This chapter examines the institutional setups and governance arrangements in tax administrations.
Tax Administration 2024
Comparative Information on OECD and other Advanced and Emerging Economies
Tax Administration
Abstract
Like all government bodies, tax administrations are ultimately accountable to the citizens they serve. They must operate and be seen to operate in a fair and impartial manner. This includes being 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.
The framework within which this accountability operates varies between jurisdictions and is a result of various factors, including the institutional arrangements and government structures in place. Differences will also be conditioned by the legislative, regulatory and judicial regime and shaped by the cultural, historical and political background. There is no single approach that will work for all tax administrations.
This chapter examines the institutional setups and governance arrangements in tax administrations by looking at (i) institutional arrangements, (ii) the autonomy of operations, (iii) control and other oversight features, and (iv) the relationship between the tax administration and the taxpayer.
The institutional arrangements for tax administrations are typically grouped around two general categories. Tax administrations are either set-up as (i) directorate(s) or unit(s) within the Ministry of Finance (MOF) or its equivalent, or as (ii) unified semi-autonomous bodies. These can be broken down further into four sub-categories:
A single directorate or unit within the MOF or its equivalent.
Multiple directorates or units within the MOF or its equivalent.
A unified semi-autonomous body, where tax administration and support functions are the responsibility of a Commissioner or Director General who reports to a government minister.
A unified semi-autonomous body with a board, where tax administration and support functions are the responsibility of a Commissioner or Director General who reports to an oversight body/board of management that may include external members. The management board may either be decision-making or advisory.
There are some exceptions to the above categories. For example, in Germany, the responsibility of collecting taxes is largely devolved to regional (i.e. Länder) administrations, while a relatively small central body exercises a high-level coordination role. In addition, in Greece, the Independent Authority for Public Revenue enjoys operational independence, administrative and financial autonomy and is only subject to parliamentary scrutiny.
Figure 9.1. provides an overview of the institutional frameworks for the tax administrations covered by this report. As can be seen, around 60% of administrations are set-up as unified semi-autonomous bodies, with around one-third of those having a board. Eight of administrations describe their boards as being decision-making boards and three describe them as being advisory boards.
There does not appear to be any consensus around board size nor the representation of private section representatives (see Table B.1):
The average number of board members was around 8.5, ranging from 4 in Peru to 15 in Canada.
Close to two-thirds of the administrations report having private sector representatives on their board, with some boards made-up entirely from the private sector.
Greece, which falls in the category of “other institutional arrangement” (see above), also has a management board with five members, who may or may not come from the private sector.
Percentage of administrations
Notes: USB – Unified semi-autonomous Body; USBB – Unified semi-autonomous body with board (AB – Advisory board; DB – Decision-making board); SDMIN – Single directorate in ministry; MDMIN – Multiple directorates in ministry; Other – Other institutional arrangement.
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table B.1 Institutional framework and management autonomy, https://data.rafit.org/regular.aspx?key=74180913 (accessed on 10 September 2024).
The Canada Revenue Agency (CRA) Board of Management (Board) oversees the organisation and administration of the CRA, and the management of its resources, services, property, personnel, and contracts. The intention was to provide a degree of independence from the federal government reflecting the CRA’s service to sub-national governments with the opportunity to innovate beyond the administrative practices of the core civil service.
The Board:
Meets six times a year, and is accountable to Parliament (through the Minister) on matters related to the general administration and enforcement of program legislation.
Comprises of fifteen individuals (directors). This includes the Chair, Commissioner (Ex officio), and representatives of every province and a territory in Canada who bring an external and diverse business perspective from the private, or not-for-profit sectors to the work of the CRA.
Undertakes its oversight role in co-operation with Agency management to ensure that the CRA is efficiently and effectively managed by bringing a forward-looking, strategic perspective to the CRA’s operations.
Provides a challenge function, ensuring the CRA is properly managing and exercising its authorities by reviewing performance reports, financial statements, and performance dashboards.
