Tax Administration 2023: Presentation of key findings by OECD

Tax

Administration 2023: Comparative

Information on OECD and Other Advanced and Emerging Economies

Summary of key findings

Tax Administration Series (TAS)

Launched in 2004

Objective:

Share information that will facilitate dialogue among tax officials on important tax administration issues, and that may also help to identify opportunities to improve the design and administration of tax systems both individually and collectively. • Coverage:

Tax administrations in 58 advanced and emerging economies making up around 90% of world GDP.

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International Survey on Revenue Administration (ISORA)

ISORA 2022 participation • Data gathering process:

TAS 2023 presents the results of the last 3 rounds of the ISORA survey launched between 2020 and 2022.

The survey is governed by: CIAT, the IMF, IOTA and the OECD. Since 2018, the ADB also participates in ISORA.

More than 160 administrations completed the survey online using the IMF’s Revenue Administration Fiscal Information Tool (RA-FIT).

Source: http://data.rafit.org

Inventory of Tax Technology Initiatives (ITTI)

• Additional data for the TAS: TAS 2023 also uses data from ITTI, a database which offers additional insight into the ISORA data on certain topics. The inventory contains information on technology tools and digitalisation solutions implemented by 80 tax administrations globally. ITTI was developed by the OECD with the assistance of the ISORA partners, the ADB, ATAF, CATA, CREDAF and SGATAR.

ITTI participation

Source:

https://www.oecd.org/tax/forum-on-tax-administration/tax-technol ogy-tools-and-digital-solutions/

Tax Administration Series: 2023 edition

• Content:

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The report covers all aspects of tax administration: (i) responsibilities and revenue collections, (ii) registration and identification, (iii) assessment, (iv) services, (v) verification and compliance management, (vi) collection, (vii) disputes, and (viii) budget and workforce.

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In addition, the 2023 edition contains a special feature on digital transformation journeys

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The data tables in the annex provide more granular detail

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In addition, the report also contains more than 100 country examples that highlight recent innovations and good practices introduced by participating tax administrations

Key figures related to the 58 administrations covered in the publication

Note: The figures are based on data obtained through the 2022 ISORA survey. The data has been converted to EUR using the exchange rate of 31 March 2023. They are minimum figures as not all administrations were able to provide information for all data points. Figures relate to the fiscal year 2021.

Staff employed 1 720 000 Audits/verifications 17 700 000 In-person enquiries 52 500 000 Telephone calls received 368 000 000 Number of active PIT and CIT taxpayers 912 000 000 Number of tax returns (PIT, CIT and VAT) received 1 450 000 000 Contacts via online taxpayer account 2 320 000 000 Operational budget (in EUR) 94 900 000 000 Collectable arrears at year-end (in EUR) 714 000 000 000 Total arrears at year-end (in EUR) 2 460 000 000 000 Net revenue collected (in EUR) 13 400 000 000 000

Tax Administration 2023: Key Findings

Impact of COVID-19

Revenue collections recover

• Revenue collections have recovered from the impact of COVID-19 with almost all jurisdictions showing increases between 2020 and 2021

Increase in revenue collections is quite significant, by +17.2% on average

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Change in total net revenue collections Between 2018-19 Between 2019-20 Between 2020-21 Increase (percent of administrations) 96 23 95 Decrease (percent of administrations) 4 77 5 Average change in percent +6.2 -3.8 +17.2

Table 2.1. Change in total net revenue collections between 2018 and 2021

Impact of COVID-19

Tax arrears slowly decline following spike during the pandemic

• Total amount of outstanding arrears remains very large, in the region of EUR 2.5 trillion

• Around EUR 710 billion are considered collectable

• Average ratio for total arrears to revenue collected declines:

– During 2020 – the first year of the pandemic – the ratio increased significantly, on average by more than 20%

– Between 2020 and 2021, the ratio decreased in most jurisdictions

jurisdictions)

Arrears ratio 2018 2019 2020 2021 Change in percent (between 2018 – 2021)

28.2 27.9 34.7 30.2 +7.0

Total year-end arrears as percentage of net revenue collected (50

Table 7.1. Evolution of average arrears ratio between 2018 and 2021

Trend towards e-administration continues

E-filing and e-payment are the norm

• E-filing rates continue to rise: From 2014 to 2021, average e-filing rates for PIT, CIT and VAT returns have increased significantly – between 17 and 20 percentage points (see table below)

• E-payment figures are high: In 2021, around 90% of payments (by value and number) were made electronically

Personal income tax (33 jurisdictions) 65.0 85.1 +20.1 Corporate income tax (35 jurisdictions) 77.2 95.3 +18.1 Value added tax (32 jurisdictions) 81.4 98.7 +17.3

2014 2021 Difference in percentage points Table 4.2. Evolution of e-filing rates (in percent) between 2014 and 2021

Trend towards e-administration continues

New pre-filling approaches

• Pre-filling returns: –

Number of administrations that prefill PIT returns with income information increased by 10 percentage points between 2018 and 2021, now at 88%

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Around 60% prefill PIT returns with certain deductible expenses, such as donations, school and university fees and insurance premiums

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New data sources allows pre-filling to move to VAT and CIT returns

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Use of data science techniques to prevent non-compliance:

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Spotting errors that taxpayers make as they finalise their return

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Predicting taxpayers who are likely to be late filers

Trend towards e-administration continues

Online interactions are prevailing…

• Taxpayer use of digital contact channels is increasing significantly every year, while in-person visits to tax offices continue to decline (see table below)

