two groups do not appear significant. While the
detailed data for each administration in Table A.20 shows a number of outliers, generally
the “Audit, investigation and other verification” function is the most resource intensive,
employing on average one-third of tax operations staff.
Figure 7.7. Staff usage by function, 2015
All administrations Administrations that included non-tax related roles Administrations that included only tax related roles
40
35
30
Percent of total staff
25
20
15
10
0
Registration and Returns and Audit, investigation Debt collection Dispute and Other tax Support functions
taxpayer services payment and other appeals operation
processing verification functions
12 http://dx.doi.org/10.1787/888933546678
Note: Excluding administrations that were unable to provide the break-down for all functions.
Source: Table A.20 Staff usage by functions of the administration in percent of the total tax administration.
Past editions of this series have reported audit staff numbers at a similar level for the
last decade. With the significant changes that have occurred to date and that are on-going
in most administrations, it is interesting that the percentage of staff engaged in audit and
verification work has remained so static. This is all the more surprising given changes to
compliances approaches. This includes the adoption of more personalised and tailored
interventions, the move to monitor and intervene in compliance closer to “real-time” and
greater use of third party data and matching, particularly to pre-fill return information. It
does raise the question of when new and innovative practices in tax auditing will allow
administrations to change their approach to audit. This issue will be addressed as part of
OECD report Audit in the 21st century (OECD, forthcoming).
Staff metrics
The survey also gathered key data concerning the age profiles, length of service, gender
distribution and educational qualifications of permanent staff of the total administration
(i.e. including both tax and customs):1 see Tables A.22 to A.24 and Tables A.53 to A.58.
Age profiles
Drawing on the data provided, there are significant variations between the age profiles
of tax administration staff when viewed across different geographical groupings. This may
be the result of a complex mix of cultural, economic, and sociological factors (e.g. economic
maturity, recruitment, remuneration, and retirement policies).
Figure 7.8 illustrates that staff are younger in Asian-Pacific administrations where,
on average, more than 60% are below 45 years of age, whereas elsewhere this percentage
is less than 50%. This is particularly the case in Nordic countries where this percentage
drops to one third of staff. When looking at the detailed table in the annex (see Table A.22)
a number of results standout, for example in Indonesia and Malaysia three-quarters of staff
are below 45 years of age whereas for Spain the figure is less than 20%. Conversely, there
are a small number of administrations where a significant percentage of staff is older,
for example, in the Nordic countries where, on average, 35% of staff is 54 or older, 10
percentage points above the average of 25%. In Iceland, Italy and the Netherlands, more
than 40% of staff is 54 or older.
Figure 7.8. Age profiles of tax administration staff, 2015

Percentage of staff by age bands for selected regional groupings
Under 25 years 25-34 years 35-44 years 45-54 years 55-64 years Over 64 years
Latin American
countries (7)
Nordic countries (5)
Europe without Nordic

countries and Russia (24)
Asian-Pacific
countries (7)
All countries
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
12 http://dx.doi.org/10.1787/888933546697
Note: Latin American countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru; Nordic
countries: Denmark, Finland, Iceland, Norway and Sweden; Europe without Nordic countries and Russia:
Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, France, Germany, Greece, Hungary,
Ireland, Italy, Latvia, Lithuania, Malta, Netherlands, Portugal, Romania, Slovak Republic, Slovenia, Spain,
Switzerland and United Kingdom; Asian-Pacific countries: Australia, Hong Kong (China), Indonesia, Korea,
Malaysia, New Zealand and Singapore
Source: Table A.22 Staff metrics – Age distribution; Calculations by the OECD Secretariat.
When comparing the age profiles of tax administration staff with the age profile of the
relevant jurisdictions’ general labour force, it should be noted that throughout all regional
groupings, except Asia-Pacific, the work force 45 years and above is over-represented in
administrations (see Figure 7.9). This outcome may well reflect how past administration
down-sizing has occurred, where staff leaving or retiring are not replaced until new full-
time equivalent (FTE) numbers are achieved (natural attrition).
Figure 7.9. Age profiles of general labour force, 2015

Percentage of general labour force by age bands for selected regional groupings
15-24 years 25-34 years 35-44 years 45-54 years 55-64 years Over 64 years
Latin American
countries (7)
Nordic countries (5)
Europe without Nordic

countries and Russia (24)
Asian-Pacific
countries (7)
All countries
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
12 http://dx.doi.org/10.1787/888933546716
Note: Latin American countries: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru; Nordic
countries: Denmark, Finland, Iceland, Norway and Sweden; Europe without Nordic countries and Russia:
Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, France, Germany, Greece, Hungary,
Ireland, Italy, Latvia, Lithuania, Malta, Netherlands, Portugal, Romania, Slovak Republic, Slovenia, Spain,
Switzerland and United Kingdom; Asian-Pacific countries: Australia, Hong Kong (China), Indonesia, Korea,
Malaysia, New Zealand and Singapore
Source: International Labour Organisation (ILO) – Labour force by sex and age, ILO modelled estimates, July
2015, www.ilo.org/ilostat; Calculations by the OECD Secretariat.
Regardless of how this age profile has come about, it is clear now that the average age of
staff in many administrations is at a level where it is already or soon will create challenges
to manage. To further complicate this challenge, most administrations are facing on-going
organisational change with a need to acquire the new skills to operate a heavily data driven
modern tax administration while retaining key intellectual knowledge. The presence of these
issues may account for why 70% of tax administrations feature age and other demographic
characteristics of staff in their current list of HR management approaches (see Table A.62).
Length of service
The difference in age profiles is also largely reflected in the length of service of tax
administration staff. Figure 7.10 indicates that a significant number of administrations
will not only face a large number of staff retiring over the next years, but that many of
these staff will be very experienced, thus raising further issues about retention of key
intellectual knowledge. The Figure also indicates that a small number of administrations
have an above-average workforce age, while the length of service is lower-than-average
(see Figure 7.10, Quadrant “Older staff/shorter tenure”).
Gender distribution
In light of the strong public interest in gender equality, administrations were invited to
break-down total staff and executive staff 2 by gender. As can be seen in Figure 7.11, while
many administrations are close to the proportional line, typically female staff remains
proportionally underrepresented in executive positions and significantly underrepresented

(see oval) in a number of administrations.
Figure 7.10. Average length of service vs. average age profile, 2015
20
Younger staff / longer tenure Older staff / longer tenure
18
Ave. length of service – years
16
TAS
14
average
12
10
Younger staff / shorter tenure TAS average Older staff / shorter tenure
8
30 35 40 45 50 55 60
Ave. age profile – years
12 http://dx.doi.org/10.1787/888933546735
Source: Tables A.22 Staff metrics – Age distribution and A.23 Staff metrics – Length of service; Calculations
by the OECD Secretariat.
Figure 7.11. Percentage of female staff – total female staff vs. female executives, 2015
100
90
80
Pct. of female executives
70
60
50
40
30
20
10
0
0 10 20 30 40 50 60 70 80 90 100
Pct. of female staff – total
12 http://dx.doi.org/10.1787/888933546754
Source: Table A.24 Staff metrics – Gender distribution and academic qualification.
Staff attrition
Staff attrition, also called staff turnover, refers to the rate at which employees leave an
organisation during a defined period (normally a year). High attrition rates may result from
a variety of factors, such as downsizing policies and/or lack of recruitment, demographics
or staff dissatisfaction. An organisation’s attrition rate should be considered together with
other measures, such as the hire rate, which looks at the number of staff recruited during
a defined period.
While a high attrition rate combined with a low hire rate is usually associated with a
general downsizing policy – and may therefore be accepted – administrations should be
concerned where both rates are high. Recruitment is costly, not only the recruitment process
itself but also the cost and time for training and supporting new staff members, and the
significant down time before new staff are fully operational or able to perform at the highest
level. Having high attritions rates are generally to be avoided.
Having attrition rates that are too low may also not be ideal either. Where an organisation
is growing a low attrition rate may be accepted. However, in situations where both the
attrition rate and the hire rate are low, an organisation may not have the ability to recruit
new skills as all positions are filled. This could be an issue particularly, for administrations
undergoing transformation and are, therefore, in need of staff with skills that are different
from what is currently available within the administration.
While what is considered a “healthy” attrition rate differs between industry sectors or
jurisdictions, and the general economic conditions also influence this judgement, average
attrition rates for Tax Administration Series (TAS) participating administrations of between
7.0% in 2014 and 6.9% in 2015 and hire rates of 6.4% in 2014 and 7.3% in 2015 (see
Table A.21) would seem to present a reasonable range for tax administrations of between 5%
and 10%. When looking at the specific administration data, it becomes apparent however,
that “attrition and hire” rates cover a very broad range. Figure 7.12 shows the relationship
between tax administration attrition and hire rates. It illustrates that there are a number of
administrations with attrition and hire rates well above 10% (upper-right box), while others
show very low attrition and hire rates (lower-left box).
Figure 7.12. Attrition and hire rates, 2015
25
20
Hire rate (in %)
15
10
0
0 5 10 15 20 25
Attrition rate (in %)
12 http://dx.doi.org/10.1787/888933546773
Note: Attrition rate = number of staff departures/average staffing level. Hire rate = number of staff recruitments/
average staffing levels. The average staffing level equals opening staff numbers + end-of-year staff numbers/2.
Source: Table A.21 FTEs in relation to citizens and labour force, and attrition and hire rates.
Human resource management

Given the challenges addressed earlier in this chapter, particularly in obtaining new
capabilities while dealing with an aging and shrinking workforce, success will often come
down to the way staff are engaged, managed and led. With 84% of the tax administrations
surveyed reporting the existence of a formal HR strategy that sets out their key plans and
objectives in management of its people, there is considerable benefit for those that have not
already established this practice to do so, and incorporate HR approaches adopted by the
majority of tax administrations.
Table 7.1. Human resource management approaches, 2015
Percent of administrations
Human resource management approach includes…

Specific Policies for Specific leadership
HR Specific recruitment Demographic flexible working and talent management Time reporting
strategy training plan plan characteristics arrangements programmes system
84% 95% 73% 69% 73% 76% 78%
Source: Table A.62 Human resource management.
For those that have an HR strategy, the importance of preparing existing staff for the
challenges ahead has been recognised. Almost all administrations have a plan that provides
for the upskilling of existing staff, and 3 out of 4 have specific leadership and talent
management programmes. Interestingly though, administrations do not put similar emphasis
on recruitment even though high quality recruitment processes allow the acquisition of
critical skills and new talent to be brought in.
Box 7.3. Succession planning and leadership programmes
In Malaysia, to ensure its future sustainability and competitiveness, in 2011 the Inland
Revenue Board (IRBM) commenced the CEO Incubator Programme (CIP). Based on the principle
that “future leaders are made today”, the programme is a key tool in IRBMs succession planning
policy for talent search, classification and continuous development programmes. The CIP starts
with the Search Committee identifying and selecting high performing talent. Individuals selected
undertake personality profile analysis before being invited to join the programme.
CIP modules and syllabus are developed in collaboration with local universities and are
specifically tailored to IRBM requirements around three main competencies: global focus and
strategic thinking; leading and managing change; and effective stakeholder engagement. The
programme which is divided across three levels: Talent Development; Senior Development;
and Advanced Development focuses on accelerating leadership skills through competency
based courses, rotational job experiences, coaching and mentoring and value added courses.
Exposure to comprehensive work experience and continuous transfer of knowledge both locally
and internationally is also provided.
Successful talent will fill posts identified as either: key leadership posts (5 posts); key
critical posts (28 posts) and critical posts (230 posts) based on vacancies IRBM’s development
programmes will indicate readiness level of each person to fill the vacancy available, with
candidates evaluated through performance monitoring and 360˚ feedback. Since its inception
most of IRBMs key positions have now been made via the CIP process.
Source: Malaysia – Inland Revenue Board of Malaysia (2017).
Human resource autonomy

As set-out in Chapter 3 on institutional arrangements, tax administrations require
sufficient autonomy and power in relation to recruitment, development and remuneration
to ensure the effective and efficient operation of the tax system. While the majority
of administrations report having high degrees of autonomy for all HR related matters,
a portion of administrations only have autonomy in some areas, and some have no
autonomy at all. Further, as mentioned in previous editions of the TAS, even where tax
administrations have autonomy, there are often regulatory or budgetary constraints that
may inhibit the effective use of these powers. Accordingly, there is considerable variation
in the extent of the autonomy tax administrations enjoy in HR matters (OECD, 2015: 149).
As can be seen in Table 7.2, the degree of autonomy remains largely consistent across
the different areas, with the exception of “Placement of staff within a salary range” which
is significantly below the ratings of other HR powers administrations typically have. The
inability of more than a third of the administrations to set remuneration for existing or new
staff could be a concern when hiring new people or trying to retain existing staff in areas
where administrations must increasingly compete with the private sector. This may be a
particular concern in the areas of digital technologies, information management, advanced
analytics, behavioural science and critical IT capabilities.
Table 7.2. Human resource autonomy, 2015
Percent of administrations: Degree of autonomy concerning…

Skills and Determination whether Placement
Determination Promotion qualifications required work is carried out of staff Termination
of work Appointment of existing for appointment of by permanent staff or within a of
Degree of autonomy requirements of new staff staff promotion contractually salary range employment
Autonomy for all staff 80% 76% 76% 73% 69% 55% 69%
Autonomy for some staff 16% 16% 18% 22% 16% 11% 20%
No autonomy 4% 8% 6% 5% 15% 34% 11%
Source: Table A.59 Human resource autonomy.
Staff satisfaction and performance management

Effective performance management is an essential ingredient in any successful business.
Such systems provide staff with an understanding of expectations for their work and how
they can personally contribute to the success of the organisation they are working for.
The importance of relating individual objectives and behaviours to the overall objectives
and values of the administration is essential. Further, performance management systems
allow organisations to identify gaps in the skillset of staff members and to develop specific
approaches to address this. Almost all tax administrations report that they have performance
management systems in place, and most of these include specific objectives for each staff
member (see Table 7.3). However, while individual development plans are important,
one-quarter of the administrations do not include them in their performance management
system.
Conducting regular surveys to gather employee perceptions of the workplace and HR
management to better inform decision making in these areas is of particular importance
in times of change. Measuring staff engagement, satisfaction and motivation, sharing the
results of surveys of these areas with staff, and involving them in the selection, design
and implementation of changes has proven a successful formula to increase productivity
in a number of tax administrations. Most administrations report conducting periodic staff
satisfaction surveys, although the frequency of surveys varies (see Table 7.3). Almost all
of those tax administrations who survey staff also share survey results with staff and most
also consult with staff when considering responses to survey findings.
Table 7.3. Staff satisfaction and performance management, 2015

Staff satisfaction, engagement and motivation Performance management

If yes, If yes,
Assessment Staff engaged Includes
Periodic of staff Results shared when responding Includes individual specific Evaluation at
staff survey engagement with staff to assessment System in place development plans objectives least annually
76% 86% 90% 79% 89% 73% 86% 96%
Source: Table A.60 Staff satisfaction and performance management.
Remuneration
Over three-quarters of tax administrations report that staff remuneration levels are tied
directly or broadly to wider public sector pay scales, while almost one-quarter report that they
have their own unique pay system (see Table 7.4). Further, more than two-thirds reported that
remuneration can be linked to performance. For those that can link performance to pay and
reward, good performance can typically result in increased remuneration (92%) while poor
performance will less often result in reduced salary (45%) or the denial of annual increments
(63%). There are a small number of administrations that report being unable to reward good
performance.
Table 7.4. Remuneration, 2015

