Collecting more tax for less

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How much would you spend collecting what you are owed? When it comes to paying our taxes, most of us think only about making sure we contribute the right amount. But a tax agency aims to collect as much as possible of what it is owed, for as little as possible. There’s a cost associated […]

How much would you spend collecting what you are owed?

When it comes to paying our taxes, most of us think only about making sure we contribute the right amount. But a tax agency aims to collect as much as possible of what it is owed, for as little as possible. There’s a cost associated with making each of us pay up, and in these straightened times most tax agencies are looking closely at how to reduce it.

HMRC’s International Tax Benchmarking Report, developed in collaboration with Capgemini Consulting and experts from tax agencies in ten different countries, provides an opportunity to analyse how well tax agencies around the world are performing. Understanding the context in each country and the qualitative detail of each model helps explain the operating practices that help deliver leading practice levels of performance.

For example, just take the use of channels for registration, filing of returns or provision of information. The public sector has tended to follow the lead of the private sector in shifting customer contact away from the most expensive face to face channels to more cost effective contact centres, or even better, online. Tax agencies have to help their customers understand what is required of them and resolve their queries, but the most efficient ones route simple queries and information requests via their websites in a way that minimises demand on resources. Ireland and New Zealand are among the leaders in this respect, which explains why they have both a low number of calls, and low cost of contact per taxpayer. By contrast, South Africa is at an earlier stage in driving use of the online channel and is encouraging taxpayers to call its contact centres instead of adding to the pressure on face to face offices which are more costly to run. In France and Poland, face to face contact remains the citizen’s preferred means of interaction with the tax office, with little use of telephone channels. In Poland, the role of contact centre agents is limited to providing general advice, without the ability to view taxpayers’ affairs on their screens.

Governments are consistently making online channels available but usage varies greatly. In Australia 92% of personal income tax returns are filed online, while in Poland it is less than 1%. In Poland, taxpayers can talk an agent through their affairs face to face while she inputs the details into the system. As a result of this, the cost of processing is relatively high. Other countries apply a variety of different models involving automation. Spanish taxpayers can approve pre-filled tax returns by SMS. Both Canada and Spain offer tele-filing via touchtone phones. Paper returns predominate in South Africa, but they are scanned and validated electronically in branches, resulting in similar efficiency benefits to the online channel.

Of course, the simpler a tax return form is to complete, and the higher the proportion which can be filed without manual intervention from civil servants, the more cheaply and easily revenue can be collected by governments. Online is a key efficiency lever in tax administration as in so many other areas of public services and the private sector. However, as this international survey of tax agencies and their methods reveals, the imperative to do more online does not automatically result in a convergence of approaches and technology provides us with an ever-changing toolbox which can be deployed in any number of ways as local challenges and priorities dictate.

For more on the findings of the international benchmarking project visit HMRC’s website. Click here to read more about how Capgemini Consulting helped HMRC to deliver the international bencharking project.