As the Commissioner and CRA Officials are responsible for the day-to-day management of the CRA, the Board may not direct the Commissioner or other CRA Officials in the exercise of statutory power and other program legislation administration. The Board is also not authorized to receive personal/business information regarding program legislation.
For further information, please see https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/board-management.html (accessed on 10 September 2024).
Source: Canada (2024).
The range of autonomy given to a tax administration depends on a variety of factors. These include the general arrangement of government functions and powers, the establishment of a jurisdiction's public sector administration practices, as well as the institutional model adopted for tax administration. For government, the return to granting greater autonomy can be the prospect of increased efficiency and effectiveness, particularly in periods of change. With few exceptions, most tax administrations report that they operate with a degree of autonomy that allows them to appropriately manage their administrative functions (see Table 9.1.).
Percentage of administrations that have the selected authority
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table B.1 Institutional framework and management autonomy, https://data.rafit.org/regular.aspx?key=74180913 (accessed on 10 September 2024).
Autonomy can take many forms, but at its core involves the government setting objectives for the tax system (including tax legislation) as well as an accountability framework, while providing tax administrations with flexibility in the following areas to decide how to deliver those objectives:
Budget expenditure management, including discretion to allocate/adjust budgeted administrative funds across functions to take account of changed circumstances or to meet new emerging priorities. Around 80% of administrations reported exercising discretion over their operating budget, and around 70% over their capital budget.
Organisation, determining the internal organisational structure of the tax administration operations, including geographical location of tax offices. Close to 85% of administrations reported having the authority to design their internal structure.
Planning, having responsibility for formulating strategic and operational plans. Almost all administrations reported preparing strategic plans as well as annual business/ operational plans (see Table 9.3.)
Performance standards, having discretion to set (in association with central bodies) administrative performance standards. Almost all administrations have that authority.
Personnel recruitment, development and remuneration, having the ability to set qualification standards for categories of recruits, recruit and dismiss staff (in accordance with public sector policies); negotiate remuneration levels in accordance with broader public sector-wide arrangements; and establish and operate training and development programmes. See Chapter 10, Table 10.9. for more detail on this.
Information and communication technology (ICT), having the authority to administer its own in-house ICT systems, or to outsource the provision of such services.
Internal controls
Administrations generally have robust internal controls built into their ICT framework to detect and prevent internal fraud, as well as internal audit functions as reported by 97% of administrations. This is supported through clear human resource policies to deal with employee misconduct. In this respect, 97% of the administrations covered by this publication report having a public service-wide code of conduct, and close to 90% report having their own code of conduct.
Further, close to two-thirds of the administrations indicated having in place an integrity strategy, which typically includes internal awareness campaigns and, in many cases, also agreements with relevant stakeholders. Around half of the administrations also conducts regular surveys to assess perceptions of the administration’s commitment to integrity. (See Table 9.2.)
Percentage of administrations that have the selected features
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table B.3 Selected governance practices: Audit, code of conduct and integrity, https://data.rafit.org/regular.aspx?key=74180913 (accessed on 10 September 2024).
Finland – Responsibility and ethical principles in the use of artificial intelligence
The use of Artificial Intelligence (AI) is increasing everywhere in society, including the activities of public authorities. AI enables authorities to provide a better service and operate more efficiently. However, there are also ethical questions relating to the responsible and safe use of AI in official tasks, so that the security of citizens and public officials alike is taken into account and decision-making is transparent.
The Finnish Tax Administration has implemented ethical principles for the use of AI, as follows:
The AI uses only reliable data.
A human is always responsible for AI operations.
AI always follows laws and regulations.
The Tax Administration takes part in public discussion on responsible and ethical AI applications.
A group of experts from the Tax Administration’s different units promote responsible AI use and assesses AI solutions from the perspective of the ethical principles. The group has approximately ten members and meets whenever necessary, usually monthly. The group consists of specialists in communication, law, taxation, technical platforms and analytics. Other experts may also be called in when new expertise is needed.