Pay scales If yes,

Tied broadly Good Poor
Tied directly to normal civil/ performance Poor performance
to normal civil/ public sector pay Performance can result performance can can result in
public sector scales but there linked to pay and in increased result in reduced denial of annual
pay scales is some flexibility Unique reward remuneration salary increment
47% 29% 24% 69% 92% 45% 63%
Source: Table A.61 Remuneration.
The nature of the reward mechanisms vary greatly and include individual or collective
salary increases, flexibility to adjust salary scales, promotions, individual or collective
bonuses, and non-monetary rewards.3
Capability change
The changes tax administrations are managing at present, whether technological,

international, policy or budget driven are significant. The level of change prompted one
tax Commissioner recently to state that managing the technology change was the easy bit.
The thing that was keeping him awake at night was how to create the new culture taxpayers
expected, and how to transition staff through this change.
All tax administrations report a strong focus on strengthening their ability to manage
and implement change. Further, they are investing in new capabilities to support their
ability to implement change more rapidly and to support the development and adoption of
new services and products, particularly involving digital technology. Box 7.4 summarises
the approaches taken by two administrations to managing future skills acquisition.
Box 7.4. Capability change
In Canada the Canada Revenue Agency (CRA) employs more than 40 000 employees,
relying on diverse skill sets to effectively execute its mandate. Recognising the need to keep
pace with technological change, address emerging challenges, and seize new opportunities,
the CRA anticipates and identifies the necessary skill sets required to meet these challenges
through the Agency Workforce Plan. The latest Plan is calibrated to anticipate the shift in the
CRA’s work from transaction-based to knowledge-based activities, and to account for the
upcoming challenges associated with an aging workforce. While the Agency Workforce Plan
identifies and articulates the Agency’s recruitment plan over a three year planning period, the
long-term planning horizon extends beyond the medium-term to 2025 and 2030. This longer-
term outlook provides the necessary context in which medium-term plans are developed.
The CRA uses a consultative process to identifying future skill sets that begins at the
programme level, as they are uniquely positioned to anticipate and identify future challenges and
the requisite skill sets needed within their functional areas. This process takes into consideration
a review of the current workforce, a “skills gap analysis”, and an external environmental scan to
better calibrate future skill sets with anticipated external developments (e.g. economic, business,
technological) and to better target, recruit, and retain skilled individuals in a competitive labour
market.
Recognising the value of bringing a multi-disciplinary approach to bear on complex tax
issues, the Agency has identified individuals with knowledge in accounting, economics (including
behavioural economics), intelligence, data analytics, and advanced technology as highly valued
assets to the organisation. These skill sets will position the Agency to better hire, develop and
retain the right talent, understand taxpayer behaviour, enhance voluntary compliance, and to
develop approaches to address challenges presented by new forms of economic activity and
technological developments, such as digital currencies.
In Singapore, the Inland Revenue Authority of Singapore (IRAS) drew on new opportunities
to further transform IRAS by refocusing and recalibrating its HR capabilities, strategies and action
plans so as to better meet the rising expectations of a digitally savvy population for high quality
service and swift policy implementation. The following four areas have been identified as critical
to professionalise IRAS’ HR team in support of a future-ready workforce in IRAS: Strategic
workforce planning (capability to better identify our core and future capabilities, and redesign
our structure, processes, and training plans); HR analytics (using data intelligently, to gain deeper
insights and make better decisions); Design Thinking (to anticipate, co-create and customise
solutions to meet staff needs); and Digitalisation (to design and deliver convenient digital services
to staff). Some of these capabilities are also applicable to key job families in IRAS.
Sources: Canada – Canada Revenue Agency; Singapore – Inland Revenue Authority of Singapore (2017).
Eighty-five percent of the participating administrations have indicated that they assess
current and future capability needs. However, only two-thirds of them have a formal plan to
address gaps or formal targets to increase capability (see Table A.63). Figure 7.13 shows that
a large number of administrations have commenced lifting their IT and analytics capabilities
and now employ data scientists, chief analytics officers and system analysts. This finding
is not surprising in a world that is becoming more focused on using data. There is likely
an opportunity, however, for other administrations that are not hiring these capabilities to
reconsider the importance of such positions to enabling modern tax administration.
While recruitment is one option to obtain new skills, tax administrations still report
a strong focus on growing the capability of their existing staff through training. The need
to increase capability internally is particularly important where employment conditions,
contractual requirements and remuneration levels, make it difficult to hire skilled staff,
particularly, when competing with private sector for skills.
Figure 7.13. Number of administrations having specialised positions, 2015
40
35
30
25
20
15
10
0
Data scientists Psychologists Ethnographic Chief analytics officer Behavioural Computer system
researchers researchers analysts
12 http://dx.doi.org/10.1787/888933546792
Source: Table A.63 Future capability needs.
Most tax administrations reported they have engaged in arrangements with educational
institutions to provide accredited training on tax technical subjects (71%) and/or non-tax
technical subjects (58%). Further, some have engaged with large corporate taxpayers/
traders to develop the commercial awareness of their technical staff (22%) – see Table A.63.
The previously reported approach of a number of OECD jurisdictions of professionalising
the public sector through increased access to university-accredited training for public
service professions is still evident.
Once a major recipient of technical assistance from international organisations and
other tax administrations, China’s tax administration (SAT) is now playing a major role
in the delivery of tax administration capacity building. Box 7.5 describes its role over the
last three years.
Box 7.5. Delivery of tax administration capacity building
In China, SAT in co‑operation with Ministry of Commerce, has organised training

programmes for tax officials from Asian and African developing countries. In 2016, regular
training events have been jointly organised for more than 200 tax officials from 54 developing
countries. Together with the OECD, SAT has established the 5th OECD Multilateral Training
Centre in Yangzhou, China, the only centre to date established in a non-OECD member
jurisdiction. The centre, which was opened in 2015, has provided six training programmes for
80 tax officials from 20 developing countries by the end of 2016, covering topics focusing on tax
treaty issues, base erosion and profit shifting, international tax avoidance and value added tax.
SAT has co-chaired with the Canada Revenue Agency the FTA work on capacity building
that culminated in the delivery of the OECD report: Tax Administration and Capacity Building – a
Collective Challenge at the FTA Plenary in Beijing, China in May 2016. The contribution of SAT
has greatly facilitated the work of the Capacity Building programme with its particular dual status
as both recipient and provider of technical assistance in tax administration over three decades.
Source: China – State Administration of Taxation (2017).
Notes
1. In the section on Staff metrics, tax administration includes both tax and customs staff of the
administration.
2. As the survey did not provide a definition for “executive staff “administrations used their own
definitions.
3. See examples included in Notes to Table 4.3. in the Tax Administration Series 2013 (OECD,
2013: 167).
References
OECD (2017), Tax Audit in the 21st Century, OECD Publishing, Paris (forthcoming).
OECD (2015), Tax Administration 2015: Comparative Information on OECD and Other
Advanced and Emerging Economies, OECD Publishing, Paris, http://dx.doi.org/10.1787/
tax_admin-2015-en.
OECD (2013), Tax Administration 2013: Comparative Information on OECD and
Other Advanced and Emerging Economies, OECD Publishing, Paris, http://dx.doi.
org/10.1787/9789264200814-en.
OECD (2012), “Executive Overview: Working Smarter”, OECD, Paris, www.oecd.org/
tax/forum-on-tax-administration/publications-and-products/compliance/49428156.pdf.
PART II. Topical issues in tax administration – 137
Part II
Topical issues
in tax administration
The chapters in Part II should not be reported as representing the official views
of the OECD or of its member countries. The opinions expressed and arguments
employed are those of the author(s).
8. Advanced analytics – 139
Chapter 8
Advanced analytics
Daniel Sinnott and Rachel O’Carroll

Office of the Revenue Commissioners, Ireland
“Advanced analytics” encompasses a set of techniques to uncover insights from

data to inform decisions and to test policies and interventions. From its initial use
in the selection of cases for audit, the scope of advanced analytics applications has
broadened significantly, as has the amount of available data. Tax administrations now
use analytic techniques to inform a wide range of actions, including optimising debt-
management processes, improving filing rates and quality, delivering better taxpayer
service, and understanding the wider impact of policy changes. Moreover, many of
these applications now support real-time (or near real-time) operational processes.
This widening of the field has given rise to a range of new organisational and
technical challenges, from establishing appropriate governance and project-
management structures, to building representative datasets and selecting suitable
modelling techniques.
This chapter summarises how Forum on Tax Administration (FTA) administrations
are using advanced analytics today and outlines the principal management and
governance challenges they face.
140 – 8. Advanced analytics
What is advanced analytics?
Advanced analytics is the process of applying statistical and machine-learning

techniques to uncover insights from data. The aim is to better inform decisions about
the deployment of resources and the design of interventions and policies. Most advanced
analytics projects fall into one of two categories:
• Predictive analytics: This aims to anticipate likely problems by looking for patterns
in historical data. For example, it can help to identify what aspects of a tax return are
most likely to be inaccurate, or find significant anomalies in a particular tax return
compared to other returns from similar taxpayers. This allows administrations to
consider preventive measures (for example rephrasing a question, producing better
guidance or pre-filling with third-party data) and helps in the selection of individual
cases for audit.
• Prescriptive analytics: The techniques used in prescriptive analytics aim to uncover
causal relationships, that is whether particular actions caused or just coincided with
a change in taxpayer behaviour. For example, does a particular style or type of
communication make a difference to on-time filing or does it make no significant
difference? Prescriptive analytics thus allows for easier testing and refining of
different (and often costly) compliance interventions.
It is worth noting that prediction based on previous examples or revealed behaviours
as well as causal inference are ordinary, everyday tasks carried out by administrators
and policy makers using their experience and judgement. The use of advanced analytics
techniques simply carries out these tasks with more reliance on data rather than human
judgement (which can show bias and be highly subjective). As the size and breadth of data
sets increases, this gives tax administrations the opportunity to uncover a greater range of
insights which might not otherwise be apparent. This can be the case for example where
anomalies in a pattern may not be very significant at an individual level, but may be very
large overall; or where there are long-held and ingrained assumptions about causality
driving decisions which turn out not to be supported by the data.
Application of advanced analytics
A key factor in determining the success of an advanced analytics project is the care
taken to understand the nature both of the business problem at hand, and of the data available
to address that problem. This assessment will determine the right analytical approach to
be taken – whether to use supervised or unsupervised learning techniques, prescriptive
modelling approaches, unstructured data, explanatory modelling, or other approaches.
Administrations that take proper care over this decision will greatly improve their prospects
of developing useful insights.
From its initial use by tax administrations in the selection of cases for audit, the scope
of advanced analytics applications has broadened considerably. Analytic techniques are
now used across all tax-administration functions and activities, with many administrations
now using them to support real-time or near real-time processes.
The following figure provides an overview of how 16 FTA administrations have
allocated their advanced analytics efforts across different operational areas.
Figure 8.1. Use of advanced analytics
100
Percent of administrations surveyed
90
80
70
60
50
40
30
20
10
0
Audit case selection Filing and payment Taxpayer service Debt management Policy
compliance
12 http://dx.doi.org/10.1787/888933546811
Source: OECD (2016), Advanced Analytics for Better Tax Administration: Putting Data to Work, p. 20,
Table 2.1, http://dx.doi.org/10.1787/9789264256453-en.
Audit case selection

For most tax administrations, the first use of advanced analytics was in assisting with
the selection of cases for audit or verification. Standard advanced analytics techniques and
approaches are well suited to this type of activity as they enable administrations to learn
directly from the outcomes of past interventions. For example analysis of previous audits
which have resulted in large adjustments might show that there was a pattern of particularly
high or low values in some components of the tax return. This might then provide a basis
for future audit selection (with further testing to check the validity of those insights). The
set of techniques which allow administrations to identify such characteristics fall under the
heading of supervised learning.
Where administrations have used such techniques with a broadly representative sample
of taxpayers, this has proved to be a highly effective approach. However, where the sample
used does not adequately reflect the wider population, supervised learning techniques may
give unreliable results since the model developed can only learn about a particular segment
of cases. In such scenarios, administrations have begun to apply techniques that identify
anomalous taxpayers or returns by comparing outcomes across relevant peer groups (as
opposed to learning from past interventions). While these models will not always target
risk accurately (since some anomalies may be perfectly innocent), they are capable of
uncovering wholly new insights into non-compliance. Such approaches generally fall into
the category of unsupervised learning.
Filing & payment compliance and debt management

While not used as widely as in audit case selection, advanced analytics techniques are
increasingly deployed to improve filing and payment compliance and the settlement of
arrears. The analytical approaches used in these areas tend to be quite different from those
used in pure case selection. In these, the task is not to predict how a taxpayer will behave
in the absence of intervention, but how they might behave in response to a particular
intervention. To tackle this problem administrations are beginning to build models that
learn from the outcomes of controlled experiments in order to identify which cases should
be subject to intervention, and which specific interventions should be carried out. This
category of analysis usually referred to as “prescriptive analytics”.
Box 8.1. Data mining models for non-filer programmes
In Canada the Canada Revenue Agency (CRA) continues to refine its predictive models
developed to assist in managing its non-filer programmes, which undertake a range of actions
to obtain overdue returns. The models improve selection and prioritisation of cases, allow better
workload management and improve business information and reporting. In its first year in
operation, one of the non-filer models was responsible for the assessment of CAD 127.6 million
of additional taxes. The CRA has also developed several other models to improve programme
effectiveness and enhance taxpayer services by predicting self-resolution (i.e. which taxpayers
will file without intervention) and responsiveness to a specific compliance action.
In addition to predictive techniques, CRA applies prescriptive analytics (methods which
focus on finding the best course of action for a given situation) to support improved strategic
and operational programme delivery. Prescriptive analytics is used to enrich the CRA’s
understanding of the non-filer population, optimise operational processes, and direct the
application of compliance activities, allowing for more fact-based decisions. Complementing
the use of predictive models, the non-filer programme is expanding its use of behavioural
economics through nudge experiments to influence taxpayer compliance behaviour. “Nudges”
are carefully designed interventions intended to steer people towards better decisions by
altering the way that different choices are presented.
Box 2.1, http://dx.doi.org/10.1787/9789264256453-en.
Taxpayer service
The use of pro-active messaging, calling, and other interventions in anticipation of
potential non-compliance has paved the way for administrations to look more closely at
how advanced analytics can improve service delivery for taxpayers. Such uses are set to
become of greater importance to tax administrations in the coming years as compliance
and verification moves upstream. Wider use of “unstructured” data (e.g. customer emails,
call transcripts, etc.) can help significantly in these efforts. This can uncover areas of
common confusion or lack of knowledge, for example of filing deadlines or of how the tax
rules work in particular areas. This then allows tax administrations to consider and test
different interventions with different audiences in mind, for example proactive contacts
with particular groups of taxpayers, different types of media (which may be appropriate to
particular age groups) or the production of guidance among other things. Using advanced
analytics in this way can also help in the design of machine rules, for example in telephone
menus, or identifying the most effective way to present information on web pages.
Box 8.2. Text mining of inbound emails
In Singapore, the Inland Revenue Authority of Singapore (IRAS) in 2014 began using text-
mining techniques to analyse the content of emails received from taxpayers. The objectives
of this project were to identify the nature of taxpayer inquiries and highlight important
changes and trends that might require response. Text data from taxpayer correspondence
was extracted, cleansed, and structured to derive patterns and insights. Close collaboration
between the analysts and business users during the course of the project enabled findings to be
contextualised and thereby improved the text mining process.
Box 8.2. Text mining of inbound emails (continued)
As a result, the IRAS was able to uncover insights, otherwise locked in textual data,
on issues pertinent to taxpayers, for example in one project, text-mining helped to identify
the common queries taxpayers had after an existing tax policy was changed. Based on this
analysis, IRAS was able to launch timely and targeted campaigns, provide more guidance
on its website, and proactively initiate updates to taxpayers impacted by the changes. These
approaches reduced the need for taxpayers to contact the IRAS.
Ongoing tracking of the nature of email enquiries combined with the IRAS’ existing
analysis of structured data has helped the IRAS to identify trends on particular topics and to
pre-empt or reduce contacts, thereby improving service delivery for taxpayers. Text mining has
now replaced the manual tracking of email enquiries, which has saved time and improved staff
productivity. It has also enabled the IRAS to track the nature of enquiries more objectively,
avoiding the inconsistencies of interpretation typical of manual tracking.
Source: Singapore – Inland Revenue Authority of Singapore (2017).
Policy evaluation
Although most analytics work is carried out to support operational activity and decision-
making, tax administrations are increasingly using analytics to assist in decision-making
in relation to strategy and policy. The most common analytic applications in this field aim
to evaluate or anticipate the impact of changes in tax policy. In general, the techniques used
in this area come under the heading of explanatory modelling, since the main objective is
to understand and explain the relationship between specific variables, rather than to predict
the overall outcome. While it is often difficult to gauge the accuracy of such models, the
approach can be effective where used to test a clearly articulated theory of behaviour.
An example of the use advanced analytics for policy assessment is China’s creation of a
general-equilibrium model to measure the economic and social impact of the introduction of
a value added tax (VAT) in 2012. This model played a key role in the policy reform process
by enabling the Chinese tax administration to trace the effects of the VAT changes on tax
revenue, industry structure, social welfare, and a wide variety of other economic indicators.
Organisational management of advanced analytics projects
Figure 8.2 illustrates how four key characteristics of advanced analytics projects give
rise to major organisational and governance challenges.
Governance
Analytics governance requires a strong focus on integrating the business, information
technology (IT), and analytics perspectives, and managing the uncertainty inherent in
most advanced analytics projects. Many tax administrations have established integrated
governance bodies to prioritise, resource, and oversee analytics projects. By consolidating
analytics governance in a single, permanent body, administrations can begin to build
expertise and experience across multiple projects.
Figure 8.2. Key characteristics of advanced analytics projects

