1. Designing JIM: Report from Thematic Working Groups Government of the Czech Republic and the World Bank February 27, 2009

2. Introduction

3. Introduction Context for the JIM project:Context for the JIM project: –Pressure on the revenue in the environment of the global financial crisis Key reasons for creation of JIM:Key reasons for creation of JIM: –improve efficiency and effectiveness –reduce compliance costs Sequencing:Sequencing: –Organizational structure and business processes must be developed in the initial phase –HR strategy, legislation harmonization, and IT follow

4. TWG 1: Business Process Re-engineering Main Issues Ways to achieve efficiency and effectiveness:Ways to achieve efficiency and effectiveness: –modernize, harmonize and centralize processes –use the extra resources for compliance management (service, audit and enforcement) –harmonize revenue administration legislation –offer efficient filing and payment options –ask only for information to be processed in the first instance Business process design must be based on these main objectives and key concepts of modern revenue administrationBusiness process design must be based on these main objectives and key concepts of modern revenue administration

5. TWG 1: Business Process Re-engineering Recommendations Create a Standard Business Process Model for JIM with the following characteristics: -possible to apply to almost all the revenue elements -can accommodate a majority of the existing processes -can become the basis for a full set of detailed business processes to be developed -can become the initial input for the new IT system

6. TWG 2: Functional Organization Main Issues Initial diagnostic completed for the following:Initial diagnostic completed for the following: -Segmentation of the client base for tax, customs, health and social insurance -Regional distribution of the taxpayers and contributors -Current allocation of existing resources -Current organizational structures and plans for changes

7. TWG 2: Functional Organization Recommendations Create Large Taxpayer Office at an early stageCreate Large Taxpayer Office at an early stage Strengthen taxpayer segmentation for the small and medium-sized taxpayersStrengthen taxpayer segmentation for the small and medium-sized taxpayers Take urgent decision on the merger of the core revenue functions of the tax and customs administrationsTake urgent decision on the merger of the core revenue functions of the tax and customs administrations Adapt the plan of short-term steps for the merger of tax administration and social contribution collectionsAdapt the plan of short-term steps for the merger of tax administration and social contribution collections

8. TWG 3: Human Resource Management Main Issues No common legislation for employment No common concept of HR functions Differences in training, competencies, and pay scales VZP staffing based on competency profiles, while others are not Transfer of collection staff from health and social security will need incentives to attract them to JIM Training infrastructure exists in all agencies, but needs to be re-oriented towards JIM

9. TWG 3: Human Resource Management Recommendations Identify staff assigned to the collection function in the social and health insurance agencies Identify issues regarding differences in employment conditions to facilitate the integration of functions into JIM Study tours for TWG 3 members to relevant countries in 2009

10. TWG 4: Legal Harmonization Main Issues TWG4 depends on input from other TWGsTWG4 depends on input from other TWGs However, many laws require change:However, many laws require change: –Social Security and health insurance in particular –Also tax administration, income tax and other laws Partial list of laws to be amended completedPartial list of laws to be amended completed Draft of legislative basis for tax administration must be reviewed in the context of JIMDraft of legislative basis for tax administration must be reviewed in the context of JIM

11. TWG 4: Legal Harmonization Recommendations Short-term: Harmonize base for health insurance, social security, and income tax Prepare a memo describing the legal framework for JIM Draft law delineating key responsibilities, governance structure, organizational structure, and circulate to each TWG Review draft law on registration of individuals Adapt draft tax administration law to ensure alignment with the plan developed for JIM TWG 4: monitor all draft legislation by four agencies to ensure consistency with JIM

