This chapter looks at the performance of tax administrations in their primary role of collecting taxes as well as other responsibilities given to them. It provides figures on the aggregate net tax revenues collected and other key information related to the activities of the administrations covered in this publication.
Tax Administration 2024
Comparative Information on OECD and other Advanced and Emerging Economies
Tax Administration
Abstract
The primary purpose of a tax administration is the collection of tax revenue to fund public services, but over time, many tax administrations have also been tasked with other responsibilities. Confidence in the proven ability of tax administrations to deliver complex administrative processes on a large scale undoubtedly plays a significant part in such decisions. This chapter provides an overview of all the responsibilities given to tax administrations and the net revenues collected. It also looks at the importance of withholding regimes to support overall compliance.
With few exceptions, jurisdictions have unified the collection of direct and (most) indirect taxes within a single body for tax administration, and Table 2.1. summarises for which revenue types the tax administrations participating in this publication have responsibility. (More detail on institutional setups of tax administrations can be found in Chapter 9.)
Percentage of administrations that have responsibility for the following revenue types
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Tables A.1 Revenue types for which the administration has responsibility: Income tax and taxes on goods and services, A.2 Revenue types for which the administration has responsibility: Other taxes, A.3 Revenue types for which the administration has responsibility: Other taxes (continued), SSC and non-tax revenue, A.4 Employer withholding taxes and combined tax and customs administrations, https://data.rafit.org/regular.aspx?key=74180893 (accessed on 10 September 2024).
Roles in addition to revenue collection
In addition to the traditional tax roles, many governments have given tax administrations other areas of responsibility (including shared responsibility in some areas). While some of these additional roles are relatively closely aligned to the core work of tax administration, some administrations report that they are being tasked with managing wider programmes and activity.
Table 2.2. illustrates some of the roles that tax administrations have in addition to revenue collection. The most common are:
Administration of property valuation functions for other parts of government that, for some jurisdictions, is also linked to the administration of real property taxes;
Collection of revenues from lotteries, gambling, gaming and casinos;
Payment of benefits under various social or welfare programmes, some of which are integrated with elements of the tax system; and
Management of government’s retirement saving plans.
Some of these roles entail use of the tax legislation framework of the jurisdiction, as well as the administrative process of the tax administration. Typically, these may be to provide economic benefits to taxpayers (e.g. welfare-type benefits) or to collect loans or debts owing to government (e.g. student loans or child support). In other situations, the role/ function is less directly related to the tax system, for example oversight of certain gambling activities or population registries.
Percentage of administrations that have responsibility for the following roles
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table B.2 Roles in addition to revenue collection, https://data.rafit.org/regular.aspx?key=74180913 (accessed on 10 September 2024).
An expansion of responsibilities, while it can bring useful economies of scale and scope, can also potentially increase risks to the core task of raising the tax revenue needed to fund public services and public goods. It therefore requires strong governance, risk management and appropriate resourcing.
Brazil – Sinter Programme: National system for territorial information management
The Sinter Programme is a public management system administered by the Brazilian Federal Revenue Service (RFB), integrating geospatial and fiscal data of urban and rural properties. It also includes legal data produced by notaries and land registries, as in Brazil the ownership of property is only acquired through the registration of the deed at the real estate registry office.
It was created to meet the Brazilian state’s need for reliable and comprehensive information on urban and rural real estate. This information was fragmented in thousands of systems distributed across the structures of the Federal Government, the states, the Federal District, municipalities and land registries offices.
This marks the beginning of the Brazilian Real State Cadastre (CIB) - a unique nationwide identifier code - assigned to properties that have geospatial information when the data is integrated into the system.
Given that Sinter uses geo-referenced data to correctly locate the properties registered with it, it has produced the following benefits:
Improved business environment;
Information about land regularisation efforts and mapping areas of deforestation and illegal fires hotspots in the Amazon rainforest, indigenous peoples and other traditional communities.
Assistance in combating land grabbing, money laundering, tax evasion and mineral smuggling;
Greater legal certainty for the parties involved in a negotiation regarding properties with a georeferenced CIB registration code; and
Timely availability of reliable and comprehensive information on real estate for strategic and effective planning of public policies.
