Dilemmas presented by current environment Raul Zambrano Technical Assistance Manager. CIAT April 2009

 In some place within the imagination... ◦ The problem of a Tax Administration  Tax returns could not be processed on time  Data entry delays impacted on statutory audit periods  Compliance enforcement and control were affected  Control of non-filers and late-filers were inexistent or late  Audits required physical copies of filed returns  Selection of cases was made disregarding information in the Tax Returns

Variable nNumber of returns cAverage number of fields per return sNecessary time to key a return field pNumber of keying phases DNumber of keyers

 Reduce p ◦ Only one keying phase  Reduction of time, better control of non-filers  Returns have many errors, however… ◦ One keying phase, validation of totals and a second keying phase only for schedules with differences

 Reduce s ◦ Usage of OCR ICR  The scanning of images is fast but success with data capture is scarce  The investment forces a redesign of the returns  The number of fields is significantly reduced

 Reduce c ◦ Simplify Tax Returns in order to reduce the data capture

 Reduce n ◦ Employees are not required to ◦ Fixed amounts for deductions on medical expenses and education ◦ Full and final payment of taxes to be withheld by Withholding Agents

 Increase D ◦ Hire more data entry operators and buy new equipment ◦ Contract third parties to key Returns (banks or other companies) ◦ Create specific offices to handle few but important Taxpayers

 All former scenarios ◦ Capture returns in two phases, one for header data, one for the rest of the fields in order to facilitate the control of non-filers and late-filers. ◦ Simplify Tax Returns ◦ Create departments for special taxpayers ◦ No Tax Returns for employees

 A different perspective ◦ What if?  A software that would help in the preparation of Tax Returns  Performs computations  Avoid reading problems  Improves data quality  Use of information beyond filing control

 Dilemmas posed by the current environment ◦ Increase of control ◦ Simplify and facilitate  Information Technology and Tax Administration  IT impact ◦ Administrative capacity ◦ Organizational structure  The Internet and electronic means

 The need to align business strategy with IT strategy ◦ IT strategy should be limited to the implementation of the business strategy ◦ IT strategy should be a driver that guides the Tax Administration Strategy

 Strategic Alignment Model (J. Henderson & N. Venkatraman) Tax Administration Strategy Legal Framework Competencies Management Business Infrastructure Structure Processes Human Resources IT Strategy Scope Competencies IT Governance IT infrastructure Infrastructure Processes Knowledge Perspectives Strategy execution _________ Technology as driver______ Service level ________________ Perspectives Strategy execution _________ Technology as driver______ Service level ________________ Strategic Alignment Model

 Quadrants ◦ Tax Administration Strategy ◦ Processes and organizational infrastructure ◦ Technology Strategy ◦ IT Processes and Strategy  Perspectives ◦ Strategy execution ◦ Technology as potential for change ◦ Service level

 COBIT ◦ IT value management ◦ Business - IT alignment ◦ Assessment of current Capability and Performance ◦ IT Strategic Plan development ◦ IT Tactical Plans development ◦ IT Portfolio Management ProposalBusiness need Capacity Assessment Development of the Plan Implementatio nEvaluation

 Engagement of the Commissioner  Dynamics of IT and Tax Administration  Lack of knowledge of the Tax Administration by IT officers  Complexity to measure the benefits of investments in IT  Failures in the planning process ◦ Measures of the Total Cost of Ownership ◦ Right indicators ◦ Determination of risk and deviation alerts  Turbulence caused by changes in management  IT Governance difficulties  Difficulties to recruit and retain talent in IT

 Mission and Vision of Tax Administrations ◦...to base its management and decision making on reliable and timely information generated by systems developed with state-of-the-art technology ◦ Be a prestigious and credible organization using efficient policies, procedures and information systems...

 Argentina ◦ Development of reciprocal applications: tax, customs and social security position. ◦ Greater interaction between citizens and the Tax Administration over the Internet ◦ Grant access to taxpayers ◦ Personalization of applications ◦ Broader use of fiscal key  United States of America ◦ Quantitative goals for electronic filing ◦ Infrastructure, security and privacy ◦ Key Drivers: volumes, complexity and a demand for continuous improvement ◦ Domains identified by functional segmentation:

 Mexico ◦ Transparency of services ◦ Integral management of Information. Generation of knowledge. ◦ Measures of information quality ◦ Security strategy that follows ISO guidelines ◦ Continued improvements ◦ Outsourced services  France ◦ Gap reduction: identifiers, applications, geographical and temporary. ◦ User-centric information system: extended obligations vector, tax account, complaints. ◦ Research and Development

 Costa Rica ◦ Strategic objective: Technological platform that supports management ◦ Organizational structure that strengths an enterprise vision of IT ◦ Fiscal portal and multi-channel platform  Kenya ◦ Integrated solutions and processes through the modernization of IT systems: Internal Taxes, Customs, Administrative systems, technological support ◦ Adoption of standards: COBIT, ITIL, ISO y  Ecuador ◦ Integrated services supported in new technologies ◦ Generation of knowledge

 The World economic crises ◦ To timely accommodate changes ◦ Budget restrictions and investment rationalization ◦ Analysis of threats and opportunities  Open source software  Virtualization  Software as a Service (SaaS) ◦ Technological innovation freezing ◦ Free access to information ◦ Security