Project characteristics Organisational challenges
Uncertainty
Outcome not known until model Project management
is complete
Dependency
Data management
Reliance on IT for high-quality data
Governance
Novelty
Change management
Techniques not familiar to most staff
Complexity
Capability development
Advanced technical skills required
Box 8.3. Centralised governance of advanced analytics
In Ireland in 2015, the Office of the Revenue Commissioners established a senior management
group to prioritise and oversee all advanced analytics initiatives across the organisation. Prior to
this, governance was organised on a project-by-project basis. While a number of effective models
were introduced under this system, the absence of a centralised, permanent governance structure
made it difficult to build organisational momentum behind analytics, and to maintain and upgrade
the models that had been built.
The new senior management group – the Revenue Analytics Group (RAG) – is led by the
Chairman of the Revenue Commissioners, and consists of representatives from the business,
analytics, and IT functions. The RAG also has direct links into the key operational and IT
governance bodies, the latter of which oversees the advanced analytics budget. Business
intelligence initiatives are governed through a separate but linked structure.
This structure provides cohesive governance of all of Revenue’s advanced analytics work:
it aligns analytics projects to organisational priorities; it ensures that the analytics function
works within the appropriate infrastructure; and it co-ordinates the activities of multiple units
to ensure that analytics initiatives deliver a strong return on investment.
Box 4.1, http://dx.doi.org/10.1787/9789264256453-en.
Project management
The nature of advanced analytics projects (which are essentially an attempt to find a
pattern that may or may not exist) creates significant uncertainty in relation to benefits and
timelines. In many ways, advanced analytics initiatives are closer to research and development
work than to ordinary IT or business projects. For analytics functions to deliver value,
administrations must find ways to manage this uncertainty. Most administrations address this
problem by using iterative, “test-and-learn” approaches in order to gather regular feedback
and deliver incremental improvements. Many have taken an exploratory approach to project
prioritisation and management, tending to begin work on a wide range of areas, and narrowing
their focus only as it becomes clear that a particular project is likely to yield results.
Data management
To get the most out of advanced analytics, it is essential that administrations recognise
that “big data” may not be “useful data”. Advanced analytics models can only learn from the
data they are applied to. If this data is inaccurate, or incomplete, or subject to selection bias,
then the value of any resulting model will be severely limited, regardless of the volume of
data available. To address this issue, administrations should develop strategic approaches to
data collection and management. Instead of seeing data simply as the residue of operational
processes, administrations must treat it as an asset to be actively managed and developed.
To this end, administrations may wish to consider sampling programmes, randomised
controlled trials, and similar data-gathering exercises. In addition, administrations should
invest in the development of data dictionaries to ensure that analysts and business users can
fully understand the information they are working with. Finally, administrations should
actively look to domestic third-party sources and data acquired through new sources, for
example automatic exchange of information initiatives, to develop a more rounded picture
of taxpayer characteristics and behaviour.
Change management
Administrations are deploying a variety of approaches to ensure that advanced analytics

models are successfully brought out of the laboratory and into the field. These include
demand-side measures such as training operational staff in understanding analytical
principles, and supply-side measures such as establishing specialist change-management
units dedicated to analytics implementation. Perhaps the most promising approaches are
those that combine demand and supply-side elements. In Norway, for instance, an analytical
project will proceed only if the prospective business “client” is willing to second a member
of staff to act as project manager. This ensures close collaboration between analytical and
operational staff, and also imposes a useful check on the project prioritisation process.
Building capability
Finally, the inherent complexity of the modelling process creates challenges in relation
to capability development. Tax administrations are working hard to secure and retain
resources with the skills to assemble, clean, transform, and fit models to large datasets.
These skills are scarce, and very much in-demand both in the private sector and academia.
The need for highly-skilled technical staff is especially acute for administrations that wish
to take advantage of the flexibility and low cost of open-source statistical programming
languages (as distinct from commercial software packages). While competition to recruit
analysts is intense, tax administrations do have certain competitive advantages: they can
offer large and varied datasets, a diverse set of interesting analytical problems, and the
opportunity to use advanced analytics to serve a wider public interest.
Next steps
Advanced analytics is now well established as a core capability in the decision-making

and work-management approaches of advanced tax administrations. Its importance will
only continue to increase as new data sources become available, including specific tax
data such as that received through enhanced automatic exchange of information as well as
data from non-tax sources, including other parts of government. It is also important that
tax administrations keep abreast of how advanced analytics is being used across public
administration and business and consider what insights or lessons this may offer them for
their own work.
The nature of advance analytics – essentially the automated search for useful patterns
in large data sets – means that success is not guaranteed and many seemingly promising
initiatives may turn out to be dead-ends. Care is therefore needed in selecting projects,
designing analytical approaches, curating data, and evaluating results. Administrations
must be prepared to make a substantial investment of time and effort if they wish to turn
raw data and computing power into practical, actionable insights.
References
OECD (2016), Advanced Analytics for Better Tax Administration: Putting Data to Work,
9. Co‑operative approaches to tax – 147
Chapter 9
Co‑operative approaches to tax
Hans J.H.A.M. Rijsbergen

The Netherlands Tax and Customs Agency
Over the last decade an increasing number of tax administrations have adopted
co‑operative compliance programmes for large businesses. These are based on
openness, disclosure and transparency between the tax payer and tax administrations
and on the principle of trust. For business these programmes provide a higher
degree of tax certainty at an early stage, enhance their internal understanding and
management of risk and can lead to a reduction in compliance costs, particularly those
associated with disputes, as well as reputational benefits. For tax administrations
the main benefits are improved assurance of tax, reduction in disputes, increased
awareness of business concerns and changes in business models as well as better
allocation of resources.
This chapter examines developments in co‑operative compliance approaches and
the scope for multilateral initiatives which may help increase tax certainty more
widely, helping to promote investment and growth.
148 – 9. Co‑operative approaches to tax
Mutual or conflicting interests
In the past the relationship between tax administrations and large businesses, particularly
multinational enterprises (MNEs) could often be characterised as adversarial, with the former
looking to maximise tax collected and the latter seeking to lower the total incidence of tax.
‑While this may sometimes be the case, in particular in the face of the aggressive tax
planning undertaken by some entities, as a general proposition this view is too simplistic.
It ignores that businesses and tax administrations are part of the same social and economic
framework and that tax is integral to that on an ongoing basis, covering both the revenues
raised and the costs imposed by tax collection. While views may not always be aligned,
for example on the interpretation of aspects of tax law, tax administrations and large
businesses share a common interest in making the tax process as simple, transparent and
cost-effective as possible, improving tax certainty and freeing up productive resource while
paying the appropriate amount of tax and ensuring public trust.
This shared interest lies behind the development and implementation in 60% of the
55 countries that responded to the tax administration survey of programmes for co‑operative
compliance (see Figure 9.1). These programmes are aimed at providing greater certainty
for large businesses which choose to participate in such programmes and at allowing tax
administrations to apply their resources effectively and efficiently to this important group
of taxpayers (which have the most complicated tax affairs).
Figure 9.1. Co‑operative compliance approaches – Existence and implementation status, 2015
Already in place
18
No co-operative
compliance approach
22
Co-operative
compliance approach Implementing
exists or planned 10
33
Planning
5
12 http://dx.doi.org/10.1787/888933546830
Source: Table A.141 Co‑operative compliance – Existence and nature of the model.
Co‑operative compliance programmes will not be suitable for all taxpayers. In some
cases, taxpayers may not wish to invest the resource needed to fulfil the conditions of
entering such a relationship, which needs to be across a group, preferring alternative
controls. This might be the case, for example, if such programmes are not available in all
the main jurisdictions in which a group operates. On the tax administration side, it may be
considered inappropriate to establish such relationships in sectors which have been more
characterised by aggressive behaviour or where they do not yet have a good understanding
of the risks, for example those resulting from changes in business models. In addition,
entry into such programmes may not be considered appropriate based on taxpayer’s
previous behaviour unless and until a tax administration is confident that the sources of
such behaviour have been addressed and appropriately controlled.
Figure 9.2. Nature of co‑operative compliance programmes, 2015
18
16
14
12
10
8
6
4
2
0
Treatment based on Participation based on Participation based on Other
enhanced relationship, a formal agreement specific regulation/
no formalised procedure legal framework
12 http://dx.doi.org/10.1787/888933546849
Note: Administrations were able to make multiple selections.

Source: Table A.141 Co‑operative compliance – Existence and nature of the model.
Risk management and taxpayer behaviour – the background to co‑operative compliance
Taxpayers differ in many regards, including ownership structures, governance regimes,

internal organisation, complexity, amounts of tax payable, industry or international
orientation; and perhaps most importantly their attitude towards payment of tax which
influences their decisions around strategy, transparency and/or the tax control they are
willing and able to achieve.
The risk management approaches of tax administrations are increasingly looking to
factor in these differences in attitude. This is not only as regards technical tax matters, such
as complex transfer pricing arrangements, but also the behavioural risks of the taxpayer.
This influences how administrations respond to the taxpayer, including any tailored
interventions that are deployed, and how specific compliance risk interventions are used to
support increased and sustainable compliance.
At the taxpayer specific level, tax administrations will take such decisions based, inter
alia, on the actual compliance behaviour of the taxpayer, including the control measures it has
taken. In this regard relevant information includes, among other things: information about tax
strategy; the existence and quality of any tax control framework; self-monitoring activities;
engagement of tax intermediaries; and assurance statements by senior management.
Box 9.1. Use of legislation
In order to influence taxpayer behaviour, in particular the understanding and management

of tax risks, the United Kingdom has taken legislative measures that target the tax processes
of large businesses. Under this legislation, businesses with a turnover of over GBP10 million
or a minimum of 20 employees have to appoint a Senior Accounting Officer. The Senior
Accounting Officer has the main duty to ensure and certify that the company establishes and
maintains appropriate arrangements to allow tax liabilities to be calculated accurately in all
material respects.
Box 9.1. Use of legislation (continued)
Very large businesses, whose turnover in the previous tax year was above GBP 200 million
or whose balance sheet was over GBP 2 billion, are required to publish their tax strategy. The
tax strategy should explain the business’s tax arrangements, attitude to tax planning, including
the role of external advice, the risk level and the approach to working with Her Majesty’s
Revenue and Customs (HMRC). Information from the Senior Accounting Officer and the tax
strategy are used in the overall risk management process by HMRC.
Tax administrations’ general approach to compliance strategies for what they perceive
to be lower risk large businesses has increasingly been formalised under voluntary
co‑operative compliance programmes. These rely upon an agreed set of commitments,
demonstrated behaviours and actions by taxpayers which, taken together, give a high degree
of reassurance as to the control of tax risks and ultimately the reliability of tax returns.
Such programmes do not, though, give a more favourable tax outcome to participants. Tax
administrations are of course required to administer laws and regulations for all taxpayers in
an equal manner. Rather such programmes shift the emphasis of compliance away from, in
broad terms, auditing after filing to reliance on the assurance systems of businesses coupled
with a high degree of transparency towards the tax administration. This also allows, in
some circumstances, for greater certainty to be provided to business in relation to specific
approaches or transactions as part of upfront engagement and a system of “no surprises”.
Like all compliance strategies they are aimed at ensuring that the right amount of tax is
paid at the right time. Figure 9.3 sets out both the specific features countries include in their
programmes and the requirements for participation. It shows that board level commitment
and the existence of a tax control framework are the most common requirements.
Figure 9.3. Co‑operative compliance programmes: Features and requirements, 2015
30
25
20
15
10
0
Disclosure Real-time Transparency More certainty Other Commitment Pending Taxpayers No payment Other
of relevant solving from the side on tax on issues need need arrears
tax issues by of relevant of the position for broad level to be solved tax control
the taxpayer tax administration taxpayer framework
on a real-time issue on audit plan, in place
basis etc.
Specific features of the approach Requirements for participation
12 http://dx.doi.org/10.1787/888933546868
Sources: Tables A.142 Co‑operative compliance – Participation and specific features of the approach and A.143
Co‑operative compliance – Requirements for participation.
Co‑operative compliance approaches also require tax administrations to adapt the way
they interact with business. The commitment of business at senior management levels needs
to be mirrored with a similar commitment within tax administrations. In addition an essential
component of the co‑operative compliance approach is that tax administrations must actively
involve and engage the taxpayer, their representatives and other stakeholders in the evaluation
and development of compliance approaches. This will include consideration and discussion
of appropriate guidance and how to minimise burdens.
Box 9.2. Use of tax risk management
The Australian Tax Office (ATO) has published a tax risk management and governance review
guide on its website. The guide was developed primarily for large and complex organisations, tax
consolidated groups and foreign multi-national corporations conducting business in Australia,
but the principles can be applied to a corporation of any size if tailored appropriately. The guide
is focussed at two levels; board-level and managerial level responsibilities. ATO comments
that within organisations that have good corporate governance processes in place many of the
identified key controls will already exist. In addition if ATO needs to assess the tax governance
processes, a strong tax control framework will give confidence that tax risks are well managed and
an assessment is likely to take less time and resource than otherwise.
Sources: Australia – Australian Tax Office (2017).
Tax control framework – the central pillar
One of the findings of the OECD report Co‑operative Compliance: A Framework

(OECD, 2013) was the centrality of tax control frameworks to co‑operative compliance
programmes. This was reaffirmed in the light of the further experience of tax administrations
in the report Co‑operative Tax Compliance: Building Better Tax Control Frameworks
(OECD, 2016). A Tax Control Framework (TCF) contains a set of actions and processes
which allow large businesses to control, and be seen to control, the core elements of their tax
position. The six essential building blocks of a TCF are:
• The tax strategy, which should be clearly documented and owned at Board level.
• Comprehensive application of the TCF, such that it governs the full range of the
business’s activity.
• Clear responsibility, with clarity that the Board is accountable for the design,
implementation and effectiveness of the TCF and that the tax department’s role and
responsibility is clearly recognised.
• Governance documented, with a system of document rules and reporting which
allows risks and anomalies to be identified and the effectiveness of the TCF
reviewed periodically.
• Testing, monitoring and maintenance to ensure compliance with the TCF.
• Assurance – which can be seen as the overall result of the TCF – which should be
capable of providing assurance to stakeholders, including tax administrations, that
tax risks are subject to proper control and that tax returns can be relied upon.
While the existence of a TCF is central to giving a high-degree of comfort to tax

