ANINTEGRATEDASSESSMENTMODEL FORTAXADMINISTRATION

COMPREHENSIVE MODEL TO ASSESS THE OVERALL PERFORMANCE OF TAX

ADMINISTRATION

PUBLIC SECTOR AND GOVERNANCE GROUP (PRMPS) WORLD BANK GROUP

Rationale for developing this tool by the World Bank Group

• Important role and increasing capacity building work of the WBG in taxpolicy and revenue administration:– As of December 2011, around 126 WBG operations (credits, loans, and

technical assistance advisory services) have components involving tax policyand revenue administration.

– These operations target more than 70 countries-most of the operations targetLow Income Countries in AFR, and Upper Middle Income Countries in LAC andECA.

• IEG Evaluation (2008) of the WBG support for PS reform recommended:– Better upstream diagnosis to better understand the context of reforms; and– Implementation of a set of tangible indicators to measure effectiveness and

progress towards achievement of objectives;

• A standardized and comprehensive tool to assess the performance of taxadministration has not been developed yet.

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Tools currently available to measure the performance of tax administration

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OECD´s Comparative Information Series for OECD and non-OECD countries (2010)

Comparative Information Series: A pilot study on Revenue Administration in Sub-Saharan Africa (OECD/ATAF)

Public Expenditure and Financial Accountability (PEFA) Framework

The European Commission´s Fiscal Blueprints

The USAID´s Collecting Taxes Database

Diagnostic Framework for Revenue Administration (WB/RAPTG, 2000)

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INDEX

IAMTAX: a comprehensive model to assess the performance of tax administration

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• The World Bank (PRMPS) has developed the IAMTAX as a comprehensive andsystematic tool for assessing tax administration performance over time.

• Overall performance of tax administration is analyzed by covering a wide array ofelements encompassing three levels of analysis: (i) legal and regulatory framework;(ii) institutional set-up/capacity building; and (iii) core business processes.

• The model is built on benchmarking analysis, but it recognizes the fact that no one-size fits all.

“As a result, the model places strong emphasis on a country’s context and its evolving nature by proposing a framework to better accommodate changes in the country’s

environment”.

IAMTAX: Objectives and main elements

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• The IAMTAX consists of two main elements:

(i) the diagnostic tool; and

(ii) the measurement framework

• The diagnostic tool would :

assess the current situation of a given tax administration; and

establish the baseline for the entire set of indicators against which the performanceof tax administration would be monitored and assessed throughout a period oftime.

The diagnostic tool would play a critical role in putting into context the current performanceof a given tax administration vis-à-vis the proposed measurement framework.

• The measurement framework would contribute towards achievement of two mainobjectives:

identify and asses performance gaps of tax administration by comparing the actualperformance against a set of desirable benchmarks and good practices(“benchmarking” tool); and

assess and monitor performance of tax administration over time.

Using the IAMTAX as a benchmarking tool

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Current trends in tax administration:

Finding the core strategic dimensions of the model

✓ A new paradigm for control of compliance

✓ Customer orientation✓ Market segmentation

together with risk analysis techniques as a central plank of a modern control of compliance strategy

✓ New organizational model

✓ Process orientation✓ The key role of ICT✓ International dimensions

of taxation

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Core Strategic Dimensions of the Measurement Framework

• The measurement framework has been developed around a reference system that consists of 14 core strategic dimensions widely recognized to be key features of modern tax administrations.

• The reference system ultimately centers on a new paradigm of tax administration that focuses on encouraging compliance and cooperation with taxpayers.

Legal and Regulatory Framework

Institutional set-up and capacity building

Core business processes

3 LEVELS OF ANALYSIS

DIMENSIONS

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Measurement Framework Indicators

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Type of taxpayer

Geographic Location/Region

Economic sector

IAMTAX Indicators

Outcome indicators(30)

Intermediateoutput indicators(20)

Drill down indicators

Reference system is linked to the environment in which tax administration operates…..

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A. Simplification of tax legislation;B. Client/taxpayer orientation;C. Enhancing voluntary compliance;D. Extensive use of Information and

Communication Technology;E. Segmentation of taxpayers;F. Application of risk based criteria to

analyze and monitor tax compliance;

G. Information as a fundamental asset of the tax administration;

H. Emphasis on Human Resource Management;

I. Increasing relevance of international taxation;

J. Equity and transparency of tax system;

K. Process orientation;L. Planning as a core element of tax

administration; M. Increasing the analytical capacities

of tax administrationN. External communication policy,

which fosters relations with the private sector and other stakeholders;

Key Objectives Strategic Dimensions Operational Level

Outputs• No. of tax audits;• Tax disputes resolved;• Tax services provided;• Tax arrears collected;• Other

Outcomes• Change in compliance

behavior;• Increased level of

voluntary compliance;

Core Business Processes

Mass Processes (Processing of tax returns, taxpayer services..)

