On August 11, 2015, the Organisation for Economic Co-operation and Development (OECD) released its annual report addressing global tax administration. The OECD’s stated mission is to “promote policies that will improve the economic and social well-being of people around the world.” The OECD describes its annual report as follows:
Tax Administration 2015, produced under the auspices of the Forum on Tax Administration, is a unique and comprehensive survey of tax administration systems, practices and performance across 56 advanced and emerging economies (including all OECD, EU, and G20 members). Its starting point is the premise that revenue bodies can be better informed and work more effectively together given a broad understanding of the administrative context in which each operates. However, its information content is also likely to be of interest to many external parties (e.g. academics, external audit agencies, regional tax bodies, and international bodies providing technical assistance).
The series identifies some of the fundamental elements of national tax system administration and uses data, analyses and country examples to identify key trends, comparative levels of performance, recent and planned developments, and good practices.
This edition updates performance-related and descriptive material contained in prior editions with new data up to end-fiscal year 2013, and supplements this information on some new topics (e.g. aspects of compliance management and strategic priorities for increased use of on-line services). It also includes coverage of four additional countries (i.e. Costa Rica, Croatia, Morocco, and Thailand).
Of particular interest in this report is the OECD’s finding regarding voluntary disclosure programs for non-compliant taxpayers. With the increased focus on offshore tax evasion by many countries, and the implementation of policies regarding the exchange of tax information among nations (including FATCA in the U.S., which is effective now, and the OECD’s Common Reporting Standard, which is just over the horizon), it is expected that taxpayers in many countries will be making greater use of voluntary disclosure programs. In the U.S., for example, the IRS Offshore Voluntary Disclosure Program for taxpayers with offshore bank accounts is the most successful voluntary disclosure program ever offered by the U.S. tax authority.
A press release announcing publication of Tax Administration 2015, and its key findings, is set forth below.
Tax administrations continue to face the challenges of improving their performance while reducing costs, decreasing compliance burdens for taxpayers tackling non-compliance. Improving taxpayer services, while making non-compliance harder, is helping revenue bodies increase their efficiency and allowing governments to finance important programmes that will further benefit their citizens.
Tax Administration 2015 is the sixth edition of the OECD’s comparative information series on tax administration. The report, which surveys 56 advanced and emerging economies (including all OECD, EU, and G20 countries), includes for the first time information: Costa Rica, Croatia, Morocco and Thailand. The series identifies fundamental elements of modern tax administration systems and uses data, analyses and examples to identify key performance trends, recent innovations, and examples of good practice.
Among the many findings and observations, the report in particular highlights:
— Significant organisational change – 40% of revenue bodies reported that they are currently managing the addition of new business activities, amalgamation with other government service providers, and consolidation of work and their office network, at a time when 60% saw reductions in staffing, with significant reductions in Australia, the United Kingdom and the United States.
— Strong investment in digital services– driven by customer expectation and productivity demands revenue administrations have invested significantly in digital on-the-go services. Average IT expenditure as a percentage of the total budget remained constant at 9.5%. Notable exceptions were Austria, Finland, Singapore and Norway where approximately 25% of the total budget is spent on IT.
— Better connected e-services, and future opportunity– while 95% of all revenue bodies offer the opportunity to file returns electronically, and over two thirds achieve usage over 75%, more could be done to move other aspects of the end-to-end process, including assessment, amendment and payment into a more integrated digital service.
— Improving outstanding tax debt position – Total tax debt for OECD member countries rose marginally in 2011 to 2013, from around 22% to just over 24% of net annual revenue collections. This ratio is however significantly impacted by two abnormal “outliers” which when removed change the results for OECD countries to show a decrease from 12.7% in 2011 to 11.1% of annual net revenue collections in 2013. Notably seven revenue bodies: Estonia, Ireland, Japan, Korea, Norway, Sweden and Switzerland have a collection to debt ratio of less than 5%. Improvements in collection performance can generally be attributed to:
-Strong management information systems;
-Well-developed analytics tools to guide use of extensive enforcement powers;
-Extensive use of tax withholding at source arrangements;
-Wide use of electronic payment methods; and
-Significant investment in information technology
— Improving management of large taxpayers – over 85% of revenue bodies have adopted the structured ‘co-operative compliance model’ recommended by the OECD, for managing their largest taxpayers. One-third use similar arrangements to manage the tax affairs of High Net Worth Individuals.
— Tax gap measurement on the increase – 43% of revenue bodies report they undertake or are researching estimates of the aggregate tax gap for some or all of the major taxes administered.
— Greater use of disclosure policies to improve tax compliance and bolster tax revenues — despite two-thirds of OECD member countries reporting that their tax law permits voluntary disclosures only 40% have a policy to encourage taxpayers to use these. Further only 11 member countries were able to report the results achieved from their voluntary disclosure programme. With the imminent implementation of automatic exchange of financial account information, it is expected that there will be greater interest in these programmes. See the recent report Update on Voluntary Disclosure Programmes: A Pathway to Tax Compliance.
— Electronic matching of VAT invoices continues to expand – with growing concerns about the VAT non-compliance, a relatively large number of revenue bodies, including many in Europe and Latin America, are successfully using systems to process bulk VAT invoice data for compliance risk management and fraud detection.