Guidelines For Improving Tax Administration In Developing Countries

This publication offers guidelines on such issues as reforming the structural organization of tax administration; enhancing the performance of its essential functions with emphasis on taxpayer registration; collection & audit.

"Taxation, like politics, is the art of the possible -- yet most public finance texts ignore the critical role played by tax administration in restoring macroeconomic balance and promoting equity and efficiency. This volume fills a gap in the literature by linking tax policy and tax administration reform and exploring ways to improve taxpayer compliance. The papers included in the volume were prepared for a symposium sponsored by the Instituto de Estudios Fiscales of the Ministry of Finance of Spain. The editors are authorities on tax policy and administration and have published extensively on tax issues."--P. [4] of cover.

Building on previous FAD work in the tax administration field, this paper defines broad criteria for diagnosing the problems in a country’s tax administration and formulating an appropriate reform strategy. To be effective, this strategy should be based on the size of the tax gap and the country’s particular circumstances. This paper discusses some guiding principles which have provided the basis for successful reforms, including: reducing the tax system’s complexity, encouraging taxpayers’ voluntary compliance, differentiating the treatment of taxpayers by their revenue potential, and ensuring the reform’s effective management. Also discussed are specific bottlenecks that hinder the effectiveness of the tax administration’s operations.

This paper examines the role of tax administration in developing countries from an economic perspective. The traditional separation of tax policy and tax administration in the literature is shown to break down in developing countries, where tax administrators decide in what manner complicated tax legislation should actually be applied. After surveying economic literature dealing with tax administration, the paper offers guidelines on how tax administrators can help implement more efficient and equitable tax systems.

This paper examines the role of tax administration in developing countries from an economic perspective. The traditional separation of tax policy and tax administration in the literature is shown to break down in developing countries, where tax administrators decide in what manner complicated tax legislation should actually be applied. After surveying economic literature dealing with tax administration, the paper offers guidelines on how tax administrators can help implement more efficient and equitable tax systems.

Statistical agencies worldwide are increasingly turning to new data sources, including administrative data, to improve statistical coverage. Administrative data can significantly enhance the quality of national statistics and produce synergies with tax administration and other government agencies, supporting better decision making, policy advice, and economic performance. Compared to economic censuses and business surveys, administrative data are less burdensome to collect and produce more timely, detailed, and accurate data with better coverage. This paper specifically explores the use of value added tax and income tax records to enhance the compilation of national accounts statistics.

This report looks at effective e-service provision by tax administrations, summarising eight critical areas, and explores big data management and portals, as well as natural systems. It highlights key opportunities, looking at how these emerging technologies can be best used by tax administrations.

This report highlights the importance of tax collection in developing countries, and recommends that the UK's aid programme should increase its focus on supporting tax authorities. This is equally valid for all forms of taxation, including VAT, personal income taxation and corporate taxation. It is also essential that taxes are paid on a fair and equal basis by all. New tax rules on developing countries, the Controlled Foreign Companies (CFC) rules are designed to discourage UK-owned corporations from using tax havens. Traditionally these rules have applied to all UK-owned corporations - both those operating in the UK and those operating overseas. Under the new rules, however, this will apply only to corporations operating in the UK, making it easier for those operating in developing countries to use tax havens. A number of NGOs have campaigned vigorously against the changes, with ActionAid estimating that developing countries may lose up to £4 billion in tax revenues as a result. The UK Government does not accept this estimate, but does not deny that there will be some cost to developing countries. The Committee recommends that - subject to the outcome of its own analysis - the Government should consider reversing the change as a matter of urgency. The Committee also received evidence which argued that the Government should require UK-owned companies to report their financial information on a country-by-country basis, rather than on an aggregate basis. The Government is reluctant to act unless other EU countries do likewise, but the Committee believes that it should act unilaterally