Taxpayer registry

Market segmentation (Tax audit function, revenue arrears

management…)

Taxpayer account

Environment

InputsHuman resources; budget; and infrastructure

(physical and IT)

e - OfficesThird party information

Banks

Transparency, equity and

simplification of tax

legislation

Strategic Vision

Effectiveness

Efficiency

Taxpayer services and

external communication

Grouping strategic dimensions into key objectives

Strategic Vision, Legal and

Regulatory Framework

Operational Performance

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Good Practices in Tax Administration

• The model incorporates a significant number of goodpractices (190) extracted from the current literatureand the extensive experience of the World BankGroup in tax administration reform projects.

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Good practices are classified according to the three levels of analysis: (i) legal and regulatory

framework;(ii) institutional set/up and

capacity building; and (iii) core business processes.

Methodology of the Benchmarking Tool

• Each strategic dimension is linked to a set of good practices, outcome and intermediate output indicators.

• Strategic dimensions are grouped into 5 key objectives including (i) transparency, equity, and simplification of tax legislation; (ii) strategic vision; (iii) effectiveness; (iv) efficiency; and (v) taxpayer service and external communication.

• Objective values or range of values are assigned to each of the indicators.

• Application of the model involves a comprehensive analysis of tax administration processes by using all available information sources.

• The “benchmarking tool” would determine how the tax administration scores in each of strategic dimensions and key objectives.

• It would also determine how the tax administration scores in (i) good practices, outcome and output indicators; (ii) particular processes or functions; and (iii) specific level or sub-level of analysis.

The overall score of the tax administration would be the sum of scores of each

strategic dimension.

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IAMTAX: Reporting Results

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14 Strategic Dimensions

5 Key Objectives12 Core Business Processes

IAMTAX: Assessing performance of the tax administration from different perspectives

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Reporting results for each strategic dimension

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IAMTAX: Approach to Key Objectives

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Reporting results for key objectives

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IAMTAX: Approach to Core Business Processes

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Performance assessment graphics

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Tax audit performance

Revenue arrears management

Strategic Vision

Taxpayer service

Reporting Results: Tax Administration performance over time

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LOWPERFORMANCE

AVERAGE PERFORMANCE

GOOD PERFORMANCE

OUTSTANDINGPERFORMANCE

Reporting Results: Strategic Vision and Operational Performance

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Country X

Reporting Results: Performance of a given Tax Administration in Strategic Vision and Operational Performance

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H

GF

B

E

I

C

Country A

D

Reporting Results: Cross-Country Comparison in LAC Region (hypothetical situation)

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H

2012

GF

B

E

I

C

Country A

D

2016

Comparative Analysis of Tax Administrations in LAC Region (hypothetical situation)

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IAMTAX AS A DIAGNOSTIC AND MONITORING TOOL

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“Theory is when you know everything but nothing works. Practice is when everything works but nobody knows why. We have put together

theory and practice: nothing is working… and nobody knows why” (Albert Einstein)

IAMTAX as a Diagnostic and Monitoring Tool

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Diagnosis of a tax administration

Analyze the Context

Setting a baseline

Monitoring Performance

Analyze the underlying factors that explain institutional gaps or weaknesses

With the help of the diagnostic tool

Setting a baseline and respective targets for the indicators over a period of time

Monitoring Performance against targets

IAMTAX as a Diagnostic and Monitoring Tool-Monitoring progress over time

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Measurement framework

Benchmarking tool

Diagnostic toolIndicators baseline

Year 1 Targets Year 2 Targets

Country X Supervision mission 2012

Year 3 Targets

Country X Supervision mission 2014

Monitoring and assessing compliance against targets

OUTCOME INDICATORS

(30) GOOD

PRACTICES (190)

DRILL DOWN INTERMEDIATE

OUTPUT INDICATORS

DRILL DOWN OUTCOME

INDICATORS

INTERMEDIATEOUTPUT

INDICATORS (20+40)

Full set of Indicators and Good Practices

Indicators and good practices used as a benchmarking tool

Indicators and good practices used to carry out diagnosis and monitoring of tax administration

+29

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Refine the methodology

Prepare documents, questionnaires and indicators matrix and monitoring cards

Analyze tax administration processes by using all available information

sources

Validate the proposed set of indicators and good

practices

The results of the first pilot will be used to build a web application which would produce reports and results of the gap analysis, and transform them

in a graphical form

Implementation of the model-Roadmap

IAMTAX-Indicators Matrix

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IAMTAX: Indicators Cards

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Web page IAMTAX: Assessment tool

WORLD BANK IAMTAX

Methodology

Diagnostic tool

Measurement framework

Best Practices

List of indicators

Statistics and reports

www.iamtax.org

The IAMTAX is a tool that evaluates in a comprehensive and systematic way performance of taxadministration. It consists of two main elements: a diagnostic tool and a measurement framework.The measurement framework would contribute towards achievement of two main objectives:identify and assess performance gaps of tax administration by comparing the actual performanceagainst a set of desirable benchmarks and good practices (“benchmarking” tool); and assess andmonitor performance of tax administration over time (diagnostic and monitoring tool). Thediagnostic tool would: (i) assess the current situation of a given tax administration; and (ii)establish the baseline for the entire set of indicators against which the performance of taxadministration would be monitored and assessed throughout a period of time.

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Additional functionalities of the model

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Documents Database

Comparative Studies of

Tax Administrati

on

Case Studies

Manual of Tax

Administration