The Reform Of Tax Administration

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 addresses tax administration reform by describing briefly the causes for inefficient tax administration, identifying the essential elements of successful reform, and presenting measures to improve the tax administration.

Tax administration improvements have contributed significantly to a doubling of China’s tax-to-GDP ratio and the substantial reduction in taxpayers’ compliance costs since the mid-1990s. This paper describes the key features of China’s tax administration and their evolution over the last 20 years. It also identifes emerging challenges to the tax system and areas where further tax administration improvements are needed to sustain tax revenue and reduce taxpayers’ compliance costs in the future.

This volume presents the work of experts on the tax reform in several developing countries, from the restructuring of the economy of post-war Japan to the 1986 reforms in Jamaica. This study is based on the conference convened by the Center for International Development Research of the Institute of Policy Sciences at Duke University in April 1988.

Over the past decade, governments in the Caribbean region have introduced the value-added tax (VAT) to modernize their tax system, rapidly mobilize revenue and reduce budget deficits. This paper analyzes VAT performance in the region and concludes that while it has boosted revenues, the VAT has not reached its potential. Intended as a broad-based tax with limited exemptions, a single rate and zero-rating confined to exports, the VAT’s design often lacks these characteristics. The paper also finds that although tax administration reforms can boost revenues, countries have just started to address organizational inefficiencies, data integrity issues, and operational ineffectiveness. These reforms need to intensify in order to have a more significant impact on compliance and revenue.

Tax Reform in Developing Countries carefully examines the experience of eight developing countries that have undergone -- and in some instances are still undergoing -- significant and comprehensive tax reform. The countries are Bolivia, Colombia, Indonesia, Jamaica, Korea, Mexico, Morocco, and Turkey. It draws on their experiences to find lessons learned and to see how they may be applied to other countries on the road to tax reform. Equal attention is given to the process of tax reform, how it is implemented, and the substance or results of reform efforts. Throughout, the focus is on the practical rather than the theoretical aspects of tax reform.

"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.