• In 2021, 64% of tax administrations used virtual assistants to respond to taxpayer enquiries and support self-service; a 29 percentage-point increase since 2018

Table 5.1. Evolution of service demand by channel

Previous year change in % Channel type No. of jurisdictions providing data 2019 2020 2021 Online via taxpayer account 31 +16.0 +32.1 +32.4 Telephone call 52 -4.4 +6.1 +9.9 In-person 35 -0.5 -55.3 -14.6 Mail/post 19 +0.3 -9.0 +11.3 E-mail 29 +11.7 +38.3 +9.5 Digital assistance 28 +93.3 +44.5 +72.2

Big data continues to open-up new opportunities

• Increased availability of data allows for the use of more sophisticated tools, for example artificial intelligence, machine learning or robotic process automation

Table 6.1. Evolution of the application of data science tools, artificial intelligence and robotic process automation between 2018 and 2021

Status of implementation and use Data science / analytical tools Artificial intelligence, including machine learning Robotic process automation 2018 2021 Diff. in p.p. 2018 2021 Diff. in p.p. 2018 2021 Diff. in p.p. Technology is implemented and used 71.9 94.8 +22.9 31.6 54.4 +22.8 22.8 50.0 +27.2 Technology is in the implementation phase for future use 19.3 5.2 -14.1 15.8 28.1 +12.3 14.0 8.6 -5.4 Technology is not used, incl. situations where the implementation has not started 8.8 0.0 -8.8 52.6 17.5 -35.1 63.2 41.4 -21.8

Percent of administrations

Data use is expanding across the wider organisation

Used Not used Improve compliance Identify trends Policy forecasting Revenue forecasting Provide new services Other Big data is Purpose of use (as a percent of those that use big data) 0 20 40 60 80 100 Percent

 Resulting in the identification and prevention of new risks, the prevention of errors and reduced cost

Figure 6.3. Use of big data for analytical purposes, 2022 Percent

administrations

Special Feature: Digital Transformation Journeys

1 5

Tax Administration 3.0

Tax administrations globally are undergoing a digital transformation guided by the vision of Tax Administration 3.0, the landmark report published by the OECD in 2020

https://www.oecd.org/tax/forum-on-tax-administratio n/publications-and-products/tax-administration-3-0-th e-digital-transformation-of-tax-administration.htm

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Digital identity is a core building block of digital transformation

• To access digital services, all administrations have some sort of digital identity system in place for individuals, and almost all for businesses

• The growing trend is for these digital identity systems to provide access to services from other parts of government or third parties

• Close to two-thirds of administrations use multi-factor authentication methods

Table 10.2. Digital identity authentication and authorisation, 2022

Percent of administrations that have the respective process in place Authentication methods used by the tax administration

Use of different authentication methods based on the level of security required for certain types of interactions

Password-based authentication ID card Mobile app Facial recognition Finger print Multi-factor authentication 87 38 42 13 13 62 50

Taxpayer touchpoints are increasingly automated

• Vast majority of tax administrations (around 85%) are now creating APIs

• 75% of them are making the APIs available to third party developers

• As part of the process of developing APIs, close to 60% of tax administrations are engaging in co-creation with third parties  This is facilitating connectivity between systems without providing direct access

• Top type of interactions for which APIs have been published:

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Registering for tax

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Filing tax returns

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Making payments

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Dealing with correspondence

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Uploading data files onto tax administration's systems

Data

• With growing use of data, all parties need to be confident that data is managed correctly, securely and to the relevant standards

• Two-thirds of administrations have a comprehensive data management strategy in place

• Data management is evolving towards a “collect once, use many times” across government approach: Vast majority of administrations shares or receives bulk information with other government agencies

Comprehensive data management strategy exists

Table 10.5. Data governance, 2022

Percent of administrations that have the respective process in place

Data quality of reported data is assessed

Data ethics framework in place

User data access and security is controlled

Data Privacy

Officer

management is becoming even more important

security unit exists

User data access and security is controlled parties hired to test the security of systems 66 88 74 100 84 90 90 82

employed Cyber

External

Digital transformation is requiring new skill sets

• Tax administrations are preparing the ground for digital transformation by mapping the skills needed for digital transformation

• More than half collaborate with government organisations or external partners to improve staff skills required for digital transformation

Figure 10.4. Skills for digital transformation: Identification and mapping, 2022

Percent of administrations

Mapping

skills officials have against skills required

for whole administration Yes, for parts of administration No Yes No

of future skills for a successful digital transformation

Yes,

Identification

0 20 40 60 80 100 Percent

Strong governance frameworks have been put in place to guide the significant investment

• Around 75% of administrations have a digital transformation strategy in place

• For most administrations, those strategies have a 3-to-5-year timeframe

• Close to 80% of administrations seeks input from external stakeholders while drawingup the strategy

• About one-third use data analysis to forecast scenarios while drawing-up the strategy

• Two-thirds of administrations have a senior management governance body to oversee digital transformation

• Half of the administrations have ring-fenced funding that support transitioning to a digital tax administration

Tax Administration Series: 2024 edition

Over the past 3 years, reports in this series have focused on performance data using the annual ISORA survey data.

The next ISORA survey, will be broader. It will also look at practices and institutional arrangements that do not change regularly and are only asked every 4/5 years.

Keep your eyes open for Tax Administration 2024.

Tax Administration Series: 2023 edition

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