2. Responsibilities and collection
The primary purpose of a tax administration is the collection of tax revenue to fund public services, but over time, as previous editions of this series have highlighted, many tax administrations have also been tasked with other responsibilities. This chapter provides an overview of the net tax revenues collected as well as some other key figures related to tax administration performance, and looks at the wider role tax administrations are playing in driving change across the whole of government.
Learning from working practices during the COVID-19 pandemic
Confidence in the proven ability of tax administrations to deliver complex administrative processes on a large scale was undoubtedly a key driver behind many governments giving their tax administrations additional responsibilities during the COVID-19 pandemic. Chapter 2 of Tax Administration 2021 (OECD, 2021[1]) has a more detailed overview of the wider roles that tax administrations took on during the pandemic.
With many jurisdictions now considering the post-pandemic environment, they are reflecting and learning on the ways of working that were needed to deliver the rapid taxpayer support schemes that governments tasked them with. Many report that the pandemic working practices they adopted are now being used in business-as-usual practices, leading to longer-term shifts in the way they manage their business.
Before the pandemic, on an annual basis nearly 200 000 tax debtors asked for a face-to-face meeting to discuss tax payment matters. With offices closing to the public during the pandemic, the tax authority needed to come up with a solution for these taxpayers that previously needed assistance.
The Belgian Tax Collection and Debt Recovery Administration, in charge of collecting and recovering Direct Taxes, VAT and a range of non-fiscal claims, launched a new initiative called REACH-OUT in spring 2020 to target a specific group by telephone to offer assistance and solve tax payment issues. The target group consisted of taxpayers with a history of late tax payment or having a low revenue.
A medium-sized outbound call centre was created to provide services to taxpayers during financially difficult moments, by gently reminding them of an upcoming personal income tax payment or offering the possibility of instalment arrangements and this in the period between 10 days before and 10 days after the due date of their annual personal income tax.
This initiative was very well received by the public and there was much appreciation for this pro-active and empathic service of the Belgian tax authority. On the taxpayers’ side, it contributed to both a higher level of trust in the tax authority and a higher payment rate in the target group. Compared to a control group, there was an increase of 31% in resolved cases, leading to a reduced workload for the contact centre and recovery teams by intervening early in the collection process. After a positive evaluation, this pilot project was extended and is now used for other purposes, for example, during the need to support citizens with their energy costs.
Source: Belgium (2023).
Revenue collections recover from the impact of COVID-19
The information from the survey analysed for this chapter is showing how revenue collections recover from the impacts of the COVID-19 pandemic. Following declining revenue collections between 2019 and 2020 across a large majority of jurisdictions, revenue collections have increased between 2020 and 2021 in almost all jurisdictions covered in this edition (see Table 2.1.).
The data also shows that this increase in revenue collections is quite significant (+17.2% on average, see Table 2.1.), hinting at a substantial recovery of economic activity following the COVID-19 related lockdown measures introduced by many governments and the forced closure of many businesses which negatively affected their taxable income and sales.
With few exceptions, jurisdictions have unified the collection of direct and (most) indirect taxes within a single body for tax administration. More detail on institutional arrangements can be found in Chapter 4.2.1. in the 2019 edition of the Tax Administration Series (TAS). (OECD, 2019[2])
Table 2.2. summarises for which revenue types the tax administrations participating in this publication have responsibility. In addition, as found in previous editions of the TAS (for example, Chapter 2.2. in TAS 2019), governments have given tax administrations other areas of responsibility (including shared responsibility in some areas) in addition to their traditional tax roles.
Typically, these may be to provide financial benefits to taxpayers (for example, welfare-type benefits) or to collect loans or debts owing to government (for example, 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. (OECD, 2019[2])
Inland Revenue (IR) provided three payments totalling NZD 350, spread over August, September and October 2022, to an estimated 1.7 million low-and-middle income-earning New Zealanders to help with the rising cost of living. IR used its digital and analytical capabilities to rapidly design and deliver the payments, taking three months from design to executing the first payment. One of the design parameters was that customers would not be required to apply for the payments.
A key for IR was understanding the information it held to determine customers’ eligibility, such as their eligibility for other payments or tax residency status. Over the course of the three payments, IR collaborated extensively, incrementally increasing its use of data matching to determine the eligibility of people who received the payments.
IR also worked with the New Zealand Government’s banking partner to ensure the large number of eligible customers would receive payments on or close to the payment date. This was the first time that the organisation had released up to 1.6 million disbursements in one go, which meant IR needed to change how and when payment information was transferred electronically between agencies. This resulted in all customers being paid on the payment day, and provided them with certainty of payment as advised by the Government. Another result is that IR and other organisations now have the infrastructure and precedence of process in place to deliver large scale payments to customers.
Source: New Zealand (2023)
This section looks at the net revenue collection of tax administrations as well as a number of other key figures related to their activities.
Net collections by tax administrations averages 21% of jurisdiction GDP
Through its Global Revenue Statistics Database (OECD, 2023[3]) the OECD generally seeks to publish internationally comparable data on the tax revenues of its members as well as a number of other jurisdictions for all levels of government. As the information contained in the Global Revenue Statistics Database reports data at a jurisdiction and not an administration level, tax administrations were asked in the ISORA survey to provide a range of information on their revenue collection activity. This information aptly demonstrates the importance of ISORA participating tax administrations to the respective economies.