12. TWG 6: Integration of Social Security and Health Insurance Main Issues I Need for Service Level Agreements between JIM and CSSZ/Health Insurance CompaniesNeed for Service Level Agreements between JIM and CSSZ/Health Insurance Companies Divergent assessment for Social Insurance, Health Insurance, and Income TaxDivergent assessment for Social Insurance, Health Insurance, and Income Tax Different penalties for filing and payment delinquenciesDifferent penalties for filing and payment delinquencies Legal impediments to data sharingLegal impediments to data sharing Implications of International and EU legal obligationsImplications of International and EU legal obligations Divergent registration requirements of CSSZ and HICsDivergent registration requirements of CSSZ and HICs Complex role of CSSZ regarding employer contact for s ickness benefit + work injuryComplex role of CSSZ regarding employer contact for s ickness benefit + work injury

13. TWG 6: Integration of Social Security and Health Insurance Main Issues II Implications for HIC business strategies:Implications for HIC business strategies: –Collection –Penalties –Individualization Who receives State contributions for those outside workforce to HICs?Who receives State contributions for those outside workforce to HICs? CSSZ/HICs need significant organizational and technical re- structuring post-JIMCSSZ/HICs need significant organizational and technical re- structuring post-JIM System of re-distributing health contributionsSystem of re-distributing health contributions Present system of SI and HIC contribution accounts must be addressedPresent system of SI and HIC contribution accounts must be addressed

14. TWG 6: Integration of Social Security and Health Insurance Recommendations Interim institutional co-operation piloted in selected regions/districts (data-sharing tasks, combined data collection measures, joint CSSZ/HIC /TA inspection teams, and CSSZ- HIC –TA database cross-matching)Interim institutional co-operation piloted in selected regions/districts (data-sharing tasks, combined data collection measures, joint CSSZ/HIC /TA inspection teams, and CSSZ- HIC –TA database cross-matching) Detailed business requirements to be defined by each participating institution (per function transferred to JIM)Detailed business requirements to be defined by each participating institution (per function transferred to JIM) Sequencing: Incorporate lessons learned about JIM’s capacity after Customs-Tax mergerSequencing: Incorporate lessons learned about JIM’s capacity after Customs-Tax merger

15. TWG 7: Integration of Tax and Customs Main Issues The main principle for determining functions to be included in JIM : whether revenue is raised as a result of the function The role of customs in an EU - country with no external land border EU legislation does not concern itself with which agency does a particular job How should non core functions in tax and customs be handled? Considerations concerned with splitting up organizations raises a number of issues in relation to cost, possible synergies, efficiency etc. Functions/ tasks that are performed in support of/on behalf of another agency’s policy should be considered as a candidate for transfer to that agency

16. TWG 7: Integration of Tax and Customs Recommendations Within JIM Outside JIM Taxes Customs duties Excises Recovery (including recovery of non JIM claims) Mobile supervision Investigation Illegal employment Intellectual property rights Security functions Subsidy control Financial control Price controls Lottery, gambling

17. TWG 8: Change Management Main Issues Project management Internal Communications – –staff survey questionnaire  design appropriate internal communication strategy External Communications – –JIM website launch and discussion forum roles – –Press releases and future public events

18. TWG 8: Change Management Recommendations Continue to convene regularly between the WB missionsContinue to convene regularly between the WB missions Project Management:Project Management: –Excellent project documentation, but need to speed up adoption of PM software –Amend governance structure of the project: TWG 8 mapped to Project Management team –Recruit a full-time professional project management team Internal Communications:Internal Communications: –Develop and implement employee survey –Present survey results to the next WB mission as a basis for internal communication strategy External Communications:External Communications: –Launch JIM website and manage discussion forum –Work with the MoF press secretary to issue the Press Release –Work with private sector stakeholders

19. Recap: Early Steps towards JIM Decide on merging core revenue functions of tax and customs as a first step to JIMDecide on merging core revenue functions of tax and customs as a first step to JIM Create Large Taxpayer Office to secure the revenue and pilot joint compliance programsCreate Large Taxpayer Office to secure the revenue and pilot joint compliance programs Adopt single taxpayer/contributor IDAdopt single taxpayer/contributor ID Develop the law to harmonize the base for tax and contributionsDevelop the law to harmonize the base for tax and contributions Plan for centralized data processing systemPlan for centralized data processing system