Administrative Dimensions of Tax Reform Presentation at World Bank, April 2003

Overview Tax administration and tax policy Tax administration reform Issues and examples

Tax Policy and Tax Administration Tax policy + no administration = 0 No policy + administration = policy Tax policy + administration = real policy

Task of Tax Administration How much? How? How costly?

What Have We Learned? Know the environment Keep it simple Taxpayer as “client”

The Tax Evasion Game The pP approach The players The context

Compliers and Non-compliers Different values? Different incentives? Different policies?

Environmental Factors “Culture” Politics Law Economics

Economics of Tax Administration Inputs Production process Outputs

Key Elements Information system Rewards and penalties Strategies ECM

Tax Administration Reform The will A Strategy Resources

Facilitating Compliance Identification Assessment Collection Service

Keeping Taxpayers Honest Know the problem Monitor closely Enforce

Controlling Corruption Incentives Training Organization Monitoring

Coping with Inflation Collection lags Enforcement Assessment

The Hard-to-Tax Type I and Type II errors Objectivity Uses and limits of presumption

Penalties No cheap finance Focus on key points Keep it reasonable

Amnesties Ever popular Almost always bad

Organizing to Tax Revenue authorities Large taxpayer offices Privatization

Computerization TINs Re-engineering organization The human element Buy don’t build

An Example - Poland Policy formulation Sequencing issues Attitudinal change