Net revenue collected by tax administrations participating in this report, as a percentage of gross domestic product (GDP) in 2021 ranges from less than 10% to reach more than 40% in the case of Denmark and Sweden. Average net revenue collected by administrations in this report is 21% of GDP (see Figure 2.1.).
Net collections by tax administrations averages 61% total jurisdiction revenue
Forty tax administrations report net revenue collections exceeding more than 50% of total government revenue in 2021, making tax administrations the principle government revenue collection agency in more than two-thirds of jurisdictions covered in this report. Average net revenue collected by administrations in this report is 61% of total jurisdiction revenue (see Figure 2.2.)
Source: Table D.1.
Source: Table D.1.
Value added tax and personal income tax account for 30% and 26% of net revenue collections, respectively, and are the two major tax types collected by around 40% of the tax administrations covered in this report. Corporate Income Tax (17%) and social security contributions (10%) comprise the other major revenue types as reflected in Figure 2.3. 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 jurisdictions covered in this publication. Where collected, they are often the predominant source of tax revenue collected by the tax administration (see Table D.4.).
Sources: Tables D.2. to D.4.
Given the importance of these major taxes to overall collection rates, tax administrations are investing in new and innovative approaches to promote tax compliance and streamlining tax collections. As well as establishing new teams to focus on tackling non-compliance, they are also:
developing new taxpayer education initiatives (such as the innovative approaches from Brazil, Finland and India highlighted in Box 2.3.);
digitally transforming collection approaches (the example from Singapore in Box 2.3. illustrates how this can reshape services);
using sophisticated analytics to identify and prevent non-compliance.
These are frequent themes throughout this edition of the series, and they are covered in more detail in later chapters.
Brazil – Fiscal Citizenship as part of university programmes
The Receita Federal do Brasil (RFB) has included fiscal citizenship as an integral part of the programme of mandatory activities for student training in educational institutions. This is helping build understanding of the importance of Fiscal Citizenship and the RFB Fiscal Citizenship programmes.
This is done by including RFB modules as an extension course of the Accounting Sciences courses where the RFB already has a partnership with the Accounting and Tax Support Nucleus (NAF) with about 520 educational institutions. As part of these partnerships, students offer free assistance on tax matters to citizens and micro-entrepreneurs who cannot afford it, which helps improve tax compliance in the wider society.
Chile – Tax regulations implementation team
The Tax Regulations Implementation Team is part of the Audit and Compliance Directorate of the Servicio de Impuestos Internos (SII), and helps implement changes related to new or modified laws that have a fiscal impact within SII, and external organisations.
The team’s main function is to identify early on the impacts of law changes that will affect both SII and taxpayers. Following this the team manages the implementation of the relevant measures, often using innovation and new technologies, so that systems, officials and taxpayers comply with the new regulations.
The team is made up of officials who are specialised in specific tax matters, and have experience in tax audits and training in tax. To deliver their objectives, the team is empowered to act autonomously and be pro-active in its work.
Finland – Happy Taxpayer concept
Happy Taxpayer is a new kind of communication concept using social media, influencers, and creative videos to showcase the services and perks that people living in Finland are entitled to thanks to tax revenues.
The aim of the project is to cultivate a positive attitude towards paying taxes and to reduce the shadow economy. By emphasising that taxes provide the building blocks of a fair and sustainable society, it demonstrates that all parties are working together to make Finland a good place to live and work in.
Happy Taxpayer was created as part of the tax administration’s three-year project relating to the Government’s action programme to combat the shadow economy. The idea for the campaign was sparked by the results of a survey that was commissioned by the tax administration. The survey showed that the 18 to 29 year olds who felt that they were adequately informed of the use of tax revenues and who felt that they benefited from taxes had a more positive attitude towards paying taxes.
India – Educating taxpayers of the future
Whereas taxpayer outreach towards school going children and young adults has always been a part of the Indian tax administrations’ outreach strategy, a new government-wide initiative celebrating the 75th anniversary of India’s independence, provided a platform for truly revolutionising the tax administrations’ communication strategy to the taxpayers of the future. As a part of this campaign, the tax administration launched board games, a 3-D Puzzle, comic books, an animated video series and an Android Game, all aimed at enhancing the tax literacy of the future taxpayers of the country.
For more detail on the board games, 3-D Puzzle and the comic books, see Annex 2.A.
Romania – Taxpayer education project
Increasing voluntary tax compliance is one of the main objectives of the Romanian tax administration, and supporting taxpayers' willingness to pay taxes must take into consideration various factors such as trust in the tax authority, social and moral values, and personal experience.
The Romanian tax agency conducted a project dedicated to individuals who earn or intend to earn income from tutoring/private lessons, and personalised notifications were sent, using messages designed to stimulate voluntary compliance. The target groups were selected from two counties, and the scope of the project was to observe taxpayer behaviour in different regions and to analyse the effects of the nudging techniques. The project was sustained by a communication campaign in order to increase taxpayer’s awareness about voluntary compliance. The result of the campaign was an increase in in fiscal registration for these category of taxpayers.
