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Chapter 1

Institutional arrangements for tax administration

This chapter provides details of the institutional arrangements put in place by governments to conduct national revenue administration operations in the 52 countries covered by the series.

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Key points

Institutional arrangements

The majority of countries (around 60%) have adopted the “unified semi-autonomous body” form of institutional setup for the revenue body responsible for the administration of direct and indirect taxes; in 11 countries, a formal management/advisory board comprised of external representatives has been established as part of the overall governance framework.

Other less autonomous forms of institutional setups include: 1) a single directorate within the ministry of finance (MOF) comprising all relevant functions and responsible for both direct and indirect taxes (nine countries); 2) a set of multiple directorates/agencies within the formal structure of the MOF (nine countries); and 3) separate direct and indirect tax administrations, generally comprising all relevant functions (five countries).

There is a clear dichotomy of approach taken to the collection of social security contributions (SSCs), a major source of tax revenue in many countries – of the 32 OECD countries with SSC regimes 19 administer their collection through separate social security bodies, while the balance have integrated their collection with tax administration operations; of the 18 non-OECD countries, seven have integrated SSC and tax collection; two countries are currently planning integration (i.e. Czech Rep and Slovak Rep.,) to improve the efficiency and effectiveness of SSC collection and enforcement while integration has also been foreshadowed as a possible future development in both Greece and Portugal.

Twelve OECD member countries have aligned the operations of tax and customs operations within a single agency, including Hungary (2011), Portugal (2012) and Slovakia (2011), while Malta has enacted legislation to achieve this outcome; in the 18 non-OECD countries, the alignment of tax and customs within a single agency has been adopted in six countries.

The national revenue body in the majority of European countries is also responsible for the administration of property taxes (and often, motor vehicle taxes); elsewhere, these taxes are generally administered by revenue bodies of sub-national governments.

Non-tax related functions

Many revenue bodies reported they have been given additional tasks of a non-taxation nature (e.g. payment of social welfare benefits, the collection of non-tax debts such as child support, student loans, and administration of elements of the Government’s retirement income policy

Autonomy of revenue bodies

The degree of autonomy of surveyed revenue bodies varies significantly; the powers least frequently devolved are: 1) to design their internal structure (16 countries); 2) budget allocation discretion (11 countries); 3) to set the levels and mix of staff within overall budget limits (16 countries); and 4) to influence/negotiate staff remuneration levels (23 countries).

Special complaints handling and tax administration oversight bodies

Governments in eleven countries have established independent and dedicated bodies to handle tax administration-related complaints (e.g. a tax ombudsman), while in most other countries dealing with taxpayers’ complaints is the responsibility of the government Ombudsman’s Office (or something similar); two countries have established separate and independent tax administration oversight bodies.

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This chapter is structured as follows:

1.Introduction;

2.The revenue body as an institution;

3.The extent of revenue body autonomy;

4.The scope of responsibilities of revenue bodies (including non-taxation roles);

5.Special governance arrangements; and

6.Special institutional arrangements for dealing with taxpayers’ complaints etc.

Introduction

In most countries, the tax system is responsible for generating the vast bulk of revenue required to fund public services. Given the range and nature of the laws to be administered, the systems of assessment and self-assessment enacted, and the large numbers of clients, revenue bodies require adequate powers and autonomy to perform in an efficient and effective manner. On the other hand, they must operate and be seen to operate in a fair and impartial manner, and be subject to a range of checks and balances to ensure transparency in their operations and proper accountability for their overall management of the tax system.

While this topic has not been the subject of detailed study by the FTA, valuable work has been carried out by other bodies to define the desirable features and characteristics of the institutional, organisational and operational arrangements appropriate for effective and efficient administration of a country’s tax system. One example of such work is the set of Fiscal Blueprints1 developed by the European Commission (EC) to guide EU candidate countries (and, presumably, countries already in the EU) in strengthening their revenue bodies.

The EC’s fiscal blueprints, structured in the form of a diagnostic tool, are organised according to a logical structure in five groups and contain valuable practical guidance for revenue officials and others, expressed in terms of strategic objectives (or “principles”), relative weightings reflecting their perceived importance, and key indicators. These groups are 1) framework, structures and basis; 2) human and behavioural issues; 3) systems and functioning; 4) taxpayer services; and 5) support. The initial grouping covered by the blueprints – Framework, structures and basis – addresses the institutional and organisational arrangements appropriate for effective and efficient tax administration and it provides a useful backdrop for the comparative analysis in this series.

Box 1.1 sets out guidance from the blueprints concerning what is termed “the overall framework of a tax administration”. This segment of the blueprints emphasises the following desirable features for a national revenue body:

It is guaranteed an adequate level of autonomy;

Its obligations are clearly translated into its mission, vision, and objectives;It has its own structure and powers for effective and efficient operation;

It is provided with adequate resources;It has a stable legal framework; and

It is accountable for its operations and is subject to control and assessment.

More is said about the autonomy of revenue bodies covered by this series later in this chapter while many of the other matters are dealt with in later chapters.

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Box 1.1. EU Fiscal Blueprints: An overall framework for tax administration

Source: Fiscal Blueprints (European Commission, Taxation and Customs Union) 2007.

Guidance from the blueprints concerning the structural and organisational arrangements seen as desirable for effective and efficient tax administration are set out in Box 1.2. This segment of the blueprints highlights the importance of the following features:

There is a unified body for tax administration:

-responsible for all national taxes (direct and indirect) and with “linkages” to the collection of social contributions;

-comprised of all the functions necessary for effective and efficient administration of the tax laws;

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Box 1.2. EU Fiscal Blueprints: Structure and administration

Source: Fiscal Blueprints (European Commission, Taxation and Customs Union) 2007.

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