Italy – Real estate digital services
The Italian Revenue Agency has taken steps to improve its real estate services, to improve the transparency of the market and improve digital services to taxpayers.
On the Agency’s website, it is possible to authenticate the prices declared in real estate sales made since 2019, along with the main characteristics of the properties sold. By browsing the national map and selecting the relevant filter (time period, size, location etc), the real estate units that have been bought and sold will be displayed, along with the price they were bought and sold for.
There is also the OMI mobile application, which provides details on the average sale and rental prices for different types of properties, and is updated every six months by the Real Estate Market Observatory of the Italian Revenue Agency. The interface allows the user to explore properties of interest through an interactive map, and get preliminary quotations on how much they cost.
Korea – Tax-Benefit Management Bureau
To support its more vulnerable citizens, Korea is actively promoting the establishment of a cross-government welfare infrastructure. To align with this trend, the National Tax Service (NTS) has reinforced its tax benefit management functions by establishing the Tax-Benefit Management Bureau.
The Tax-Benefit Management Bureau is responsible for the operation of both the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) programmes, designed to support low-income households. The EITC focuses on encouraging low-income earners’ participation in the labour market through work-linked income, whereas the CTC aims to support childcare expenses. In addition, this Bureau manages a "Real-time Income Identification Programme," which collects income information of workers in need of welfare benefits in a timely manner and provides it to the relevant agencies.
By 2023, the number of households receiving EITC and CTC increased eightfold, benefiting one in five households nationwide. Recent enhancements include leveraging IT technology to facilitate EITC and CTC applications for the elderly and people with disabilities, continually strengthening welfare tax services.
Through the real-time income identification system, the NTS collects income information on a monthly basis not only for full-time wage-earning employees, but also for workers in non-standard employment arrangements such as platform-based service providers. By providing this information to social insurance agencies, the NTS supports the timely identification of individuals in need of welfare benefits.
Sources: Brazil (2024), Italy (2024) and Korea (2024).
Tax crime investigation responsibilities
Finding ways to fight tax crime is a high priority as money laundering, corruption, terrorist financing, and other financial crimes can threaten the strategic, political and economic interests of jurisdictions. Tax administrations, as gatekeepers to a sound financial system, play a critical role in countering these activities and are in possession of information that could be crucial for a successful criminal tax investigation.
There is a range of organisational approaches for conducting tax crime investigations, and the ISORA survey continues to look at the role of tax administrations in this process. As can be seen from the data, slightly more than half of the tax administrations covered in this publication are involved in conducting tax crime investigations (Table A.87.). The majority of those administrations have responsibility for both conducting and directing tax crime investigations, while the others have responsibility for solely conducting investigations, under the direction or authority of another agency, such as the police or public prosecutor (see Table 2.3.).
In situations where administrations do not have any responsibility for conducting tax crime investigations, this work is done by another agency, such as the police or public prosecutor. This could also be a specialist agency, established outside the tax administration.
Percentage of administrations
Note: In some jurisdictions, the organisational approach for tax crime investigations may depend on the tax offence or tax-related criminal proceedings. In those cases, an administration may have selected multiple answer options. This is why the percentages add up to more than 100 percent.
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table A.87 Tax crime investigations: Role of the administration, https://data.rafit.org/regular.aspx?key=74180895 (accessed on 10 September 2024).
More information on the rationale for adopting a national strategy for countering tax crime and on the design of such strategies, is included in the 2024 OECD report Designing a National Strategy against Tax Crime: Core Elements and Considerations (OECD, 2024[1]). The report draws on the practices of members of the OECD’s Task Force on Tax Crimes and other Crimes (TFTC), which includes officials from many tax administrations.
The Australian Taxation Office (ATO) has established a proactive framework that identifies and responds to significant fraud outbreaks which have the potential to cause systemic failure of controls and significant impacts.
The framework places accountability with a senior officer in the ATO for the management of significant external fraud events. Combined with a clear committee structure that is enacted during a fraud surge, this provides a governance framework and accountability that enables the organisation to work together to mitigate against the fraud event.
The framework is built to prevent fraud events from happening. The framework relies upon intelligence and data that is drawn together in an early warning system, looking for patterns to identify fraud early. This approach means that projections can be made, and possible scenarios can be tested. The ability to foresee possible future fraud events means that the ATO can start to position responses early – either changing approaches and controls immediately to respond to potential events, or monitoring and preparing a response should the worst-case scenario happen.