administrations in how a business controls risk, it cannot be seen as a sole proxy of
co‑operative compliance but needs to sit in within a context of mutual transparency and
engagement. In fact, almost half of countries that responded to the tax administration
survey reported it as a requirement for participation in the programme (see Figure 9.2). It
also needs to be subject to review of its effectiveness (including ensuring that over time tax
administrations do not lose objectivity). Such reviews can be performed in different ways,
for instance through the review of a self-monitoring report, reviews by third parties, or an
audit of tax returns or particular tax risks.
Tax intermediaries can also play an important role in assurance of co‑operative
compliance. While they are not generally involved in the preparation of tax returns, they
are frequently involved in providing advice about tax structures, including the adequacy of
internal controls, and opinions on uncertain tax positions. Further, intermediaries are often
involved in assisting a large business in setting up and implementing their tax strategy and
TCF.
Several tax intermediary organisations have also set up multidisciplinary teams that
combine corporate governance, accountancy and information technology. This is an
interesting development and one that may offer benefits to both large businesses and tax
administrations, particularly if this work expands and broadens the scope of their work to
more holistic services on the overall tax policy and tax position of large businesses.
Exiting co‑operative compliance
Despite a business’s efforts to ensure compliance through investment in its TCF and
self-monitoring, tax returns still can contain errors or issues can arise, such as differing
legal interpretation, where parties might hold differing positions which might result
in a legal case. By itself this is not necessarily a reason for terminating a co‑operative
compliance relationship provided that the overall framework remains robust and reasons
for any errors are identified and rectified.
However, since co‑operative compliance is a voluntary programme both parties have the
option to end their participation. In the Netherlands a number of co‑operative compliance
arrangements have been terminated by mutual agreement and in a very small number of
cases by unilateral action. If an arrangement is to cease, it is preferable that this occurs by
mutual agreement, as this allows both parties to discuss how the tax affairs of the business
will be managed going forward, given that the tax administration will need to adapt its
compliance approach, for example undertaking a wider range of audit activity, requiring
different information etc. Clarity on that can help in reducing burdens and minimising tax
uncertainty.
In general revenue bodies have noted the following reasons for mutually ending an
agreement:
• differing expectations about service levels
• insufficient investment in a TCF by a large business
• changes in the strategy of a large business, for example a change in attitude to risk
or the taking of aggressive tax positions, or
• where significant issues are suspected or where serious enforcement action is being
taken.
Next steps
As co‑operative compliance approaches are built on the mutual interests and established
processes of the parties they are able to readily respond to changes in legislation or
regulation. This has seen them already being adapted to accommodate the requirements of
initiatives like country-by-country reporting and other outcomes from the OECD/G20 Base
Erosion and Profit Shifting (BEPS) project into the TCF of the taxpayer and into the risk
assessment systems of tax administrations.
The 2013 Co‑operative Compliance report recommended the development of
multilateral co‑operative compliance programmes. The changing international landscape,
including as a result of the outcomes of the BEPS project, is leading to a stronger interest
within tax administrations as to how they can co‑operatively assess multinational
enterprises and the opportunities for joint or simultaneous audit. This is partly with an eye
to reducing the number of disputes coming into Mutual Agreement Procedures (MAP).
Against this background a number of members of the OECD’s Forum on Tax
Administration have agreed to pilot an international compliance assurance programme
(ICAP) which builds on the principles of domestic co‑operative compliance programmes.
This project pilot will involve undertaking a co‑ordinated multilateral risk assessment on
a small set of low and medium risk MNEs.
The ICAP process is designed to be a swifter and internationally co‑ordinated way of
assuring the activities and transactions of MNEs, while isolating quickly key risk areas
for further attention. The underlying drivers of this pilot are to test whether this may help
minimise MAP disputes by increasing collaboration and co‑operation between a MNE
and multiple tax authorities at an early stage; to increase tax certainty for business; and to
positively influence taxpayer behaviour. The pilot will also involve using the new country-
by-country reporting on a multilateral basis for ICAP risk assessment which will also
inform the wider use of this new information set in risk assessments for large businesses in
general, in particular as regards transfer pricing.
Following the pilot, it is intended that there would be an assessment of the pros and
cons of a broader roll-out, participation in which would be a decision for individual tax
administrations.
References
OECD (2016), Co‑operative Tax Compliance: Building Better Tax Control Frameworks,
OECD (2013), Co‑operative Compliance: A Framework: From Enhanced
Relationship to Co‑operative Compliance, OECD Publishing, Paris, http://dx.doi.
org/10.1787/9789264200852-en.
10. Insights from innovations in tax debt management – 155
Chapter 10
Insights from innovations in tax debt management
Katie Clair
Office of the Revenue Commissioners, Ireland
Tax administrations focus on achieving a high level of tax compliance on the premise
that prevention is better than cure. This is especially the case when it comes to tax
debt and the minimisation of arrears and write-offs. Traditionally debt management
has focussed on approaches that produce better debt recovery performance.
Increasingly tax administrations are investing in research to enable them to develop
policy approaches that help avoid tax debt being incurred in the first place or avoid
tax debt increasing through supportive interactions with taxpayers.
This chapter provides an overview of some of the innovative approaches and
strategies of tax administrations in this regard where the common theme has been
around tailoring interventions more closely to the specific circumstances of the
taxpayer.
156 – 10. Insights from innovations in tax debt management
Innovation in tax debt management
In the past innovation has in the main focused on better ways to collect tax debt
once incurred, for example by sequestering bank accounts, increasing penalties or court
processes and insolvency proceedings. With advances in technology and the range of “data
tools” now at the disposal of tax administrations, there is an increasing trend towards
the development of policy or administrative approaches that help to avoid tax debt being
incurred, or enable more taxpayer specific interventions to be made when they do incur tax
debt. These “tools” have led to a new wave of innovation, based around experimentation,
segmentation and campaign approaches as administrations seek not only to collect what is
outstanding but to change behaviours, including as regards future compliance.
In its publication on Working Smarter in Tax Debt Management (OECD, 2014) the
OECD provided an overview of the modern tax debt collection function. This chapter will
explore some recent examples of innovation in debt management using the major themes
set out in that publication.
Use of advanced data analysis in tax debt management
Risk in the context of debt management is generally defined as the “exposure to non-
payment”. While debt risk analysis in many administrations is still under development,
many countries are now able to point to evidence and research to highlight its effectiveness.
Within debt management analytical techniques are increasingly being used to enable
the streamlining of operational processes and improvements in compliance, including
through innovative campaigns. Predictive modelling uses a wide range of techniques
which, through a process of pattern “fitting” and systematic trial-and-error, aim to discover
regularities in historical data. In the debt management context, traditional modelling and
experimentation was focussed towards identification of high risk debt cases. However,
substantial gains have been made in the use of predictive modelling to identify those who
are most likely to respond to an intervention. Oftentimes there is overlap between these
two groups, but the differences have given tax administrations a better understanding
of taxpayer behaviours, highlighting cases where traditional intervention is not likely to
yield results and identifying new more productive approaches, including as regards early
interventions. For example the Australian Tax Office (ATO) developed a predictive model
which led to a range of interventions, including the use of SMS nudges. This has been
highly successful in improving on time payments.
Box 10.1. Debt risk modelling
In Australia the ATO uses a payment compliance analytical model identifies when a
client’s bill is “unlikely to be paid”; an SMS may then be issued to nudge prompt payment.
In 2015-16 this approach resulted in just under AUD 1 billion being paid on time by clients
who had a previous pattern of not paying or paying late. For the ATO, risk-based analytical
models are increasingly driving client interactions. The Next Best Action model, currently
under development, will determine a customised treatment path that increases the likelihood
of debt prevention/resolution. Purposeful First Action, which has been implemented as the
first component of this model, focuses on improving the timeliness and outcomes of our initial
interactions with clients once they’re in debt.
Box 10.1. Debt risk modelling (continued)
In Sweden the Swedish Tax Agency’s involvement with risk modelling in debt commenced
in 2007 when it used data mining combined with the insight of experienced tax collection
area managers to build a risk model. This model, which was piloted before being rolled out in
January 2010, is still the basis for its debt modelling work today. The system does not provide
a risk-score for non-payment to the case handler, but does provide them with information on
why the case assigned has been identified for action. Case handlers are encouraged to use their
entire debt collection “toolbox” (from withdrawal of the certificate of tax compliance through
to filing for bankruptcy). The predictive model uses the signal to identify work items for the
case handler, who can make informed decisions on what measures to take. The model has been
subject to on-going improvement. The latest enhancement will signal to staff whether there is
a significant payment risk before an audit commences. These measures have helped Sweden
maintain a very low payment loss rate – currently 0.22 % of the total tax debt.
Source: Australia – Australian Tax Office, Sweden – Swedish Tax Agency (2017).
Segmentation
As part of the increased use of data analytics, a number of tax administrations have
experimented with “unsupervised segmentation”. These techniques, which fall under the
broad heading of “cluster analysis”, seek to identify groups of taxpayers who are similar to
each other in some significant respects, and dissimilar to the other groups identified. These
projects have often provided interesting general insight into the taxpayer population, but
have typically not shown a strong practical impact as the segments identified have not had
obvious business applications.
An alternative approach, looks to group taxpayers based largely on their predicted
response-to-intervention. If all taxpayers respond in the same way to a given intervention,
then there is little practical value in segmentation; where there are large and consistent
differences in response-to-intervention, then segmentation is worthwhile, and should
follow the observed differences in response. This approach is likely to create multiple
segmentations – ultimately, each type of intervention may require a different segmentation
of the taxpayer base. A further alternative approach taken by the ATO which has segmented
taxpayers into two categories: propensity to pay and capacity to pay.
Box 10.2. Segmentation
In Ireland between 2006 and 2009, the tax debt available for collection rose by 82%
due to the economic downturn; in 2006, debt available for collection in Ireland amounted
to EUR 792 million rising to EUR 1 443 million in 2009. To prevent further escalation of
the debt, the Irish Office of the Revenue Commissioners (“Revenue”) established a risk
model where customers were segmented into one of five tiers based on the risk exposure to
Revenue. The tiers were based on liabilities of the tax returns filed with a threshold level for
each tier with the highest potential liability segmented to tier 1 with the lowest to tier 5. This
provided for the identification of high risk customers and the establishment of a more focussed
approach towards customers. Also, Revenue invested heavily in new information technology
infrastructure called “Arrears Case Analysis Tool” to examine and prioritise debt available for
Box 10.2. Segmentation (continued)
collection primarily by reference to case size age of debt collection stage and risk rating. This
segmentation of cases and use of data analytics attributed to a significant reduction of the debt
available for collection. Between 2009 and 2015, the debt available for collection fell by 43%.
In late 2016, the authority is revising their segmentation process for debt management by
categorising the customers by “Value to Revenue” (VTR). A VTR, assigned to each customer,
is calculated by using a range of data sets (returns, estimates, payments etc.) over the previous
2 to 4 years to produce an annualised value of the customers’ liability to Revenue. This
annualised value is segmented into VTR thresholds values.
Source: Ireland – Office of the Revenue Commissioners (2017).
Behavioural approaches
Innovative behavioural approaches building on a better understanding the behaviour of

tax payers who default and use that understanding to build appropriate interventions, which
may be multi-faceted even in the case of a single taxpayer. Education and communication
are cited most commonly in respect of strategies for influencing behaviour, however other
approaches focussed around building trust and positive perceptions of tax administrations
are also considered strong influencers.
The Belgian tax administration has recently conducted field experiments with randomised
controlled trials to test different methods of lifting tax compliance. The project was run in
consultation with the Oxford University and London School of Economics in the United
Kingdom. A large trial with a population of 250 000 debt cases was used involving nine
different types of letters. The control group received a simplified standard letter while the
other eight groups received the same letter with different additional phrases giving a specific
nudge, including: an explicit penalty message and a public good message aimed at raising
the “moral costs” of non-compliance. All the letters were structured to communicate simply,
with a clear and strict tone, but in a way which supported positive behaviours.
Strong results were achieved with an average increase of 18.2% in payments within
14 days. It was found that the most effective letter in this experiment was the one that
used an explicit penalty nudge. This letter realised an increase of 21%. Overall the project
concluded that behavioural nudging works well in raising tax compliance, and is very
effective in achieving more timely payments.
Campaign based activities
Outbound calling
In the private sector innovations focussed towards changing behaviours have been
targeted through established and dedicated call centres. This has led many countries to
establish similar centres for tax collection activities, with calling campaigns featuring
in the core operations of many tax debt management areas. For instance, Sweden uses
outbound calls to target new “high risk debtors”; this approach has resulted in more than
80% of debtor’s contacted making payment. In New Zealand, early interventions by
outbound call centre agents had resulted in an increase in immediate payments and time-
to-pay arrangements, resulting in earlier collection of tax debts.
Box 10.3. Outbound call campaign
In Canada the Canada Revenue Agency (CRA) runs a focussed outbound calling campaign
which includes use of its debt call centre and automated dialling. Its annual campaign is run
in October each year, with bi-annual campaigns also run in May and November. The focus of
these campaigns is those individuals on instalment payment programmes who were charged
interest in the last year and have also missed an instalment payment in the current year.
Individuals for the campaign are selected by a data mining tool, which assigns a score of 0 to
100 predicting the likeliness of the taxpayer making a payment. Those with a score of 10 to 80
(individuals most likely to respond to a nudge) are likely to get a call.
Over the last few years, results of these campaigns have shown that taxpayers contacted
(otherwise expected to be non-compliant) made instalment payments for a value of
CAD 80-112 million. Compared to control groups, a higher percentage of taxpayers paid their
taxes during the taxation year when they were called by the CRA. The campaigns also showed
positive results but sensitivity regarding the timing of campaigns was identified. It was noted
that in the May campaign, more payments were received than the November campaign. This
was mainly attributed to the fact that by November, taxpayers focus is mainly on outstanding
balances rather than current liabilities. Another factor acknowledged is the closeness of the
May campaign to the holiday season.
In the United Kingdom, staff dealing with phone calls have direct access to real-time queue
and service level statistics. This helps them identify quieter times when it would be best to
carry out tasks other than handling calls (e.g. improvement and training activities). The central
resource and workflow team also monitor real-time statistics to respond to the busier periods by
employing call routing to bring in more people to meet demand so Her Majesty’s Revenue and
Customs (HMRC) can provide the best customer service. Every call outcome is recorded and
classified allowing managers to discuss resolution rates, the quality achieved, and the outcome
of the call. A range of call and outcome information is displayed on each team’s performance
board for discussion. Staff are empowered, and take satisfaction, in carrying out continuous
improvement activity, aiming to resolve a case at the first point of contact but also educate and
support customers to be compliant and willing to engage with HMRC in the future.
Source: Canada – Canada Revenue Agency; United Kingdom – HM Revenue and Customs (2017).
Non-filers and outbound calls

In 2015, Tax Norway carried out a phone campaign aimed at increasing filing. It was
organised as a randomised controlled trial among entities which were around three months
late in submitting their return and which had already received a reminder letter. The primary
finding was that personal phone calls influenced many non-filers to file. Calls to self-
employed taxpayers resulted in 9% submitting outstanding returns, with 6% of corporations
also filing after receipt of the call. There were also very useful supplementary findings as
to the reasons why taxpayers had failed to file, as illustrated in Figures 10.1 and 10.2. The
findings confirm that a one-size-fits-all compliance strategy is very unlikely to be the best
use of resources. For example, taxpayers reporting that they did not think they needed to file
as a reason for non-compliance will be unresponsive to any type of compliance campaign.
Figure 10.1. Phone campaign results – Figure 10.2. Phone campaign results –
self employed, Norway limited companies, Norway
Self-employed: Why have I not yet filed? Limited companies: Why have we not yet filed?
Unable to file, In liquidation/

need help bankrupt
Life crisis/ 4% 5%
Unaware
illness Forgotten that we
Did not think
15% 3% needed
I needed to file
22% to file
10%
Other
11%
Other
Reasons related to 18%
accountant, Reasons related to Life crisis/
auditor or other accountant, illness
23% auditor or other 11%
48%
Unable to file, Postponed it
need help 11%
19%
Source: Norway – Norwegian Tax Administration (2017). Source: Norway – Norwegian Tax Administration (2017).
Reminder calling
Results from a phone campaign conducted by the Federal Public Service in Belgium
in 2016 also indicated that phone reminders do influence taxpayers to pay sooner. This
campaign was designed specifically to: improve taxpayer’s compliance both for current and
future debts by influencing their payment behaviour; quickly recover the unpaid taxes; and
increase tax recovery with restricted staff resources. Specifically it was found that while
the payments made after a phone reminder would on average have been paid anyway, this
would have occurred only following other actions which would incur costs. The added
value of the service, comparing the proportion of the debts paid with intervention, to the
proportion of the debts paid for a control group, was recorded at EUR 23 million corporate
income tax and EUR 13 million in value added tax.
Next steps
Effectively managing the collection of tax debt is one of the major tasks undertaken
by administrations. Since the publication of the report Working Smarter in Tax Debt
Management (OECD, 2014) many tax administrations have begun using advanced analytics,
tailoring treatment strategies for prevention and enforcement, using outbound calling to
support debt collection and prevention campaigns, examining their organisational and
operational models, and working together to address debtors resident in other jurisdictions.
The range of performances described in the Collections part of Chapter 6 clearly
illustrate that there is a lot more administrations can learn by continuing to share their
experiences and practices. There are also tangible gains to be made as well through
increasing the co-operation between administrations to use tax treaty powers or other
agreements between countries to work together in the collection of “cross border debt.”
With total debt levels still approximating EUR 1.8 trillion (see Figure 2.1) administrations
will need to continue to search for innovative approaches using risk management techniques
to prevent debt arising and to collect tax arrears for efficiently.
References
OECD (2014), Working Smarter in Tax Debt Management, OECD Publishing, Paris, http://
dx.doi.org/10.1787/9789264223257-en.
11. Using digital delivery to enhance the integrity of tax systems – 163
Chapter 11
Using digital delivery to enhance the integrity of tax systems
Claire O’Neill
Australian Tax Office
Developments in digital technology and in the analytical tools available to tax