The Tax Administration promotes responsible AI use by training staff, assessing and providing tools for AI use, and evaluating the solutions in use. The Tax Administration’s expert group monitors the development of the EU’s AI legislation and adjusts its activities and instructions accordingly.
Spain – Ethics Advisory Committee
The Spanish Tax Agency (AEAT) has launched the Ethics Advisory Committee. Following the guidelines of the AEAT Strategic Plan 2020-2023, this Committee was created to support and assist the AEAT Management Board in ethical issues and corporate conduct.
The Committee adds strategic value in promoting good practices through an official forum, in which ethical issues and dilemmas relevant to AEAT are discussed. It plays a key role in the internal socialisation of the code of principles and conduct in AEAT through the preparation of a catalogue collating good practices in ethics, integrity and transparency, as well as responses to the most relevant issues.
The Committee is made up of eight members: a chair, a secretary and six members. It is chaired either by the Director General of AEAT or a member of the Management Board designated by the Director General.
The Advisory Committee’s role is to warn of reputational risks and advise on possible complaints that can be assessed from an ethical perspective.
Sources: Finland (2024) and Spain (2024).
External control and other oversight features
As regards external controls, a significant number of administrations (83%) are subject to a degree of oversight by a public accounts committee (or equivalent) that assesses their results as well as a budgetary review process that monitors their spending. Results are typically reviewed and verified by a national audit function. Parliamentary committees will also usually have the capacity to review performance against output metrics, as well as more strategic goals.
Percentage of administrations that have the selected features
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Tables B.3 Selected governance practices: Audit, code of conduct and integrity, and B.4 Selected governance practices: Plans, reports and standards; and organizational chart, https://data.rafit.org/regular.aspx?key=74180913 (accessed on 10 September 2024).
Common other oversight features of tax administrations include:
Publication of an annual report: Around 95% produce an annual report, and 90% of those also publish it. (See Table 9.3.)
Periodic assessments against agreed metrics (for example, revenue collections, debt levels, number of compliance interventions, customer service levels): 85% of administrations prepare a formal set of service delivery standards and around 60% of those make the set of delivery standards public. (See Table 9.3.)
Systems of risk oversight: Slightly more than 80% of administrations have in place formal approaches in place for identifying, assessing and prioritising key compliance risks. However, only 29% make the identified risks public regularly and 27% regularly publish reports of outcomes in addressing key compliance risks. (See Chapter 6, Table 6.1.)
An agreed set of strategic goals and objectives to guide administrations’ performance. High-level outcome measures and indicators used by tax administrations generally encompass the following:
i) taxpayers’ satisfaction with the services provided and overall perceptions as being an efficient, fair and effective administration (see also Chapter 5, Table 5.3.);
ii) taxpayers’ compliance;
iii) taxpayer service delivery, such as availability of services and responses to outages;
iv) organisational efficiency; and
v) employee engagement and satisfaction (see also Chapter 10, Table 10.12.).
Board or executive committee to review, assess, and challenge strategic direction (around 20% of tax administrations have a board, see Figure 9.1.).
Annex 9.A. contains a list of selected links to annual reports, strategic plans and organisational charts published by tax administrations participating in this publication.
Control and other oversight features: A high-level picture
Taking the data from the ISORA 2023 survey, Figure 9.2. presents a high-level picture of control and oversight features in tax administration. It does not name individual tax administrations but rather combines a set of data points providing an overall view for three areas:
Preparation of documents: The preparation of strategic and operations-related documents that can provide guidance, enhance decision-making and assist in resource allocation. Reassuring the public that those documents are prepared, even if they are not published, can enhance community confidence and trust in the tax administration. The data taken into account includes the preparation of (i) a strategic plan; (ii) an annual business / operational plan; (iii) an annual report; (iv) a formal set of service delivery standards; (v) a formal compliance risk management strategy and the existence of a formal approach for identifying, assessing and prioritising key compliance risks; (vi) tax gap estimates; (vii) taxpayer satisfaction surveys; and (viii) an integrity strategy and surveys to assess perceptions of the administration’s commitment to integrity.