In containing an instance of fraud, the ATO also considers future prevention activity by enhancing systemic controls. Where necessary, investment cases are developed to support this activity.
The fraud surge response framework design leverages experience from previous large fraud responses and data breach events, as well as best practice drawn from international and Commonwealth incident management frameworks.
Source: Australia (2024).
This section looks at the net revenue collection of tax administrations, as well as a number of other key figures related to their activities.
Overall, the increase in revenue collections that was noted in the last edition of this publication has continued. Between 2021 and 2022, revenue collections increased in almost all jurisdictions covered. The average increase remains quite significant (+17.3% on average, see Table 2.4.) continuing the substantial recovery of economic activity following the COVID-19 pandemic during which lockdown measures were introduced by many governments and the forced closure of many businesses negatively affected taxable income and sales.
Note: The table is based on the data from jurisdictions covered in this publication. Data for India was excluded as the Indirect Tax Board information was only available from fiscal year 2021.
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table A.5 Net revenue collected by the tax administration: Total, https://data.rafit.org/regular.aspx?key=74180904 (accessed on 10 September 2024).
Net collections by tax administrations averages 22% of jurisdiction GDP
Through its Global Revenue Statistics Database (OECD, 2023[2]), the OECD generally seeks to publish internationally comparable data on the tax revenues of its members, as well as a number of other jurisdictions for all levels of government. As the information contained in the Global Revenue Statistics Database reports data at a jurisdiction and not an administration level, tax administrations were asked in the ISORA survey to provide a range of information on their revenue collection activity. This information aptly demonstrates the importance of tax administrations to their respective economies.
Net revenue collected by tax administrations participating in this report, as a percentage of gross domestic product (GDP) in 2022, ranges from less than 10% to reach more than 40% in the case of Denmark and Sweden. Average net revenue collected by administrations in this report is 22% of GDP (see Figure 2.1.).
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table D.1 Revenue related ratios: Revenue to total government revenue and GDP, https://data.rafit.org/regular.aspx?key=74180898 (accessed on 10 September 2024).
Net collections by tax administrations averages 62% of total jurisdiction revenue
Forty-two tax administrations report net revenue collections exceeding more than 50% of total government revenue in 2022, making tax administrations the principal government revenue collection agency in almost three-quarters of jurisdictions covered in this report. Average net revenue collected by administrations in this report is 62% of total jurisdiction revenue (see Figure 2.2.)
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table D.1 Revenue related ratios: Revenue to total government revenue and GDP, https://data.rafit.org/regular.aspx?key=74180898 (accessed on 10 September 2024).
Value added tax accounts for 30% of net revenue collections and is the major tax type collected by 43% of the tax administrations covered in this report. This is followed by personal income tax, which accounts for 26% of net revenue collections, and is the major tax type collected by 36% of administrations. Corporate Income Tax (19%) and social security contributions (10%) comprise the other major revenue types as reflected in Figure 2.3. In many jurisdictions, social security contributions are not collected by tax administrations and are therefore underrepresented when looking at average net revenue collections for all jurisdictions covered in this publication. Where collected, they are often one of the major sources of revenue collected by the tax administration (see Table D.4.).
Sources: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Tables D.2 Revenue related ratios: Tax to GDP and non-tax revenue to total revenue, D.3 Tax structure and SSC proportions: PIT, CIT and VAT, and D.4 Tax structure and SSC proportions: Excises, Other taxes and SSC, https://data.rafit.org/regular.aspx?key=74180898 (accessed on 10 September 2024).
Streamlining collections: Withholding at source
Withholding regimes can form part of compliance-by-design approaches, which support overall compliance while significantly reducing burdens for large numbers of taxpayers, depending on the extent of taxpayer involvement in any post-payment adjustments that might be needed (i.e. where withholding results in under-payment or over-payment of tax). In place of self-reporting and paying, withholding taxes are taxes paid directly to the tax administration, usually by a principal who pays the net income to the recipient (for example withholding by an employer on salary paid to an employee), or by an intermediary between the payer and customer.