administrations will facilitate fundamental changes in the way that tax is assessed,
verified and collected. This has the potential to increase compliance while reducing
burdens significantly, including direct costs, and freeing up resources for more
productive activities. Tax administrations are at different stages of digital maturity
and will profit from exchange of best practices and practical experience, in particular
in the light of the pace of technological change, the associated change management
issues and the proliferation of legacy systems.
This chapter looks at the building blocks of digital delivery, in particular robust
identification of taxpayers and integration of natural systems, and suggests further
work on measurement of outcomes.
164 – 11. Using digital delivery to enhance the integrity of tax systems
Digital delivery and the evolution of compliance
Current tax administration is largely a mix of rules-based activities based around actions
or processes that are normally are undertaken after the fact, and still in most countries
rely heavily on the taxpayer to provide information normally in the form of filing. It is
characterised in general by a high degree of complexity in areas which continue to require
considerable interaction between taxpayers and tax administrations, often in-person or
paper based. This can be prone to errors and misreporting (both accidental and deliberate).
The size of the workload and the impact is large; with OECD Forum on Tax Administration
(FTA) members reporting that around 14% of their staff is dealing with more than
450 million taxpayer inquiries annually (see Chapter 6 on operational performance).
Time and cost spent by taxpayers on tax administration will, in general, divert resources
away from alternative productive activity, thereby representing an opportunity, or welfare cost.
Of itself, reductions in the burden involved in complying with obligations to report and to pay
tax also have implications for the degree of tax compliance. This can be both directly through
increased accuracy and certainty and indirectly by helping to shape attitudes to compliance.
The shared goal of tax administrations, within legal and administrative constraints,
is to maximise compliance with the least opportunity/welfare cost, and with cost
effective administration. Over time, this means designing the tax system to make it more
understandable and easier for taxpayers to comply, while minimising the opportunities for
those seeking to stretch the rules or commit fraud.
Advances in technology and much greater access to data, as well as the ability to use that
data more effectively, have the potential to fundamentally alter this equation, reducing the
burdens arising from tax administration for compliant taxpayers while increasing compliance
overall. Some of the underlying challenges and opportunities have been set out in a number
of OECD reports, including Right from the Start (OECD, 2012); Tax Compliance by Design
(OECD, 2014) and Technologies for Better Tax Administration (OECD, 2016).
As digital delivery is used more, traditional compliance approaches must also evolve.
If a tax administration has designed and delivered its digital services effectively, then
taxpayers should experience greater tax certainty and have improved trust and confidence
in the system, which may improve overall levels of compliance. This may also present new
opportunities for tax authorities to shift from post-event audits to “upstream compliance”
and early intervention activities.
There are also significant change management aspects associated with a shift to greater
digital delivery, to embed new technology and skills. In particular there will be a capability
shift from post-event auditing expertise, to systems design and earlier, upfront assistance.
Building, maturing and maintaining skills in digital literacy, support and client service will
become increasingly important.
Stronger identity security
The starting point for the effective use of digital technologies is a comprehensive and
robust system of registration and identification. At its core, the integrity of a tax system
as well as the ability to reduce burdens (for example by supporting self-service, voluntary
compliance, withholding and third party reporting) relies on knowing both who the taxpayer
is and, where third parties are involved, what their relationship is to the taxpayer. This is
also critical to reducing non-compliance whether through error, fraud or by activities taking
place in the non-observed economy.
Digital technology is increasingly providing new and secure ways for taxpayers directly,
or through third parties (including other parts of government) to establish and prove their
identities at lower cost, more quickly and with greater certainty. Recent developments
include:
• Australia’s Document Verification Service (DVS). This is a national secure system
that checks and matches government issued credentials (for example, drivers’
licences) in real-time. It is available 24-hours a day, and provides confirmation of
taxpayer credentials without requiring a face-to-face or paper-based interaction.
The Australian Taxation Office (ATO) also utilises the DVS for requests to
update date of birth details made on-line and over the phone and in procedures for
compromised identities (Office of the Australian Information Commissioner, 2014).
It provides a fast and secure way to verify the identity of the taxpayer, thereby
protecting both the government and the wider community from identity crime
(Document Verification Service, 2016).
• Voiceprint authentication is used by a number of tax administrations (OECD,
2016). A voiceprint is inherently more secure than other credentials, as it is
unique to each individual. Digital technology matches features of each voiceprint
differently to the human ear, and can detect with high accuracy if the voiceprint
matches the taxpayer (Australian Department of Human Services, 2016).
Technology is also used to convert each voiceprint to a “hashed” series of numbers
and characters (a numerical algorithm which cannot be reversed) meaning a stolen
voiceprint is useless.
• Many countries provide taxpayers with unique digital identities for accessing
government, and in some cases private sector services. In Belgium since 2009,
citizens over the age of 12 have been issued an eID, which as well as providing
online security for day-to-day activities like online shopping, library loans or as
a train ticket allows the secure lodging of tax returns. In Denmark 4.5 million
citizens have a NemID, a common login to securely lodge tax returns and access
other government services, as well as services provided by some private companies,
including Danish banks. In Singapore all citizens over the age of 15 can apply for a
SingPass ID to use government online services, including tax services.
As well as enhancing the delivery of various interactions between the tax administration
and taxpayer, certainty of identity is also necessary to establish a taxpayer’s overall tax
position, which is critical to improve overall compliance and reduce the associated burden.
A taxpayer’s overall tax position often includes multiple income sources, a range of
offsets or benefits, multiple expenses, and potentially multiple relationships with other
entities (for example, in the case of a business there will be relationships with suppliers
and purchasers). The ability to map tax-related data to the right taxpayer, and to match and
understand a complex set of information is impossible without certainty of identity and
relies on having a mature digital capability.
By way of example, in Canada, the Canada Revenue Agency (CRA) can trace and
match data to link corporate entities to major shareholders, their value added tax, payroll
and importer accounts as well as to foreign affiliates and associated transactions. Company
proprietors are also linked to their spouses and family, and income levels benchmarked
against appropriate comparators. Using digital technology, a sophisticated data matching
system like this can map large, disparate data sets to the right identity and allow wider
analysis to be conducted of the data as a whole.
Integration with natural systems
Digital delivery also provides a mechanism by which tax authorities can integrate tax
services with the “natural systems” that taxpayers use in other aspects of their day-to-day
activities. Natural systems in this context encompasses the range of tools and recording
systems used by taxpayers, such as business and accounting software, banking services and
payment systems, point-of-sale systems, use of intermediaries, third party applications etc.
Integration of such information, including by supporting the development of third party
apps and software, has the potential to significantly reduce reporting burdens and improve
the way in which data is collected. Examples of such integration include:
• The introduction of a Single Touch Payroll service by the ATO through business
payroll software. This will require large employers to report to the ATO each
employee’s salary, wages and tax withholding and superannuation at each payroll
event (currently only reported annually). Employees will also have access to the
reported information that relates to them, providing them with visibility throughout
the year of their income, tax and superannuation amounts. By using digital
technology to embed this tax service into the natural system of the employer (in this
case, the payroll components of their business management software) the data can be
automatically provided with little or no effort. Single Touch Payroll will be available
for all employers from July 2017 and will be mandatory for large employers from
July 2018.
• New Zealand Inland Revenue also delivers integrated digital services via accounting
and financial systems to encourage seamless service delivery and improved
compliance. Some online accounting products are integrated with online banking,
reducing double-handling of bills and reconciliation of invoices, with the option to file
Goods and Services Tax (GST) returns directly to the Inland Revenue Department.
• The Federal Tax Service of Russia has also introduced an e-Registration requirement
for cash registers which will help to verify tax accounting procedures at the point of
sale. This will enable the tax administrations to automatically validate data, track and
match certain information related to sales, and provide better data for audits in close
to real time.
Brazil is among a number of countries that have mandated e-invoicing: electronically
sending, receiving and storing invoices between suppliers and buyers (either business
to business or business to government). This has helped establish a national digital
bookkeeping system, “SPED”, which enables direct reporting of annual income taxes and
other tax information. The Brazilian tax administration can now review, assess and act
on some information almost instantly, including issuing penalties in near real-time. As a
result, the number of audits, their assessed value and total tax collected has significantly
increased. There is also greater overall reported participation in the tax system.
Increasingly, tax administrations are also applying digital end-to-end solutions to design
integrated services that extend beyond the tax system itself. For instance, in Australia the
ATO is also responsible for administering the country’s superannuation system and has
used digital technology to deliver its “Super Stream” service. This service introduced
standard electronic messaging for the exchange of data and payments from employers to
superannuation funds, and leverages the employees’ Tax File Numbers to ensure payments
are made correctly. For the December 2016 quarter approximately 32 million transactions
were made through the Super Stream service, to the value of AUD 70 billion. This service
has strengthened the integrity of the system, providing greater assurance for 11 million
employees entitled to superannuation contribution payments. In November 2016, Super

Stream won the “Gold Award” in the Institute of Public Administration Australia (IPAA)
Prime Minister’s Awards for Excellence in Public Sector Management.
Emerging technology
As highlighted by the OECD in its report Technologies for Better Tax Administration:
A Practical Guide for Revenue Bodies (OECD, 2016), the challenge facing all organisations
including tax authorities is keeping pace with ever evolving technology and, as necessary,
rethinking how services and delivery can be changed to best utilise that technology. This
needs to be done, though, with a clear focus on the end objectives of reducing burdens,
including on the tax administration budget, while increasing compliance.
For example some tax administrations are currently exploring the opportunities
presented by the use of blockchain technology. This new technology is, in essence, a
distributed ledger that records when a transaction occurred, the details of that transaction,
including transfers of assets and ownership, and provides assurance that the required
business rules have been met without the need for third party verification. Updates to the
blockchain are subject to consensus from all participants in the network, making it virtually
impossible for any one individual, or group of individuals, to falsely change or create
records. Each transaction is protected by a cryptographic key, which includes the key of the
prior transaction, creating an immutable historic “chain” of transactions.
As such, blockchain may offer new ways for tax authorities to combat fraud, trace and
match data and automate reporting. The Estonian government has already started using
this in tax and business registration systems. The Danish tax administration has started
a proof of concept to better track and secures vehicle registrations using a blockchain
solution, to confirm that all related tax payments are paid as ownership or other changes
occur. In the United Kingdom, the government is considering its applications to better
track tax revenue, while the Australian government is conducting a comprehensive review
to examine its potential for a range of government services.
As with other aspects of emerging digital developments, this may be an area where
sharing of information and experience between tax administrations will be of high value.
Measuring the impact of digital delivery
Overall, developments in digital delivery look set to allow tax authorities to reshape
not just the taxpayer experience, but the broader compliance landscape. Previously dim
features on that landscape can be brought to light and those already visible come into
sharper focus. As compliance improves and participation in the system grows, revenue will
not only be protected, but potentially be increased.
That raises the question, though, of how tax authorities can best measure digital delivery
success to inform both strategy and resource decisions. The most common metric is currently
digital uptake. However, considering the direct relationship between digital delivery and
compliance, further work on compliance-related metrics would be helpful. For example,
a decrease in outstanding lodgements, a decline in post-event audits as more information
arrives digitally, or an increase in accuracy of case-selections may be attributed to effective
digital service delivery. Metrics could also be explored for the timely transfer of third party
data, the effectiveness of automated matching and the quality of data collection.
And finally
As tax administrations around the world embrace digital technology to deliver better
services to taxpayers, overall tax compliance may also be enhanced. The theory is simple: by
meeting taxpayer expectations and simplifying the service experience, then taxpayers should
find it easier to comply. Therefore, digital service delivery may drive an increase in voluntary
compliance, which would then increase revenue and participation, and improve overall trust
and confidence in the system.
References
OECD (2016), Technologies for Better Tax Administration: A Practical Guide for Revenue
org/10.1787/9789264223219-en.
OECD (2012), “Right from the start: Influencing the Compliance Environment for Small
and Medium Enterprises” (information note), OECD, Paris, www.oecd.org/tax/forum-
on-tax-administration/publications-and-products/compliance/right-from-the-start-
influencing-the-compliance-environment-for-smes.pdf.
12. Large business and international – 169
Chapter 12
Large business and international
Gord Parr and Francine Turcotte

Canada Revenue Agency
Large business taxpayers are of critical importance to the economies in which

they operate. They produce the majority of export income, provide a large share
of the tax revenue and, in many economies provide the majority of jobs. They also
have complex business structures with multiple operating entities that engage in
international transactions presenting distinct and significant tax compliance issues
that can have major consequences on tax revenues if not adequately addressed by tax
administrations.
In the wake of the work on the OECD/G20 project on Base Erosion and Profit Shifting
(BEPS), which will provide tax administrators with new information and tools to
address compliance issues related to this important taxpayer segment, it is incumbent
upon tax administrations to ensure that their own actions do not create unnecessary
tax uncertainty which could have negative consequences on economic growth and
result in unpredictable government revenues. In this context, the issues surrounding
tax certainty for both businesses and tax administrations will be of increasing
importance.
In this chapter, we will explore the current trends in managing large taxpayer
compliance that focus on compliance risk management, international collaboration,
co‑operative compliance, and tax certainty.
170 – 12. Large business and international
Compliance risk management
The majority of tax administrations have adopted a risk-based approach to compliance.

As such, they have formal processes in place for identifying, assessing and prioritising
their compliance risk areas as part of responsible tax administration. Advanced analytical
tools that leverage more comprehensive data offer new opportunities for the use of business
intelligence in the identification of non-compliance. As noted in the OECD’s Advanced
Analytics for Better Tax Administration report, “advanced analytics is proving an extremely
valuable tool in improving tax administration effectiveness” (OECD, 2016). Through the
use of these tools, tax administrations can more effectively assess and prioritise risks, and
determine the appropriate level of intervention to achieve compliance.
As an example, in the context of its Approach to Large Business Compliance, the
Canada Revenue Agency (CRA) has developed an automated Integrated Risk Assessment
System that risk ranks its entire large taxpayer population based on a significant number of
risk algorithms developed by subject matter experts in the domestic, international and tax
avoidance areas. Experienced case managers, auditors, and industry specialists, taking into
consideration inherent and behavioural risk factors, determine an overall risk profile for each
taxpayer. The highest risk cases of non-compliance form the basis of regional and national
work plans. This approach allows the CRA to focus its audit resources on the highest-risk
cases of non-compliance and to reduce the compliance burden for businesses that are low
risk. The business intelligence gathered at each stage of the risk assessment process and
during the audit is used to improve risk algorithms and the overall risk assessment process.
In addition to having better tools to analyse data, tax administrations continue to
access a range of different data sources. In the past, the majority of available data came
from the various forms and tax returns filed by taxpayers. Administrations are increasingly
looking to large businesses to provide them with more detailed information on their
organisational structure, cross-border transactions and uncertain tax positions. Once
implemented, the outcomes of BEPS Action Item 13, Transfer Pricing Documentation and
country-by-country (CbC) Reporting (OECD, 2015a) will provide administrations with new
information for transfer pricing risk assessment. This additional information, along with
enhanced business intelligence tools, will allow tax administrations to be more effective in
the compliance risk management of the large business population segment.
International collaboration
The large business environment has changed significantly in recent years. Along with
the rise in globalisation and electronic commerce, there are more multinational business
structures. The survival of these businesses depends heavily on their ability to succeed in
a fiercely competitive global economy. This has led many businesses to actively consider
various and complex tax treatment options, such as: hard-to-value intangibles; cross-border
lease arrangements; thin capitalisation; related party and hybrid financing; restructuring
and liquidations; and, determinations of permanent establishment. As such, effectively
managing tax compliance risks in this environment is critical.
This competitive environment is also amplified by corporate tax rate variances
between tax jurisdictions in order to attract international investment and the consequential
economic benefits. Such initiatives typically lead to non-harmonised tax regulations
between tax jurisdictions and the shifting of reported profits to countries with the lowest
tax rates, thereby threatening the tax bases in various countries.
The BEPS package, approved in late 2015, is intended to address aggressive international
tax avoidance strategies used by some multinational enterprises (MNE) to inappropriately
minimise their tax obligations.1
Over the past several years, we have seen a significant increase in collaboration among
tax administrations to address international tax evasion and aggressive tax avoidance
issues, for example, through joint audits and risk assessments. The implementation of BEPS
recommendations will provide additional tools to address these cross-border compliance
issues.
Action 13 on Transfer Pricing Documentation, in particular, will provide new
opportunities for tax administrations to work together on risk assessment using common data
sets resulting from CbC implementation. Further enhancements to each tax administration’s
risk assessment processes can be achieved through combined efforts to identify risk indicators
and industry-specific issues, and ensure that data is being interpreted in a consistent manner.
Forums such as the OECD’s Joint International Taskforce on Shared Intelligence and
Collaboration (JITSIC) Network,2 will continue to facilitate the sharing of business intelligence
and strengthen the capacity of tax administration to tackle common risks.
In order for tax administrations to fully realise the value of this collaboration, they will
need to continue to improve their capacity to risk assess and profile their large business
population. For example:
• Improve automation – Aging systems need to be updated. New systems such as
learning software that can improve our understanding of key relationships between
corporations and other taxpayer groups are needed. The information gathered can
be greatly beneficial in developing or enhancing risk algorithms and profiles across
a broad spectrum of taxpayer segments.
• New skill sets – For the most part, staff in large taxpayer units have audit-related skills.
However, expertise in the areas of risk assessment, profiling, and communications are
new and important competencies that should be developed or acquired.
• Access to and use of external sources of data – The use of domestic and
international data sources offer significant opportunities to not only improve
monitoring, but to move toward real or near real-time compliance activities. Tax
administrations will have the opportunity to use various data sources to consider the
level of engagement or intervention needed to influence compliance behaviour.
Co‑operative compliance
The concept of co‑operative compliance is based on the premise that taxpayers provide
timely and detailed information about their tax transactions and issues and, in turn, the tax
administration will review that information in real-time and provide early tax certainty to
the taxpayer regarding their tax position prior to them filing their tax return. With major
potential tax issues largely settled before filing, taxpayers are generally subject to a timelier
and more narrowly focused post-filing examination. It also allows the tax administration to
raise issues with the taxpayer before taking a tax position.
In recent years, a number of OECD tax administrations have adopted a co‑operative
compliance approach. The form of the approach can vary: some are based on enhanced
relationships with no formalised procedures some use formal agreements, and others rely
on specific regulations or a legal framework. Whichever approach is utilised, the goal is to
have an open and transparent relationship between the taxpayer and the tax administration;
one that is built on trust.
As concluded in the OECD report Co‑operative Compliance: A Framework: From
Enhanced Relationship to Co‑operative Compliance (OECD, 2013), a tax control framework
(TCF) is considered to be centrally important to effective co‑operative compliance
programmes. A TCF ensures that the large business or MNE has the proper internal controls
and governance in place with respect to its tax processes and tax function. A TCF can
prevent tax errors, allow companies to manage compliance-related risks more effectively,
and promote transparency and co‑operation with tax administrations.
An evaluation of the effectiveness of the TCF allows the tax administration to
complement its existing risk assessment and adjust its audit plan accordingly. A TCF
requires transparency by both parties; the business must allow the tax administration to
review its TCF, and the tax administration should be prepared to discuss the impact of
the framework on its assessment of risk and planned audit activities. It is only with such
transparency that trust can be established, which in turn leads to the desired outcome of
tax certainty and compliance.
Tax certainty
Although most tax administrations provide taxpayers with guidance and education
about their tax obligations, improving tax certainty through effective public information,
clear forms and instructions, face-to-face meetings between taxpayers and tax authorities,
collaborative compliance approaches, efficient programmes for advance tax position rulings,
and Advance Pricing Arrangements can assist in maximising voluntary compliance. Clear,
consistent and timely responses to enquiries, reasonable interpretation of the law, and
transparency of processes can help taxpayers make sound and timely business decisions and
reduce their compliance costs.
By actively involving and engaging taxpayers, their representatives and other
stakeholders such as industry associations to achieve a better understanding of the taxpayer’s
tax compliance obligations, improved outcomes and reduced costs for both the taxpayer and
the tax administration can be achieved. The knowledge gained by engaging stakeholders can
in turn be applied to tailor products and interventions, to design processes and solutions that
are more meaningful, and to improve the overall effectiveness of the tax system.
Following the major changes flowing from the BEPS package, concerns that resulting
tax uncertainty could negatively impact business decisions, have a negative effect on growth
and result in unpredictability of government revenues, will prompt tax administrations to
further examine and engage on the issue of tax certainty.
The challenge for revenue bodies will be to implement policies and practices in ways
that support tax certainty, and minimise compliance intervention and burden for low-risk
taxpayers.
Many of the BEPS Action items and existing compliance approaches can in fact assist
in providing tax certainty for both tax administrations and businesses. As an example, CbC
reports will provide new information for transfer pricing risk assessment and enable tax
administrations to work collaboratively from the same data set to assess transfer pricing risks
and tailor responses that can be utilised across multiple jurisdictions. Furthermore, BEPS
Action Item 14 will require tax administrations to implement more effective and efficient
Mutual Agreement Procedures processes (OECD, 2015b). Also, existing international Forums
such as JITSIC can be leveraged to address significant risk issues at an earlier stage, thereby
enhancing tax certainty for compliant taxpayers.
While collaboration amongst tax administration is an important condition to achieve
tax certainty in this global context, effective communication and transparency between tax
administrations and taxpayers can lead to improved outcomes and reduced costs for both
the taxpayer and the tax administration. The knowledge gained can in turn be applied to
tailor products and interventions and to design processes and solutions that improve the
overall effectiveness of the tax system.
Future direction
The global context in which tax administrations operate continues to change at an

unprecedented pace. New technologies, increasing global collaboration and the tightening
of tax rules provide tax administrations with new opportunities and tools to improve
compliance outcomes for the large business taxpayer segment. These developments
together with advances in the sophistication of risk-assessment will continue to build the
individual and collective capacity of tax administrations to effectively deal with existing
and emerging tax risks in a timely manner.
As countries move to implement BEPS, those businesses that continue to engage
in aggressive tax avoidance arrangements will experience a more concerted effort both
on a domestic and international level to combat these arrangements, and to make non-
compliance more difficult.
At the same time, effective implementation of BEPS measures by tax administrations
demands reconsideration of relationships with largely compliant taxpayers and in particular
those enterprises operating in multiple jurisdictions. While tax administrations acquire
increased confidence about risk assessment, taxpayers are looking for assurance that
their compliance efforts are being recognised with reduced burden and greater certainty.
Transparent engagement can go a long way toward encouraging compliant behaviour,
identifying opportunities to reduce taxpayer risk and limit the potential for tax controversy.
The higher this level of engagement can be, both on the part of the taxpayer and on the part
of the tax administration, the greater its potential impact will be on compliance behaviour
and the promotion of trust.
The implementation of collaborative approaches, which can take many forms, will
therefore be an important priority in an environment where taxpayers and tax administrations
alike seek to have cost-effective confidence and certainty. It will be beneficial if all
stakeholders can move to a place where avoiding tax disputes and thereby creating certainty,
will be recognised and valued over resolving problems after they occur.
Notes
1. For further information on the BEPS package please see www.oecd.org/tax/beps/.

