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Chapter 5
Resources of national revenue bodies
This chapter provides summary data and analyses concerning the resources used for tax administration and, where applicable, other revenue body roles.
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Key points and observations
Government mandates to cut costs of operations
Revenue bodies in many countries have been directed to cut their administrative costs as part of fiscal consolidation efforts, for some requiring significant staffing reductions.
Aggregate salary and IT costs
Aggregate salary costs vary enormously from just under 50% to over 90% of aggregate administrative costs; a factor explaining the relatively low salary costs in some revenue bodies (e.g. Italy and New Zealand) appears to be the significant use of outsourcing for IT and/or other services).
IT-related costs (both salary and other administrative costs) are a significant component of the overall expenditure budget of many revenue bodies; across all revenue bodies, total IT-related costs were reported by 18 revenue bodies as exceeding 10.0% in 2011 (including 10 that consistently report amounts in excess of 15%).
Revenue bodies reporting consistently high levels of IT expenditure (as a share of total expenditure) score fairly highly across a series of performance-related measures calculated and reported in other parts of this series (i.e. e-filing (Tables 7.1 to 7.3), e-payment (Table 7.4), average staffing (Table 5.5), total administrative costs/GDP (Table 5.4), total costs/net revenue (Table 5.3), and average debt levels (Table 6.16).
Expenditure and staffing related ratios
Cost of collection ratios vary widely across revenue bodies, significantly influenced by structural and other factors unrelated to relative efficiency, of the kind described throughout this series (e.g. a country’s legislated tax burden and the taxes collected).
For the vast majority of revenue bodies, there is a decreasing trend in their respective ratios up to 2007/08 followed by a significant decline in 2009 in the aftermath of the global economic crisis; for many of these revenue bodies, the ratio improved in 2010 and/or 2011 but remains beyond the level attained in 2007.
The computed ratios for tax-related expenditure as a proportion of GDP vary significantly but there is a concentration of revenue bodies with a ratio in the region of 0.15 to 0.25% of GDP for most/all of the period covered.
Staffing ratios (e.g. number of citizens or labour force members/FTE) vary enormously across OECD countries due to structural and efficiency related factors.
There are significant variations in the relative distribution of staff resources across key functional groups, more than likely resulting from a complex mix of factors, and point to the need for substantial care when undertaking detailed cross-country benchmarking exercises.
Outsourcing of tax administration-related activities
Outsourcing is used widely for some tax administration tasks, in addition to the provision of IT services; interesting initiatives are noted concerning debt collection (Australia) and the provision of HR administrative support services (New Zealand and United Kingdom).
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The resources of national revenue bodies
The overall level of resources allocated for tax system administration is an important and topical issue for many governments, their revenue bodies, and external observers. All governments have limits on the funds at their disposal for public sector administration (including for revenue bodies) and many are actively seeking to reduce public sector costs. For their part, revenue bodies must decide how to make optimal use of the funds allocated to them to administer the laws in the most efficient and effective manner. As noted earlier in this series, most revenue bodies have some flexibility in deciding how their available funding is used for carrying out their responsibilities. Where this flexibility exists, resource allocation can be a critical part of a revenue body’s planning, enabling resource shifts to be made to meet newly emerging priorities.
This chapter provides a relatively detailed account of the aggregate resource allocations made to revenue bodies to carry out their mandate, an array of comparative analyses and trend data, and some insights on expected developments in staffing, in particular for those revenue bodies where Government decisions have been taken to improve efficiency and/ or downsize operations. Various ratios/indicators, etc., are presented as some of these are used regularly in international comparisons of tax administration systems. Given the “comparative” nature of this series, every effort has been made to validate the accuracy of the information displayed, while steps have been taken to exclude (where practicable) from relevant tabulations those revenue body resources attributable to non-tax functions, a topic dealt with at the end of the chapter. For the reasons outlined, considerable care should be taken when interpreting this information and in drawing any conclusions as to the relative efficiency and effectiveness of the individual revenue bodies identified. Further background on resource management issues in revenue bodies can be found in the FTA note “Working smarter in structuring the administration, in compliance, and through legislation” published in January 2012 (www.oecd.org/dataoecd/53/6/49428209.pdf ).