Publication of documents: While public knowledge of the preparation of such documents can be helpful, their publication can be a much stronger message to stakeholders. In this respect, the high-level picture takes into account the publication of the afore mentioned documents, or (i) in the case of the compliance risk management strategy, whether the administration makes public regularly the risks and the results in addressing those risks; and (ii) as regards the taxpayer satisfaction surveys, whether the administration makes public the results of the surveys.
Existence of oversight features: As regards oversights features, the data points considered include the existence of (i) a Board; (ii) an external auditor; (iii) a formal internal assurance mechanism (internal audit); (iv) a code of conduct; and (v) specific mechanisms for dealing with taxpayer complaints.
The scoring and weighing of the data points took account of the different nature and level of detail of the underlying ISORA questions. Whilst the various aspects of control and oversight features that were explored in ISORA 2023 should not be considered exhaustive and do not have equal weight or significance, their occurrence or lack thereof can provide some indication of the capability of tax administrations in that area.
For each of the three areas, the figure shows the range of administrations that are between the lower and upper quartile (illustrated by the “boxes”), with the median represented by the horizontal lines drawn through the boxes. The lines extending the boxes vertically (the “whiskers”) indicate the range of administrations that are in the upper and lower quartiles.
Figure 9.2. shows that most tax administrations covered by this publication are subject to a good degree of oversight and control, and also prepare a significant number of strategic and operational documents. For both of those areas, the median is around 80% with some administrations also scoring 100%.
However, this is very much different as regards the publication of strategic and operational documents where the median drops to below 60% and only a few administrations score above 80%, indicating that there is room for more transparency which may help further enhancing community confidence and trust in tax administration.
Source: OECD Secretariat calculations based on CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, https://data.rafit.org/regular.aspx?key=74180914 (accessed on 10 September 2024)
An important part of the governance of tax administrations is the definition of taxpayer rights and obligations. This can help place the governance framework within broader societal expectations for government services and provide a benchmark for press and civil society. Table 9.4. sets out some of the most commonly reported rights and obligations, and Box 9.2. provides examples on this.
Public reporting of performance against elements of taxpayer rights (such as complaints handling, quality of service, etc.) can help in giving visibility and credibility to such arrangements. This is often done through the publication of annual reports.
As Table 9.5. shows, the vast majority of jurisdictions have legislation or administrative procedures in place governing taxpayers’ rights and obligations, with the majority of jurisdictions setting out the rights in law or other statutes and the remaining in administrative or other type of documents (see Table B.43). While the codified approach to taxpayer rights has the force of law and in some circumstances may be more robust, the administrative approach tends to be more flexible and service orientated.
In all jurisdictions there is also a special mechanism for dealing with taxpayers’ complaints. All administrations have an internal mechanism for dealing with complaints and in half of the administrations this process is independent. In addition, in more than 90% of the jurisdictions there is also a mechanism that is external to the administration. As regards both internal and external mechanisms, in around 80% of jurisdictions the process allows for systemic issues to be raised. (See Table 9.5.)
Percentage of jurisdictions that have the selected features
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Tables B.43 Taxpayer rights: Documentation, and B.44 Taxpayer rights: Complaints mechanisms, https://data.rafit.org/regular.aspx?key=74180919 (accessed on 10 September 2024).
Australia
The relationship between the tax collector and taxpayer in Australia is set out in the Australian Taxation Office (ATO) Charter (the Charter). The Charter explains what the taxpayer can expect from the ATO and what the ATO is committed to follow in all its dealings with the taxpayer. It sets out:
the way the ATO conducts itself when dealing with a taxpayer;
what the taxpayer can expect from the ATO;
what the taxpayer can do if they are not satisfied.
For further information see also: https://www.ato.gov.au/about-ato/commitments-and-reporting/ato-charter/our-charter (accessed on 10 September 2024).