2. For further information on JITSIC please see www.oecd.org/tax/forum-on-tax-administration/
jitsic/.
References
OECD (2015a), Transfer Pricing Documentation and Country-by-Country Reporting, Action 13
– 2015 Final Report, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264241480-en.
OECD (2015b), Making Dispute Resolution Mechanisms More Effective, Action 14 – 2015
Final Report, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264241633-en.
OECD (2013), Co‑operative Compliance: A Framework: From Enhanced
Relationship to Co‑operative Compliance, OECD Publishing, Paris, http://dx.doi.
org/10.1787/9789264200852-en.
13. Improving mutual agreement procedures – 175
Chapter 13
Improving mutual agreement procedures
John Hughes and Deb Palacheck

United States Internal Revenue Service
Nearly all tax treaties between countries provide for a mechanism, known as the
mutual agreement procedure (MAP), for resolving disputes as to the application
and interpretation of the treaty provisions. Over time, however, the number of
unresolved disputes within the MAP procedure has increased, creating uncertainty
for both taxpayers and tax administrations.
This chapter provides an overview of initiatives that have been taken to improve the
MAP process, including the recent minimum standard agreed under Action 14 of
the OECD/G20 Base Erosion and Profit Shifting (BEPS) project. This will provide
context for a discussion of opportunities and approaches that countries might
wish to consider in order to prevent disputes reaching MAP and, where they do, to
improve the effectiveness of the MAP process.
176 – 13. Improving mutual agreement procedures
The primary purpose of most tax treaties, also known as double taxation agreements,
is to eliminate double taxation of the same transaction or income and to prevent fiscal
evasion. Where these occur, they can have significant economic costs, including for trade
and investment. Tax treaties therefore set out agreed rules as to the allocation of tax on
cross-border transactions and income of taxpayers resident in the signatory countries.
As with any agreement, however, the parties may sometimes take different views
on the application or interpretation of those rules in a particular context. Where such a
dispute arises, then the vast majority of tax treaties provide for a formal process for dispute
resolution through a mutual agreement procedure (MAP). Such a procedure is set out in
Article 25 of the OECD Model Tax Convention (Convention). The Convention is used by
most countries as the framework for negotiations on tax treaties. MAP is of fundamental
importance in minimising incidents of double taxation and taxation otherwise not in
accordance with applicable tax conventions.
In the last decade, MAP has increasingly shown signs of strain, raising concerns
among taxpayers and governments given its central role in the international tax system.
According to recent statistics, MAP caseloads have increased in pure numbers as well as
in the average time it takes for jurisdictions to reach agreement. It is important to note in
this context that MAP is not an independent or binding arbitration process but a discussion
between countries.
At the end of 2015, the total number of open MAP cases reported by OECD member
countries was 6 176, compared to 5 429 in the 2014 reporting period and 2 352 in the 2006
reporting period (see Figure 13.1).
Figure 13.1. Evolution of the inventory of MAP cases in OECD member countries, 2006-15
7 000
6 000
No. of MAP cases at the end of
5 000
the reporting period
4 000
3 000
2 000
1 000
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
12 http://dx.doi.org/10.1787/888933546925
Source: OECD (2017), Mutual Agreement Procedure Statistics for 2015, www.oecd.org/ctp/dispute/map-
statistics-2015.htm.
Improving the effectiveness of the MAP process is an important element of the BEPS
project, designed to provide certainty and predictability and thereby complement the actions
that counter BEPS.1 Action 14 of the BEPS project, Make Dispute Resolution Mechanisms
More Effective, is intended to “develop solutions to address obstacles that prevent countries
from solving treaty-related disputes under MAP, including the absence of arbitration
provisions in most treaties and the fact that access to MAP and arbitration may be denied in
certain cases” (OECD, 2013).
The outcome of Action 14 – discussed in more detail below – is an agreed minimum

standard to ensure disputes related to tax treaties are resolved as quickly and efficiently as
possible, supported by a peer review and monitoring mechanism (OECD, 2015).
Precursors of the BEPS Action 14 minimum standard
Action 14 is the most recent mechanism to improve the MAP process, building on
earlier multilateral and bilateral initiatives. An example of a bilateral initiative is the
administrative agreement entered into by the United States and the United Kingdom in
2000 “to assist taxpayers in the conduct of cases under the MAP, to ensure taxpayers know
what they can expect from the competent authorities, and to make the MAP as expeditious
and effective as possible” (IRS, 2000).
On the multilateral side, in 2007, the OECD Committee on Fiscal Affairs (CFA) released
its Manual on Effective Mutual Agreement Procedures (MEMAP), which provided basic
information on the operation of MAP. It also set out best practices that competent authorities
and taxpayers could follow to support and improve the MAP process and other cases eligible
for MAP consideration (OECD, 2007).
The multilateral approach was taken further by the Forum on Tax Administration
(FTA) through the creation of the FTA MAP Forum in 2014. This forum provides a
means for FTA-member countries to surface concerns and collaborate on improving the
effectiveness of MAP programmes. This is done on the basis of a Strategic Plan, which
commits participants to “ensure that the principles embodied in [the participant’s] global
network of tax conventions are properly applied to minimise to the fullest possible extent
incidents of double taxation, unintended double non-taxation and taxation otherwise not in
accordance with the provisions of applicable tax conventions” (OECD, 2016a).
Specific topics addressed in the Strategic Plan include the need for competent authorities
to:
• Maintain an adequate number of experienced MAP case handlers,
• Retain an appropriate degree of independence from internal practices and policies
relating to revenue collection,
• Approach the MAP process from a posture of mutual trust and co‑operation,
• Commit to a programme of continuous review and implementation of internal
improvements in handling the MAP process, and
• Ensure taxpayers have effective legal and practical access to MAP at the conclusion
of an audit, if not before.
BEPS Action 14 minimum standard
These bilateral and multilateral initiatives laid the groundwork for Action 14 of the
BEPS project. Action 14 goes beyond earlier initiatives through its inclusive scope and
mandate to participate in a peer review and monitoring programme. It also sets a clearly
defined target for resolving MAP cases within an average timeframe of 24 months.
In September 2016, the FTA MAP Forum together with a Focus Group on Dispute
Resolution formed by the CFA completed work on the structure and governance of the peer
review programme. The programme’s details are set forth in Terms of Reference and an
Assessment Methodology (see OECD, 2016b). Together with supporting documents, these
set out the process for conducting a fair and informative review process, including separate
questionnaires for the reviewed jurisdiction, peers and taxpayers. Jurisdictions must also
submit annual statistical reports, including on the amount of time it takes to close MAP
cases.
Together with the OECD FTA MAP Forum Secretariat, the FTA MAP Forum will
review each jurisdiction on its progress towards meeting the elements of the Article 14
minimum standard and then document its findings in a report. These elements of the
minimum standard are divided into four main areas:
• Prevention of disputes.
• Assurance of appropriate and effective access to MAP.
• Efficient resolution of MAP cases, including seeking to resolve cases within an average
of 24 months and ensuring that adequate resources are provided to jurisdictions’ MAP
functions.
• Timely implementation of MAP case resolutions.
The reports, which are already underway, are prepared on the basis of an agreed
assessment methodology.
The Action 14 peer review programme incentivises jurisdictions to find concrete ways
to improve their own handling of the MAP process. For example, in order to progress
towards the standard of seeking to resolve cases within 24 months, jurisdictions may need
to streamline their internal processes for evaluating cases and producing and responding to
position papers. The peer review programme also incentivises jurisdictions to work jointly
to meet the 24-month timeframe, including through adequate preparation prior to meeting
and agreement to conduct their discussions in good faith and in a constructive manner.
The peer review programme also promotes efforts to improve the MAP process beyond
reducing case closures to 24 months. Element 1.4 of the Action 14 minimum standard
requires that countries become members of the FTA MAP Forum and participate fully and
collectively in its work. In addition to timeliness, other elements essential to improving
the MAP process are consistency and predictability, effective management of MAP case
inventories and efforts to reduce incoming MAP cases altogether by preventing disputes.
Innovative approaches to prevent disputes and for quicker resolution
In order to achieve significant reductions in current MAP case inventories and the
average time for completion, competent authorities should continue to explore the range of
approaches that might help in preventing and resolving MAP cases.
Although each case presents its own facts and circumstances, the majority of MAP cases
are similar in the facts and issues they present. This observation allows for the exploration of
innovative case resolution techniques.
• Safe harbours: An approach that could lead to quicker resolution is the adoption of
bilaterally agreed-upon safe harbours. These provide certainty that cases presenting
the same essential facts will be treated in an agreed, consistent way. Although safe
harbours are most often used as provisions in domestic law, they could also be
explored and adopted between competent authorities, particularly in relation to the
more common disputes, such as intercompany transactions between affiliates or

assertions of the existence of, and profits attributable to, a permanent establishment.
• Agreement of frameworks for handling cases: Though not a safe harbour per se,
it is possible to agree a framework for handling more common cases. For example
in 2015 the US and Indian competent authorities agreed a framework for handling
intercompany cases that represented approximately half of their shared MAP case
inventory. This incorporated a systematic approach for deriving individualised
arm’s length benchmarks on the basis of data points specific to the tested parties.
• Strict time limits for common cases: One straightforward approach requiring modest
efforts would be for competent authorities to agree upon strict time limits – well
below 24 months – for the handling of cases that present common, familiar fact
patterns or cases of modest size. Those concerning common services transactions
and allocations of intercompany services might often fall into this category. If
analysts cannot reach agreement within the expedited time frame, such cases could
be rapidly elevated to the executive level.
• Advanced Pricing Agreements (APA): APA programmes are an effective tool
for managing MAP case inventories. By providing tax certainty for both tax
administrations and taxpayers on a prospective basis, MAP cases that might otherwise
result from audits can be entirely avoided. The administrative advantages of bilateral
and even multilateral APAs are amplified when they include roll-back provisions. As
well as providing certainty for future years, roll-back can help resolve earlier years
either under audit or already in MAP where there is similarity in the relevant facts and
circumstances.
• Advanced Competent Authority Procedures (ACAP): ACAP can provide a similar
return to APAs on upfront administrative investment. If a MAP case is already in
negotiation, then there are obvious efficiencies if the two competent authorities
are able to address not only years currently before them, but also address the same
issues that arise in subsequent years. This is on the assumption of similarity in
relevant facts and circumstances. Resolving “ACAP” years in the MAP discussions
is tantamount to negotiating a bilateral APA with a roll-back provision, alleviating
the burden of a separate audit and MAP process.
Due to domestic legal regimes, a bilateral APA programme and ACAP agreements
may not be available to a particular competent authority to manage its MAP case
inventory. However, even those competent authorities that lack such tools can avail
themselves of other approaches for improving the efficiency and conduct of MAP. For
example a competent authority can improve the MAP process by filtering out weak cases
on a unilateral basis. This is in accordance with the obligation contained in the mutual
agreement article to withdraw adjustments raised by its own examination function that are
not justified and to otherwise resolve the taxpayer’s request without presenting the case to
its treaty partner.
Such unilateral actions need not be taken only when a taxpayer formally presents its
case to the competent authority. Some competent authorities have reported participating in
internal panels within their tax administrations that review the propriety of international
examination adjustments before they are actually made. Such early intervention is
consistent with Action 14’s recommendation that countries develop “global awareness”
within their tax administration. Such wider awareness can help in reducing the number
of MAP cases and allow resources to be directed to reducing the processing times of
remaining cases.
Note
1. For further information on the BEPS project please see www.oecd.org/tax/beps/.
References
IRS (2000), “U.S.-U.K. Develop New Administrative Arrangements for Mutual Agreement
Procedure”, IR-2000-79, US Internal Revenue Service, www.irs.gov/pub/irs-news/ir-00-
79.pdf.
OECD (2017), “Mutual Agreement Procedure Statistics for 2015”, www.oecd.org/ctp/
dispute/map-statistics-2015.htm (accessed 30 May 2017).
OECD (2016a), “Multilateral Strategic Plan on Mutual Agreement Procedures: A Vision
for Continuous Map Improvement”, OECD, Paris, www.oecd.org/tax/forum-on-tax-
administration/map-strategic-plan.pdf.
OECD (2016b), “BEPS Action 14 on More Effective Dispute Resolution Mechanisms
– Peer Review Documents”, OECD/G20 Base Erosion and Profit Shifting Project,
OECD, www.oecd.org/tax/beps/beps-action-14-on-more-effective-dispute-resolution-
peer-review-documents.pdf.
OECD (2015), Making Dispute Resolution Mechanisms More Effective, Action 14 – 2015
Final Report, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264241633-en.
OECD (2013), Action Plan on Base Erosion and Profit Shifting, OECD Publishing, Paris,
http://dx.doi.org/10.1787/9789264202719-en.
OECD (2007), “Manual on Effective Mutual Agreement Procedures (MEMAP) – February
2007 Version”, OECD, Paris, www.oecd.org/ctp/38061910.pdf.
14. The measurement of tax gaps – 181
Chapter 14
The measurement of tax gaps
Heather Whicker
Her Majesty’s Revenue and Customs, United Kingdom
A key objective of all tax administrations, whether explicit or implicit, is to improve

tax compliance and minimise the tax compliance gap. An increasing number of
OECD countries are estimating tax gaps and publishing their findings, particularly
for value added tax (VAT). Estimation of tax gaps over time, as well as one off,
or partial tax gap analysis, can provide valuable insight to inform policy and
compliance strategies and help revenue authorities to understand the scale of non-
compliance and emerging risks.
While the tax gap has intuitive attraction for both the public and political representatives,
it is a difficult concept to define precisely. Estimation is also difficult as much of the
tax gap is either deliberately concealed from view and/or data may be difficult to
find. The measurement and publishing of tax gaps should therefore be navigated and
communicated carefully. Limitations of tax gap estimates mean they are not a good
basis for explicit performance targets.
This chapter sets out some issues to consider in tax gap measurement.
182 – 14. The measurement of tax gaps
What is the tax gap and why measure it?
The tax gap is the difference between tax due and tax collected. This however raises a
number of questions of definition. For example what is the tax due, is it tax assessed or the
total tax that should be assessed if there was full information? How the impact of policy
should be captured (for example as regards potential avoidance)? Should tax collected
include tax that is not collectible, for example because the taxpayer is insolvent, or cannot
be collected within a particular period?
While different countries take different approaches to defining the tax gap, the
main consideration is that any chosen approach contains information that is useful for
understanding the relative size and nature of non-compliance over time, including in the
components of the tax gap. This can help administrations identify trends and risks to the
tax base across different taxes and/or customer groups and inform approaches to tackling
non-compliance, whether through policy changes or compliance interventions. In addition,
when the tax gap components are brought together into an aggregate figure, it provides a
strong starting point for wider strategy development, informing prioritisation and longer-
term resourcing. Some of the data sources used for compiling tax gaps, such as data from
random audits, can be also bring benefits in improving risk identification as well as sources
of non-compliance or under-reporting in particular areas.
Figure 14.1. Tax gap measurement and random audits