Impacts of recent Government decisions on revenue bodies’ budgets
At the time of planning the preparation of this edition, it was generally known that governments in many countries were taking steps to reduce their public sector costs, in some cases by fairly significant amounts. As large employers, revenue bodies are prime targets for expenditure reduction efforts, with potential impacts on their service delivery and compliance programmes, not to mention the consequences of managing the human resource management aspects in achieving large reductions in staffing. The survey accordingly sought details of any expenditure reduction policies that were in place to gain some insight as to their scale and how they were being realised. Details of some the policy initiatives reported are set out hereunder:
Australia reported that the Government applies an annual reduction to the funding of most departments and agencies (including the ATO) to promote improved productivity, known as the “efficiency dividend”. In addition to an ongoing efficiency dividend of 1.5%, the Australian Government is implementing an additional, one-off efficiency dividend of 2.5% in 2012-13, giving 4% overall for 2012-13.
The ATO monitors recruitment and overall staffing levels to maintain a sustainable workforce, and is also reviewing and prioritising its capital investment plans for 2012-13. It will continue to manage staffing levels through natural attrition and ensure that any recruitment activities source staff of appropriate levels and
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employment types (for example, casual) for the work required. This strengthens the flexibility of the ATO’s workforce, ensuring that performance targets and commitments can be achieved, whilst maintaining an appropriate level of responsiveness. The ATO also maintains a focus on administrative spending to ensure that a balanced end of year position is achieved. Focus areas include: accommodation holdings, competitive procurement processes, discretionary supplier expenditure, including travel and consultancies, considering the requirement to fill the roles left vacant by departing staff (natural attrition), reviewing the required APS classifications required for work types to ensure the right level for the right work, containing the number of non-ongoing and casual staff and utilising them to focus on seasonal workload peaks, and reviewing and reducing other supplier expenditure wherever possible. By focusing on these strategies, the ATO believes it will be able to target savings to minimise the impacts of the cuts on core service delivery, compliance activities and revenue collection commitments.
Staffing of the Austrian tax administration-around 7 700 FTEs in 2011-has to be reduced by 600 FTEs by 2016; the administration is also required to absorb about 400 FTEs from other administrations in the next year.
Canada reported that for 2010-11, departmental budgets, including the CRA’s, were not adjusted to fund wage increases that took effect after April 2010 (Budget 2010 measure). Departments and Agencies were required to reallocate from the remainder of their operating budgets to fund these increases. Furthermore, for 2011-12 and 2012-13, operating budgets of departments are frozen at 2010-11 levels. Practically speaking, this means that CRA’s salary and operating budgets were frozen at their 2010-11 levels for both 2011-12 and 2012-13. Combined with other identified operating pressures, the CRA has estimated an impact of around 4% of its budget by 2012-13. In line with normal practice when faced with unfunded operating pressures, it undertook a targeted internal review to identify opportunities for cost savings and resource realignment. It also examined ways to ease demand in key workload areas. The resulting cost containment plan identified opportunities to realign existing resources in ways that would minimise impact on core programmes and staff.
Denmark indicated that as part of a MOF downsizing plan, it is required to reduce staff by almost 25% from 2007 to 2013, ending up with 6 500 full-time employees in total (currently 7 589). This reduction will be achieved primarily through natural retirements, while the general service level will be maintained through increased automation, incremental increases in efficiency and taxpayer demand management.
Expenditure reduction targets set for France’s tax administration translated into reductions of 2 471 FTEs in 2009-10 and 2 902 FTEs in 2010-11.
Ireland’s Revenue reported that the Government has set Employment Control Framework (ECF) targets as part of its overall policy to reduce Public Service staff numbers. It has been set a staff target of 5 467 by end-2015, a 17% reduction – by 1 March 2012, staffing had reduced to 5 732, a 13% reduction since 2008. Revenue has reviewed this requirement as part of a comprehensive review of expenditure and considers that it can reach this target but over a slightly longer period – by around 2015/16-provided it is allowed to recruit openly and from within to replace skills at the same time it is reducing numbers.
Mexico’s tax and customs administration faced an 8% reduction in administrative staffing in 2010 and a further 4% by end-2011.
TAX ADMINISTRATION 2013: COMPARATIVE INFORMATION ON OECD AND OTHER ADVANCED AND EMERGING ECONOMIES – © OECD 2013