Where taxpayers remain unsatisfied with the ATO’s response, complaints can be taken to the Inspector General of Taxation and Taxation Ombudsman (IGTO). The office of the IGTO is an independent statutory body, separate from the ATO and its governing board. As well as dealing with individual complaints, it will also conduct broader reviews into the administration of taxation, including the identification of systemic issues, and make recommendations to the ATO and to Government.
Canada
There are 16 rights that describe the treatment a taxpayer is entitled to when dealing with the CRA. Additionally, there are five small business commitments. The Taxpayer Bill of Rights builds upon the CRA's mission, vision, and values.
Taxpayer Bill of Rights
1. You have the right to receive entitlements and to pay no more and no less than what is required by law.
2. You have the right to service in both official languages.
3. You have the right to privacy and confidentiality.
4. You have the right to a formal review and a subsequent appeal.
5. You have the right to be treated professionally, courteously, and fairly.
6. You have the right to complete, accurate, clear, and timely information.
7. You have the right, unless otherwise provided by law, not to pay income tax amounts in dispute before you have had an impartial review.
8. You have the right to have the law applied consistently.
9. You have the right to lodge a service complaint and to be provided with an explanation of our findings.
10. You have the right to have the costs of compliance taken into account when administering tax legislation.
11. You have the right to expect us to be accountable.
12. You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances.
13. You have the right to expect us to publish our service standards and report annually.
14. You have the right to expect us to warn you about questionable tax schemes in a timely manner.
15. You have the right to be represented by a person of your choice.
16. You have the right to lodge a service complaint and request a formal review without fear of reprisal.
For more information see: https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/taxpayer-bill-rights.html (accessed on 10 September 2024).
Commitment to small business
As an additional measure within the Taxpayer Bill of Rights:
1. The CRA is committed to administering the tax system in a way that minimizes the costs of compliance for small businesses.
2. The CRA is committed to working with all governments to streamline service, minimize cost, and reduce the compliance burden.
3. The CRA is committed to providing service offerings that meet the needs of small businesses.
4. The CRA is committed to conducting outreach activities that help small businesses comply with the legislation we administer.
5. The CRA is committed to explaining how we conduct our business with small businesses.
Taxpayers’ Ombudsperson
Taxpayers can resolve service-related issues with the CRA through the office of the Taxpayers’ Ombudsperson. The office identifies and reviews systemic and emerging issues, and will generally review a complaint only after all CRA internal complaint resolution mechanisms have been exhausted. These exclude non-service-related issues, court matters, and complaints that have been addressed by the minister’s office.
United States
Taxpayers rights are set out in various parts of tax legislation. In 2014 they were brought together in “Bill of rights” published by the Internal Revenue Service (IRS). These set out ten rights:
1. The Right to Be Informed
2. The Right to Quality Service
3. The Right to Pay No More than the Correct Amount of Tax
4. The Right to Challenge the IRS’s Position and Be Heard
5. The Right to Appeal an IRS Decision in an Independent Forum
6. The Right to Finality
7. The Right to Privacy
8. The Right to Confidentiality
9. The Right to Retain Representation
10. The Right to a Fair and Just Tax System
For further information see also: https://www.irs.gov/taxpayer-bill-of-rights (accessed on 10 September 2024).
When complaints and concerns are not resolved through the internal processes of the IRS, taxpayers can go to the Taxpayer Advocate Service (TAS). TAS is an independent organisation within the IRS which is available to both individuals and business. TAS provides taxpayers access to various resources, including information on the Taxpayer Bill of Rights. When a taxpayer qualifies for help, they will be assigned to one advocate. The service is always free.
TAS will also review large-scale or systemic problems in tax law or tax administration. Examples of systemic issues are those which:
Apply to multiple taxpayers;
Involve IRS systems, policies, and procedures;
Involve protecting taxpayer rights, reducing burdens, ensuring fair treatment, or providing essential taxpayer services.
For more information see: https://www.taxpayeradvocate.irs.gov/ (accessed on 10 September 2024).
Sources: Australia (2024), Canada (2024) and United States (2024).
This section contains selected links to a number of documents (annual reports, strategic plans and organisational charts) published by tax administrations participating in this publication.