40
35
30
25
20
15
10
5
0
Administrations that Administrations that Administrations that Administrations that Administrations that Administrations that
measure tax gaps measure and publish measure and publish measure but do not conduct random audits use random audits
for one or more areas tax gaps tax gaps publish tax gaps for the purpose of
for one or more areas for all major tax types for all major tax types estimating tax gaps
12 http://dx.doi.org/10.1787/888933546944
Source: Tables A.139 Tax gap and A.140 Random audits.
Measurement and design options
Tax gap design will be influenced by the availability of data and user requirements.
The two main approaches used for tax gap measurement are:
• Top-down: The tax base is used to calculate a theoretical value of tax that should be
collected, and the actual amount of tax collected is subtracted from this to estimate
the tax gap.
• Bottom-up: Detailed risk information, administrative data sources, or other bottom-up
modelling techniques are used to build a picture of the tax gap for discrete areas.
Where there are robust external surveys, it may be relatively easy to construct top-
down tax gaps. Bottom-up tax gaps rely on combining good operational knowledge with
management information systems and can be more difficult. For example, it may be that
avoidance and/or large business tax risk is not sufficiently understood and distinct that it
can be included in the estimates. If random audits of taxpayers are a viable option, they can
be used to build a good understanding of tax losses for large populations. If these statistics
are to be used to influence strategy, it may be possible to design the audits in a way which
can inform and evaluate policy changes.
Where feasible, a better picture can be drawn by using both top-down and bottom-up
estimates – the former capturing all non-compliance and the latter providing greater insight
into the behaviours contributing to aspects of the tax gap. Additional factors to consider
might include:
• Resourcing: The resource requirement to generate the estimates and to assure
methods and findings internally is likely to be significant. The most significant
implication is caseworker time to conduct enquiries into randomly-selected taxpayers,
particularly where this accounts for a significant proportion of compliance resource.
There is an opportunity cost of using trained tax professionals for tax enquiries which
are not targeted due to risk information. There can also be a significant analytical
requirement (in the United Kingdom this is around 12 full time analysts).
• Availability of data: Data availability will differ between tax types and approaches.
Some methods such as random audits will require investment over a number of years.
• Governance arrangements: Consideration needs to be given to analytical integrity,
quality assurance and sense checks of findings. These approaches also need to provide
mechanisms to allow internal debate and agreement on subjective assumptions.
• Management attention: The management and any release of tax gap estimations,
which can generate significant public and political debate, is likely to require senior
management focus and support.
• Whether to publish: This is good practice but has consequences, in particular the
risk of misunderstanding and consequent misuse, and should be seen in the wider
context of transparency and public accountability.
• Frequency of updates: Whilst year on year changes are limited in meaning,
there are benefits of maintaining a series over time and as up to date as possible.
Retaining a permanent team of tax gap analysts supports consistency of approach
and knowledge retention. If resources are constrained, periodic full updates could be
interspersed with interim updates using quicker methods, for example risk analysis
or tax efficiency metrics.
Box 14.1. Measuring tax gaps
In the United Kingdom, Her Majesty’s Revenue and Customs (HMRC) define the tax gap
as “The difference between the amounts of tax that should, in theory, be collected by HMRC,
against what is actually collected.”
The United Kingdom publishes an annual estimate of aggregated tax gaps each year, using a
top-down and bottom-up approach, and has a time series from 2005-06. Around 30 component
estimates are compiled from a wide range of sources and methods, by government analysts
working under a code of practice for official statistics to assure independence and quality.
The UK Code of Practice for Official Statistics was published as required by the Statistics and
Registration Service Act 2007. It sets out common standards that should be followed by all UK
Box 14.1. Measuring tax gaps (continued)
organisations that produce official statistics (https://www.statisticsauthority.gov.uk/monitoring-

and-assessment/code-of-practice/). In contrast the United States, Inland Revenue Service (IRS)
uses a periodic task force approach for its federal taxes. This enables them to compute more
precise, albeit infrequent, estimates with more detailed breakdowns, which can be used to
calibrate their risk models.
Top-down: The tax base in the United Kingdom is used to calculate a theoretical value
of tax that should be collected, and the actual amount of tax collected is subtracted from this
theoretical value to estimate the tax gap: VAT gaps are estimated this way by comparing
economic data on consumption with tax receipts; Excise tax and duty gaps are estimated by
using volume estimates of consumption to calculate a theoretical tax base, then comparing this
with excise receipts.
Bottom-up: HMRC uses internal data and operational knowledge to identify areas of potential
tax loss. The best information available is used for each area and aggregated to create an overall
tax gap: where there are large populations, audits are conducted of a random sample of taxpayers
and their results are grossed-up to form an estimate of the tax gap; where HMRC tracks risks
intensively, such as for avoidance and large businesses, management and operational information
on identified risks and compliance yield is used; and where information is limited, HMRC uses
illustrative models – for example in estimating the size and nature of the hidden economy.
For all methods tax gap analysts develop strong communication links with internal HMRC
policy customers. This helps analysts to understand the tax systems and processes involved
in data capture, and the operational compliance context. It also informs explanations and
understanding of emerging tax gap results.
A simplified diagram representing HMRC’s interpretation of the tax gap is shown in
Figure 14.2.
Source: United Kingdom, HM Revenue and Customs (2017).
Figure 14.2. HMRC’s interpretation of the tax gap

What HMRC should in theory collect
What is actually… … collected
Avoidance Compliant tax planning,

Criminal attack, evasion, hidden
reliefs and international
Voluntary compliance economy, non-payment, failure to
tax structures that
take reasonable care and error
Legal interpretation mitigate tax liabilities
Law is
HMRC changed or
compliance Net tax gap clarified to
work uphold
HMRC view
Gross tax gap
Note: The components of the figure do not represent the actual scale.
Source: United Kingdom, HM Revenue and Customs (2017).
Alternative approaches to measuring the tax gap
Some countries, even with limited resources, have been able to build a reasonable
understanding of their tax gap through a mix of top-down estimation, surveys and risk-
based models. This may also include an in-depth understanding of one area, rather than
a whole tax gap. International Monetary Fund (IMF) technical assistance to Estonia is an
example of this (IMF, 2014). Other administrations have investigated tax gap estimation
and reached a conclusion that the costs of measuring tax gaps outweigh the benefits, given
data availability, resource investment required and the levels of uncertainty involved.
Sweden, for example, has published a tax information map, which gives an indication of
the information regime around different taxes and the changing levels of risk (Skatteverket,
2014). It followed an exercise to update their tax gap estimates. However, they concluded
they did not have the necessary data to update their tax gap estimates. Some non-OECD
countries have made good progress on developing tax information maps.
A tax information map approach builds on the clear finding set out in the United
States IRS report on tax gaps, namely improving information assurance on tax regimes
reduces the scope for non-compliance (IRS, 2016). Administrations can use this approach
systematically to help reduce the tax gap, avoiding the interim measurement challenges.
Figure 14.3. Effect of information reporting on individual income tax reporting compliance,
tax years 2008‑10
100%
90%
Net misreporting percentage
80%
70% 63%
60%
50%
40%
30%
19%
20%
10% 7%
1%
0%
I. Items subject to substantial II. Items subject to substantial III. Items subject to some IV. Items subject to little or no
information reporting and information reporting information reporting information reporting
withholding
12 http://dx.doi.org/10.1787/888933546963
Source: IRS (2016), “Federal Tax Compliance Research: Tax Gap Estimates for Tax Years 2008–2010”
(report), https://www.irs.gov/pub/irs-soi/p1415.pdf.
Random audit programmes are considered a high quality method to estimate tax gaps
in large populations of registered taxpayers. Deployed alongside risk-based audits, they
can be an effective deterrent to taxpayers and provide a strong evidence base for a range
of compliance analysis. However, they are costly to administer and reduce the compliance
resource available for risk-based audits.
Some countries are using and exploring methods for estimating tax gaps using risk
based compliance information. This is difficult as risk based audits are more likely to
have a higher incidence and amount of yield. This selection bias needs to be identified and
controlled for before tax gaps can be estimated for the whole population. The Heckman
two-stage estimation procedure is an econometric tool that allows analysts to take into
account the probability of audit and the characteristics that drive incidence and scale of
yield. Application depends on the observable data around risk selection. The Italian Revenue
Agency has used a Heckman approach to estimate tax gaps this way. Other fiscal authorities
are also considering this approach and variations such as choice-based sampling. Italy
makes an aggregate estimate of tax evasion each year using “top-down” methodology, and
the resulting tax gap reflects overall non-compliance for Italy’s personal and corporate taxes,
VAT and regional tax on productive activities.
Limitations of tax gap estimates
While tax gap estimates can provide a rich source of data for tax administrations, they
do have a number of limitations which means that they are not a good basis for explicit
performance targets (which may lead to suboptimal resourcing and prioritisation decisions).
The main limitations are:
• Error and Uncertainty: There are many sources of error including systematic errors
in the assumptions used, missing data and standard errors due to sampling. Whilst
users can place heavy scrutiny on annual movements in data, the scale of error
and uncertainty makes year on year changes limited in meaning and it is better to
observe the longer term trends. For this reason, few tax administrations publish data
annually.1
• Lagged data: Many tax gap estimates are heavily lagged, for example the United
Kingdom published tax gap estimates for 2014-15 in October 2016. Within this some
component estimates were projected forward from actual data relating to the 2012-
13 tax year. The reason for this lag is that compliance interventions may take a long
time to complete – particularly the high yielding cases.
• Wider factors: Tax gaps can change due to economic factors beyond the control
of tax administrations – such as changes to the tax base including from economic
cycles. Changes to tax policy, for example movements in tax rates, can shift the tax
gap up or down. These can be mitigated to an extent by expressing the tax gap as a
percentage of tax liabilities, rather than as a cash value.
• Volatility and Revisions: Tax gaps can change, and be revised for a number of
reasons unrelated to actual taxpayers’ behaviour. These include new or revised
economic data used in modelling the tax base, new data from compliance activity
where cases are settled late and differ from forecast yield, and from improved
methodology or changes in data source.
Note
1. The exception is for VAT, where European Commission publishes VAT gap estimates annually
for EU-26 and EU 28 member countries (CASE, 2016).
References
CASE (2016), “Study and Reports on the VAT Gap in the EU-28 Member States: 2016 Final
Report”, TAXUD/2015/CC/131, Center for Social and Economic Research, Warsaw,
https://ec.europa.eu/taxation_customs/sites/taxation/files/2016-09_vat-gap-report_final.
pdf.
IMF (2014), Republic of Estonia: Technical Assistance Report – Revenue Administration
Gap Analysis Program – The Value-Added Tax Gap, IMF Country Report No. 14/133,
IMF Publishing, Washington, http://dx.doi.org/10.5089/9781498370110.002.
IRS (2016), “Federal Tax Compliance Research: Tax Gap Estimates for Tax Years
2008–2010” (report), US Internal Revenue Service – Research, Analysis & Statistics,
Washington, https://www.irs.gov/pub/irs-soi/p1415.pdf.
Skatteverket (2014), “The Development of the Tax Gap in Sweden 2007-12” (report),
Skatteverket, www.skatteverket.se/download/18.15532c7b1442f256baeae28/1395223863657/
The+development+of+the+tax+gap+in+Sweden+2007-12.pdf.
15. Third-party data management – 189
Chapter 15
Third-party data management – the journey from post-assessment

crosschecking to pre-filling and no-return approaches
Frode Lindseth
Norwegian Tax Administration
The use of third party data plays an important role in supporting modern tax
administrations processing of tax returns and ensuring complete and accurate
information in assessments. While post-assessment crosschecking of information
remains the norm in most Forum on Tax Administration (FTA) countries, many
administrations report strategies to extend the range of data sources used to
improve both coverage of the regime and the quality of the pre-filled return.
The majority of countries report that moving to pre-assessment verification is a
high priority in their current compliance strategy, as is extending the use of data
provided from third parties.
This chapter describes the pathway from post-assessment crosschecking to pre-filling
and, where appropriate, no tax return approaches.
190 – 15. Third-party data management
The pre-filled “pathway”
Tax administration is undergoing a fundamental change, facilitated by advances in

technology and the availability of data, from a system based on filing and post-assessment
cross-checking to one that delivers pre-assessment verification.
Ultimately the combination of technological developments and the integration of data
into redesigned tax administration systems, including third-party data used by taxpayers
in their day-to-day life, have the potential to make tax administration close to invisible for
many taxpayers. Embedding compliance, including upfront verification, in the design of
tax administration systems should substantially reduce administrative burdens, freeing up
taxpayer and tax administration resource, while improving overall compliance.
These benefits, including a better taxpayer experience and greater taxpayer confidence
in the integrity of the tax system, can also be realised to a greater or lesser extent in different
taxpayer segments during the transition to full integration of tax-relevant data (including on
identity). For example, for many employees with income only from employment, interaction
with the tax system is already minimal in a growing number of countries, with tax taken at
source and limited or no end of year “square-up process” or formal reporting. Greater use of
third party data can also already improve post-assessment actions, enhance risk assessment
and, through the use of advanced analytics, inform wider tax administration strategies. Even
the simple capability to access third part data, as a number of studies have shown,1 can also
have a strong positive impact on compliance.
Figure 15.1. A pre-filling maturity “pathway”
Characteristics for data management development pathway
External enablers: Internal enablers:

Political consensus and Complete database of
Performance gap (correct and on time reporting in tax returns)
Automatic support for simplification businesses and individuals

large scale and reduction of and a high integrity taxpayer
post-assessment compliance cost. identifier (TIN) to match large
matching for volumes of third party data. Silent accept and
audit purposes Support from other no-return
and case government agencies. Simplified tax return. approaches.
Manual selection based Pre-filling of
post-assessment on risk Coordinated whole-of- preliminary tax Taxpayer Value for taxpayer
matching for audit parameters. government digitalization returns and service/compliance
purposes. development and reuse advanced activities and
Wide range of of information. analytics. personalisation in
Mainly internal data sources how the Tax
Electronic filing
data sources with (internal and Administration
arrangements.
limited use of data external). delivers its
from other services.
Developed information
governmental
Strong investment in technology solutions and
agencies.
digital services. skills (both internal for
receiving data, and external
Change in the legal for data providers)
framework.
Ensure correct reporting
Trust and transparency. from data providers
Pre-assessment
Post-assessment matching Transformation verification/preliminary
proposal
Maturity level
Source: Norway – Norwegian Tax Administration (2017).
Figure 15.1 depicts the possible pathway from post-assessment to pre-assessment

verification, with a description of the characteristics of different levels of maturity is below.
The rest of this chapter outlines the steps in this pathway.
Post-assessment
Currently most tax administrations systems are based on the filing of individual
income tax returns on an annual basis, with one-third of these returns still filed in paper
form (see Chapter 6). Returns are generally regarded as “self-assessed” and processed by
the administration as filed, with only minimal direct checking. Any verification or auditing
of the return is conducted post-assessment or post-filing whereby the tax administration
will seek to verify the accuracy of tax returns. This can be done by:
• Acceptance of the tax return depending on judgements about the risk of non-
compliance in a particular taxpayer group.
• Cross-checking amounts reported, on a full or sample basis, with information
from third-party sources, such as returns from employers, information from banks
and financial institutions, information provided from other government agencies,
information on overseas accounts received under the Common Reporting Standard
etc.
• Audits of particular taxpayers, either on a random, sectorial or a risk basis. The
increase of information in digital form more easily allows anomalies and other risk
factors to be picked out.
When differences are identified between the amount assessed on the basis of tax
returns and as a result of information in the post-assessment phase, the tax administration
will reopen the assessment and make adjustments. This is resource intensive for the tax
administration, potentially involving extensive interaction with the taxpayer, accounting for
some of the 30% or overall tax administration resources devoted to audit and verification
activity. Different levels of maturity in this phase are characterised by the coverage of
data, the number of sources, the technology used to support crosschecking and awareness
of taxpayers as to what information is available to the tax administration from third party
data providers.
Box 15.1. Combining information from multiple sources
In New Zealand, the intent is to move towards increasing levels of pre-population of data
supported through enhanced and improved data sharing (both public and private information)
to significantly reduce customer effort and provide customers the ability to easily confirm their
tax position through smart, easy to use online digital services. This includes a focus on policy
intent, significant technological change and simplified and integrated business processes to
support customer outcomes.
In Russia, assessment of property taxes is done on the basis of information which is supplied
to the tax administration in an xml file format by property registry which provides descriptions of
taxable properties and tax base values. The information on established tax rates is received from
local governments. Tax information accompanied by descriptions of taxed properties, regardless
of their location, can be accessed by taxpayers online through a personal secure account in the
tax administration’s web portal.
Box 15.1. Combining information from multiple sources (continued)
In Singapore, the “No-Filing Service” (NFS) provides a seamless experience using

income tax data from employers and other government bodies which has eliminated the need
to file personal income tax returns for many taxpayers. The NFS was piloted in 2007 with
45 000 taxpayers and has grown to 1.39 million in 2015. Taxpayers can preview their Notice
of Assessment on the web portal even though they need not file. The use of reliable third party
data to automate the tax filing process reduces the risk of non-compliance and the need for
contact between the customer and the revenue authority.
Source: New Zealand – Inland Revenue, Russia – Federal Tax Service, Singapore – Inland Revenue Authority
of Singapore (2017).
Transformation phase
The development and transformation, from post-assessment verification to a situation

where the volume and the quality of data allow the tax administration to move to pre-
assessment and possible pre-filling, can be a lengthy journey. It is a result of a long-term
strategy using technology to develop efficient and user-friendly solutions for the tax
administration, providers of third-party data and taxpayers. An important part of this is
identifying data sources – including from other parts of local or national government – and
understanding how such data sources can be integrated into tax administration systems
(including the question of whether to adapt legacy systems or make more fundamental
changes, including the possibility of using commercial off-the-shelf systems). This can
also involve tax administrations working with third-party providers directly or through a
wider dialogue on acceptable formats and standards. In parallel, relevant legislation may
require adjustment, including possible mandating of third party reporting of tax-related
information or withholding. Tax administrations must also develop internal capacity and
skills to receive and process data including for use in advanced analytics (OECD, 2016).
Many tax administrations are already reporting substantial increases in recruitment of
people with such skills.
Box 15.2. Collection of data for third parties
Tax administrations are also using their information gathering powers to obtain information
on those operating in the rapidly growing, sharing economy. The Australian Tax Office has been
working with the platform facilitators to obtain data on drivers and people letting properties.
While in Finland legislation that enables the collection of third party information has been used
to obtain data to monitor online credit/debit card payments and detect possible unregistered
remote sellers and VAT EU distance sellers. Where a significant volume of payments are
identified as being made to an unknown person, this can be investigated to determine if the
person is an unregistered business. To date, the tax authority has identified 188 unregistered
distance sellers, amounting to sales of EUR 50 million. Based on sales, the estimated VAT loss
is EUR 12 million yearly.
Source: OECD (2017), “Technology Tools to Tackle Tax Evasion and Tax Fraud”, www.oecd.org/tax/
crime/technology-tools-to-tackle-tax-evasion-and-tax-fraud.pdf.
This transformation process requires political and public support given that it will involve
major change management programmes, changes in how tax administrations interact with
taxpayers (and thus a large education element) and will involve public discussion about data
privacy and security issues. This may be part of a broader whole-of-government digitalisation
process to promote simplification and reuse of information.
A fundamental enabler in processing third-party data is a comprehensive electronic
infrastructure for exchange of information between the tax administration, other public
sector agencies, individuals and businesses. This will require that systems can talk to
each other and that data is of good quality and can be integrated easily. This requires the
active engagement of the tax administrations with providers of data, as well as software
developers, about formats, compatibility and approach. In particular, consideration needs to
be given to the ability to make changes with short lead times and at low cost given the pace
of technological change. Solutions must also be designed to handle high volumes during
peak filing periods, storage and extraction of data for audit (internal or external) or wider
analytical purposes.
In principle, providers of third party data can be exposed to similar obligations of
taxpayers given their role in the broader economy. Taxpayer’s obligations are usually
defined as the obligation to register in the tax system, to file tax returns, pay on time and
the obligation to ensure that information is complete and accurate. Similar obligations
can be placed by legislation on providers of third party data, as they are already in some
circumstances where withholding is required, including the obligation to pay on time.
Legislation may also be necessary for data protection purposes, ensuring that data is
collected, used and retained for specified purposes and kept confidential.
Even where legislative obligations are brought in, tax administrations must facilitate
voluntary compliance for third-party data providers as they do for taxpayers with the
necessary information and support to meet their obligations. In addition, tax administrations
must use a range of verification actions and risk-based approaches to monitor the accuracy
and quality of data received from third-party data providers. This means a shift from using
resources to verify information received from taxpayers, to focus on ensuring accuracy in
data reported from third parties.
Box 15.3. Working with third parties to obtain data
To support high levels of voluntary compliance by taxpayers, the Norwegian Tax