The most common withholding tax in operation globally is income tax on employment income (so called Pay-As-You-Earn (PAYE) approaches). Other examples include withholding taxes on interest, dividends or royalties. Depending on the underlying tax regime and nature of the payments, withholding can vary from a simple system, at a universal set rate, to a more complex system that is responsive to the customer’s wider circumstances. Table 2.5. shows the types of income that are generally subject to tax withholding at source for jurisdictions covered in this publication.
Percentage of jurisdictions
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table B.49 Withholding at source, https://data.rafit.org/regular.aspx?key=74180917 (accessed on 10 September 2024).
In addition to minimising burdens, withholding regimes can also reduce misreporting and underpayment as the principals or intermediaries responsible for forwarding taxes to the administration have no right over the respective amounts. Of course, there remains scope for failures in such approaches by misapplication of rules or errors by principals or intermediaries where the system relies on them providing information. However, increased automation, greater cross-checking of data and whole of government approaches have the potential to reduce such risks.
To understand the importance of withholding at source for personal income taxes, the ISORA survey asked participating administrations to estimate the percentage of total personal income tax withheld by third parties and subsequently paid to the administration. Administrations that were able to provide this information estimate that around 80% of total personal income tax collections were withheld at source in 2022, a figure that remained stable over the past five years (see Table 2.6.).
Note: The table shows the average percentage of personal income tax withholding for 39 jurisdictions that were able to provide the information for the years 2018 to 2022.
Source: CIAT, IOTA, IMF, OECD, International Survey on Revenue Administration, Table D.40 Electronic payment proportions and third party withholding, https://data.rafit.org/regular.aspx?key=74180902 (accessed on 10 September 2024).
Korea – Streamlining the process of income tax payments using digital technology
The Korean NTS has been expanding taxpayer convenience services, starting with earned income tax and extending to the declaration of business income to streamline the income tax payment process.
In 2006, to facilitate the reporting of income deductions and tax credits for year-end tax settlement on salary and wage earners, the NTS began digitally compiling supporting documents such as insurance premiums, medical expenses, and credit card usage for taxpayers, providing them in electronic file formats. This service relieved taxpayers from the burden of personally collecting supporting documents, as they could submit the compiled data received from the NTS to their withholding agents (employers).
Since 2022, with taxpayer consent the NTS initiated a service where it directly provides year-end settlement data to withholding agents. This streamlines the withholding process for employers, allowing them to complete income tax withholding tasks more efficiently. Taxpayers, particularly those with earned income, can finalise their income tax reporting by simply verifying income deduction and tax credit results. The need for taxpayers to access the NTS portal site (Hometax) or visit tax offices to obtain supporting documents for deductions diminished significantly, reducing the tax compliance costs associated with year-end settlements.
Through these efforts, NTS is moving one step closer to Tax Administration 3.0. The taxation processes will become more seamless and frictionless, embedded within the natural system of taxpayers.
United Kingdom – Improvements to the Pay As You Earn system
There are nearly 18 million new job starters each year, and around one in seven of them are initially put on an incorrect tax code due to wrong or missing information. The United Kingdom’s HM Revenue & Customs (HMRC) get around 1 million calls a year from new starters regarding this.
HMRC has made improvements to the system that holds customers’ Pay As You Earn records to spot when a tax code does not look right, and then automatically issues a new code if HMRC holds enough information to do so, without the need for further contact. This means the employee receives the correct pay and pays the correct tax much sooner.
HMRC is also testing how best to reassure new starters when this happens, and are trialling contacting some customers via email and text message to let them know that HMRC are aware of the issue and working to correct it. During testing, 681 SMS messages and emails were sent to customers. The contact rates from customers who received the emails/SMS messages dropped considerably – down from an average of 28% of people to just 1.2% from the sample group. Given this was a small sample, further analysis is being undertaken to test this correlation.
Sources: Korea (2024) and the United Kingdom (2024).
References
[1] OECD (2024), Designing a National Strategy against Tax Crime: Core Elements and Considerations, OECD Publishing, Paris, https://doi.org/10.1787/0e451c90-en.
[2] OECD (2023), Global Revenue Statistics Database, https://www.oecd.org/en/data/datasets/global-revenue-statistics-database.html (accessed on 10 September 2024).