The lessons learned from this project include that the behaviour of the same category of taxpayers in different regions is different, meaning understanding of the target groups is a must and key messages must be adapted. Also just sending letters/notifications is not enough and communication campaigns must support all other actions. To track success data must be collected from internal and external sources and at a national level not only from the target group. Through continuous analysis the impact of nudge techniques influences across the same category of taxpayers can be considered at a national level.
Singapore – Digital transformation of enforcement processes
As part of its digital transformation, the Inland Revenue Authority of Singapore (IRAS) consolidated its frontline operations across several tax types for greater effectiveness, and further differentiated its approach in managing voluntarily compliant taxpayers (including those who could be compliant with assistance) and recalcitrant offenders.
Under Frontline 2.0, with the increased use of chatbots and other self-service tools, frontline officers have more bandwidth to take on a wider range of issues across multiple tax types. Work was redesigned such that staff specialising in a single tax type previously would now handle general queries across different tax types and service channels, as well as assist taxpayers who filed or paid their taxes late to nudge them towards compliance. Technology-related roles were also created or expanded, such as training of chatbots, experimenting with and scaling-up of automation initiatives, developing digital self-help solutions, etc.
Enforcement 2.0 complemented these efforts by focusing on recalcitrant taxpayers and handling them on an entity basis to deal with all tax compliance matters holistically across different tax types. To achieve this, the Integrated Enforcement Frontline was formed to handle recalcitrant taxpayers across different tax types and contact channels. Additionally, a Delinquent Taxpayer Taskforce to build deeper expertise in handling high risk and complex cases was successfully piloted and implemented. Using automation and analytics also allowed IRAS to take swift and effective tax recovery actions. For instance, an Entity Risk Profile model was developed to provide more precise assessments of filing and payment risks, and its predictive capabilities enabled more targeted actions to improve recovery outcomes.
As a result of these cross-training initiatives on multiple tax types and modes of contact, IRAS successfully developed a pool of future-skilled officers.
Sources: Brazil (2023), Chile (2023), Finland (2023), India (2023), Romania (2023) and Singapore (2023).
Streamlining collections: Withholding at source
Withholding regimes can form part of compliance-by-design approaches which support overall compliance while significantly reducing burdens for large numbers of taxpayers depending on the extent of taxpayer involvement in any post-payment adjustments that might be needed (i.e. where withholding results in under-payment or over-payment of tax). In place of self-reporting and paying, withholding taxes are taxes paid directly to the tax administration, usually by a principal who pays the net income to the recipient (for example withholding by an employer on salary paid to an employee), or by an intermediary between the payer and customer. The most common withholding tax in operation globally is income tax on employment income (so called Pay-As-You-Earn (PAYE) approaches). Other examples include withholding taxes on interest, dividends or royalties. Depending on the underlying tax regime and nature of the payments, withholding can vary from a simple system, at a universal set rate, to a more complex system that is responsive to the customer’s wider circumstances.1
In addition to minimising burdens, withholding regimes can also reduce misreporting and underpayment as principals or intermediaries responsible for forwarding taxes to the administration have no right over the respective amounts. Of course, there remains scope for failures in such approaches by misapplication of rules or errors by principals or intermediaries where the system relies on them providing information. However, increased automation, greater cross-checking of data and whole of government approaches have the potential to reduce such issues.
To understand the importance of withholding at source for personal income taxes, the survey underlying this publication asked participating administrations to estimate the percentage of total personal income tax withheld by third parties and subsequently paid to the administration. Administrations that were able to provide this information estimate that around 80% of total personal income tax collections were withheld at source in 2021 (see Table 2.3.).
References
[3] OECD (2023), Global Revenue Statistics Database, https://www.oecd.org/tax/tax-policy/global-revenue-statistics-database.htm (accessed on 22 May 2023).
[1] OECD (2021), Tax Administration 2021: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://doi.org/10.1787/cef472b9-en.
[2] OECD (2019), Tax Administration 2019: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://doi.org/10.1787/74d162b6-en.
Box 2.3. – Brazil: Link to a presentation on the fiscal citizenship course: https://www.oecd.org/tax/forum-on-tax-administration/database/b.2.3-brazil-fiscal-citizenship-course.pdf
Box 2.3. – Chile: Link to an overview slide on the Tax Regulations Implementation Team: https://www.oecd.org/tax/forum-on-tax-administration/database/b.2.3-chile-regulations-implementation-team.pdf
Box 2.3. – Finland: Link to a website with more detail on the Happy Taxpayer concept: https://happytaxpayer.com/
Box 2.3. – India: Link to more detail on the educating taxpayers of the future campaign: https://www.oecd.org/tax/forum-on-tax-administration/database/b.2.3-india-educating-taxpayers-of-the-future.pdf
Note
← 1. For further information on the withholding regimes put in place in jurisdictions, please see Tax Administration 2019 (OECD, 2019[2]), Tables A.73. and A.74.