Administration (NTA) works closely with third party data providers to ensure they have the
information and support they need to meet their obligations at the lowest possible cost.
An important feature of this support has been the development of Altinn, a portal for
electronic dialogue and information exchange between public sector agencies, individuals and
businesses. Altinn began as collaboration between the tax administration, Statistics Norway and
the Brønnøysund Register Centre and has seen its use increase significantly since its launch in
2002. As of February 2016 forty three organisations were registered as service owners. One of
the newest services on the portal is an initiative between NTA, the Norwegian Labour Welfare
Administration and Statistics Norway, that gives employers access to reported salaries and
employment information via single point of contact for all three agencies. A side benefit of this
work has seen the harmonising of due dates which has allowed the agencies to reduce third party
burden, by reducing the number of electronic forms businesses need to submit from five to one.
Box 15.3. Working with third parties to obtain data (continued)
With most initiatives, launched by the NTA to increase compliance from third party providers,
requiring changes in the law, it is important to have an effective overall legal framework that
creates and supports the third party reporting regimes. The NTA also has established a forum for
dialogue with intermediaries and regularly hosts training and education events to make businesses,
particularly small and medium enterprises, aware of their obligations as third party data providers.
Beyond this it is important that administrations have a programme of monitoring and intervention
in place to detect and deter insufficient or inaccurate third party reporting. In this regard, the NTA
has recently moved resources from its traditional audit operations to support actions aimed at
ensuring sufficient and accurate information from third party data providers.
Source: Norway – Norwegian Tax Administration (2017).
Pre-assessment verification
At some point the data flow from third party data providers together with external and
internal enablers and changes in the design of tax administration systems, will allow tax
administration to verify returns immediately, or to pre-fill tax returns or, eventually, to
dispense with them altogether.
In addition to the reduction of burdens and costs, choices here will also depend on a
wider public debate about the connection of taxpayers to the tax system, in particular how
visible should tax obligations be to taxpayers. This is partly a wider political issue but also
has implications for compliance where data is missing, in particular as regards shadow
economy activity.
A number of tax administrations have already moved to pre-filling of tax returns for
some taxpayers, which the taxpayer then has to either agree (which may be by deemed
agreement after a certain period of elapsed time) or provide further information which may
lead to an upwards or downwards adjustment. The data needed for pre-filling is simplest in
the case of employees with only one source of income and where the employer has provided
the relevant income information to the tax authority. As a minimum this will require
taxpayer identity, tax history, income, and credit and deduction related information (which
may already be embedded in the employer’s systems). The most frequent sources used for
pre-filling, as reported by jurisdictions participating in this publication, are: data on salary
and wages provided from employers; dividends and interests from banks and financial
institutions; and pension information from other government agencies (see Table A.93).
Tax administrations may choose to make a shift from post-assessment crosschecking to
pre-filling – which will implicitly reveal what information is available from third parties –
when the external and internal enablers are able to provide a sufficient data of appropriate
quality. Careful consideration needs to be given to the question of what is “sufficient data”.
While full information is not a pre-requisite where taxpayers remain under an obligation
to confirm that all taxable income has been reported, significant gaps can also lead to
significant non-compliance. This can either be because the taxpayer does not believe that
the tax administration has access to the data or the taxpayer just assumes that the amount
assessed is accurate.
New data sources also may not always be immediately used in pre-filling because of
quality issues or because of difficulties in integrating such data. This needs to be taken
into account when moving to pre-filling. For example, we will see a large increase in the
amount of data available on accounts of taxpayers held overseas as exchange begins under
the Common Reporting Standard (CRS). Due to the fact that pre-filling of tax returns
requires a high degree of certainty, in the early days of exchange under a new standard
such as the CRS, tax administrations may exercise caution before using the data in pre-
filling tax returns until they are sufficiently confident about the quality of the data and the
matching of that data against individual taxpayers.
Box 15.4. Bringing it together
In Australia, the Australian Tax Office (ATO) provides the opportunity for clients to choose
to pre-fill information directly into individual income tax returns, including salary, interest
and private health insurance data sourced directly from employers, banks and insurers. The
information provided through this system helps the ATO improve services and makes it easier
for those that want to comply to do so and harder for those that choose not to. In the last financial
year, the ATO made close to 96 million transactions available for pre-filling, with taxpayers
downloading more than 54 million of those transactions. It used over 636 million transactions
reported by third parties to match individual income tax returns and other income statements.
The ATO is using increasingly sophisticated data analytics and risk modelling to identify and
review income tax returns that may omit information or contain incorrect statements.
The ATO conducted around 450 000 reviews and audits resulting in revenue adjustments of
over AUD 1.1 billion in income tax. Cases involved omitted income or over-claimed entitlements
such as deductions or offsets, including those significantly different to claims made by taxpayers
in similar circumstances.
Note
1. See for example Kleven et al. (2010). The study finds evasion rate to be very small for income subject
to third-party reporting, but substantial for self-reported income. This project analysed a randomised
tax enforcement experiment in Denmark with a sample of over 40 000 individual tax filers.
References
Kleven et al. (2010), “Unwilling or Unable to Cheat? Evidence from a Randomized Tax
Audit Experiment in Denmark”, NBER Working Paper, No. 15769, National Bureau of
Economic Research, Cambridge, www.nber.org/papers/w15769.
OECD (2017), “Technology Tools to Tackle Tax Evasion and Tax Fraud” (report), OECD,
Paris, www.oecd.org/tax/crime/technology-tools-to-tackle-tax-evasion-and-tax-fraud.pdf.
PART III. Annexes – 197
Part III
Annexes
Annex A. Data tables – 199
Annex A
Data tables
Annex A contains the set of tables which hold the data provided by tax administrations
in response to the 2016 tax administration survey, and that were used to prepare information
contained in this report.
It is available in electronic form only and can be found at: http://dx.doi.org/10.1787/
tax_admin-2017-en.
Annex B. Participating tax administrations – 201
Annex B
Participating tax administrations
Country Tax administration Website address Currency code

Argentina Federal Administration of Public Revenues www.afip.gov.ar ARS
Australia Australian Taxation Office www.ato.gov.au AUD
Austria Federal Ministry of Finance https://english.bmf.gv.at/ EUR
Belgium Federal Public Service Finance www.minfin.fgov.be EUR
Brazil Secretariat of Federal Revenue of Brazil www.receita.fazenda.gov.br BRL
Bulgaria National Revenue Agency (NRA) www.nap.bg BGN
Canada Canada Revenue Agency www.cra-arc.gc.ca CAD
Chile Servicio de Impuestos Internos www.sii.cl CLP
China State Administration of Taxation www.chinatax.gov.cn CNY
Colombia National Tax and Customs www.dian.gov.co COP
Administration
Costa Rica Directorate of Taxation, Ministry of Finance www.hacienda.go.cr CRC
Croatia Tax Administration, Ministry of Finance www.porezna-uprava.hr HRK
Cyprus 1
Department of Inland Revenue, VAT Service www.mof.gov.cy/ird EUR
www.mof.gov.cy/vat
Czech Republic Financial Administration of the Czech Republic www.financnisprava.cz CZK
Denmark Danish Tax Administration (SKAT) www.skat.dk DKK
Estonia Tax and Customs Board www.emta.ee EUR
Finland Finnish Tax Administration www.tax.fi EUR
France Direction générale des finances publiques (General www.impots.gouv.fr EUR
Directorate of Public Finances)
Germany Federal Ministry of Finance – www.bundesfinanzministerium.de EUR
Tax Administration of the “Länder” (Federal States)
Greece General Secretariat for Public Revenue, Ministry of www.publicrevenue.gr/kpi/ EUR
Finance
Hong Kong, China Inland Revenue Department www.ird.gov.hk/ HKD
Hungary National Tax and Customs Administration www.nav.gov.hu HUF
Iceland Directorate of Internal Revenue (Ríkisskattstjóri) www.rsk.is ISK
India Central Board of Direct Taxes www.incometaxindia.gov.in INR
Indonesia Directorate General of Taxes www.pajak.go.id/?lang=en IDR
Ireland Office of the Revenue Commissioners www.revenue.ie EUR
Israel Israel Tax Authority http://ozar.mof.gov.il/taxes ILS
202 – Annex B. Participating tax administrations
Country Tax administration Website address Currency code

Italy Revenue Agency www.agenziaentrate.it EUR
Japan National Tax Agency www.nta.go.jp JPY
Korea National Tax Service www.nts.go.kr KRW
Latvia State Revenue Service www.vid.gov.lv EUR
Lithuania State Tax Inspectorate under the Ministry of Finance www.vmi.lt EUR
Luxembourg Administration des contributions directes (Acd) – www.impotsdirects.public.lu EUR
Direct Tax Administration www.aed.public.lu
Administration de l’enregistrement et des domaines (Aed) –
Indirect Tax Administration
Malaysia Inland Revenue Board www.hasil.gov.my MYR
Malta Inland Revenue Department (Direct Taxes), VAT www.ird.gov.mt EUR
Department www.vat.gov.mt
Mexico Tax Administration Service (Servicio de administración www.sat.gob.mx MXN
tributaria)
Morocco General Administration of Taxes www.tax.gov.ma MAD
Netherlands Netherlands Tax and Customs Administration www.belastingdienst.nl EUR
New Zealand Inland Revenue Department – Te Taari Taake www.ird.govt.nz NZD
Norway Skatteetaten (Tax Norway) www.skatteetaten.no NOK
Peru Superintendencia Nacional de Administración Tributaria www.sunat.gob.pe PEN
(SUNAT)
Poland Ministry Of Finance www.mf.gov.pl PLN
Portugal Autoridade Tributária e Aduaneira www.portaldasfinancas.gov.pt EUR
(since 1 January 2012)
Romania National Agency for Fiscal Administration www.anaf.ro RON
Russia Federal Tax Service (FTS of Russia) www.nalog.ru RUB
Singapore Inland Revenue Authority of Singapore www.iras.gov.sg SGD
Slovak Republic Financial Directorate of the Slovak Republic www.financnasprava.sk EUR
(since 1 January 2012)
Slovenia Financial Administration of the Republic of Slovenia www.fu.gov.si EUR
South Africa South African Revenue Service (SARS) www.sars.gov.za ZAR
Spain Agencia estatal de administración tributaria – State Tax www.agenciatributaria.es EUR
Administration Agency
Sweden Swedish Tax Agency (Skatteverket) www.skatteverket.se SEK
Switzerland Federal Tax Administration www.estv.admin.ch CHF
Turkey Gelir İdaresi Başkanlığı (Turkish Revenue www.gib.gov.tr TRY
Administration)
United Kingdom Her Majesty’s Revenue and Customs www.hmrc.gov.uk GBP
United States Internal Revenue Service www.irs.gov USD
Note: 1. Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island.
There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the
Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the
United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus is
recognised by all members of the United Nations with the exception of Turkey. The information in this document relates
to the area under the effective control of the Government of the Republic of Cyprus.
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(23 2017 09 1 P) ISBN 978-92-64-27911-7 – 2017
Tax Administration 2017
Comparative Information on OECD and Other Advanced
and Emerging Economies
The OECD’s Tax Administration Comparative Information Series, which commenced in 2004, examines the
fundamental elements of modern tax administration systems and uses an extensive data set, analysis and
examples to highlight key trends, recent innovations and examples of good practice. The primary purpose of the
series is to share information that will facilitate dialogue among tax officials and other stakeholders on important
tax administration issues, including on identifying opportunities to improve the design and administration of their
systems both individually and collectively.
This report is the seventh edition of the OECD’s Tax Administration Comparative Information Series. It provides
internationally comparative data on important aspects of tax systems and their administration in 55 advanced
and emerging economies. The format and approach for the 2017 edition of the publication has been revised.
The commentary is now more succinct, focusing on significant tax administration issues and trends. It provides
increased analysis, backed by more than 170 data tables and complemented by more than one-hundred
examples of innovation and practice in tax administrations. It also features eight articles authored by officials
working in participating tax administrations that provide an “inside view” on a range of topical issues tax
administrations are managing. The report has three parts. The first contains seven chapters that examine and
comment on tax administration performance and trends up to the end of the 2015 fiscal year. The second
part presents the eight tax administration authored articles, while part three of the publication contains all
the data tables which form the basis of the analysis in this report as well as details of the administrations that
participated in this publication.
Consult this publication on line at http://dx.doi.org/10.1787/tax_admin-2017-en.

This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases.
Visit www.oecd-ilibrary.org for more information.
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Part I. Comparative information on tax administrations�������������������������������������������������������������������� 25

Chapter 1. The changing face of tax administration���������������������������������������������������������������������������� 27

Chapter 3. I nstitutional arrangements of tax administrations������������������������������������������������������������ 39

Tax gap measurements, random audits and robust monitoring of risk�������������������������������������������������� 62

Chapter 5. The changing role of tax service providers ������������������������������������������������������������������������ 67

Chapter 10. Insights from innovations in tax debt management �������������������������������������������������������155

Chapter 13. I mproving mutual agreement procedures�����������������������������������������������������������������������175

Figure 7.3 Development of primary IT solutions, 2015 ���������������������������������������������������������������������� 123

AE Agenzia Entrate (Italy)

IOTA Intra-European Organisation of Tax Administrations

Significant change continues

This report highlights four significant drivers of on-going change:

Strengthening delivery performance

The collective performance of tax administrations covered in this publication has

Sharpening compliance focus

The use of more sophisticated tools is allowing administrations to more actively

Changing the compliance environment

Managing, using and securing data more effectively

Tax Administrations covered by the report

Changes to data gathering process and reporting

• Chapter 6 summarises operational performance data for: registration; assessment;

Forum on Tax Administration

The changing face of tax administration

The emergence of new technologies, increased digitalisation and the unprecedented

Figure 1.1. Tax administration eco-system

Third Legislation &

Culture Collaborative Strategy

If administrations ever considered their national tax systems to be only a function of

Collaborative and integrated

Meeting taxpayers’ expectations of a modern tax administration requires greater

Data and insight led

Traditionally the majority of data available to tax administrations was supplied by

Better informed compliance management

The primary purpose of a tax administration is the collection of tax revenue on

Net revenue collected (in EUR) 8 500 000 000 000

Tax debt at year-end (in EUR) 1 800 000 000 000

Operational budget (in EUR) 73 000 000 000

Number of active PIT and CIT taxpayers 750 000 000

Telephone calls received 290 000 000

In-person inquiries 130 000 000

Audits/verifications conducted 58 000 000

Administrative reviews resolved 4 600 000

Staff employed 2 000 000

Number of complaints received 500 000

Number of regional/local offices 16 000

Jurisdictions covered by this publication 55

Net collections by tax administrations averages 20% of jurisdiction GDP

Net collections by tax administrations averages 54% total jurisdiction revenue

Twenty-five jurisdictions report tax administration net revenue collections exceeding

Figure 2.6. Taxpayer registrations by tax type, 2015

Part I. Comparative information on tax administrations�� 25

Chapter 1. The changing face of tax administration�� 27

Chapter 3. I nstitutional arrangements of tax administrations�� 39

Tax gap measurements, random audits and robust monitoring of risk�� 62

Chapter 5. The changing role of tax service providers �� 67

Chapter 10. Insights from innovations in tax debt management ��155

Chapter 13. I mproving mutual agreement procedures��175

Figure 7.3 Development of primary IT solutions, 2015 �� 123