INTRODUCTION
During the past decade, there has been a noticeable trend throughout the world whereby the pressures on tax administration to become more efficient and effective have resulted in major efforts to reform tax systems. More and more taxpayers are demanding top quality services for them to meet their responsibilities and that the tax laws be applied with integrity and fairness to all within the society. This has been brought about by the fact that the public have become more enlightened about the affairs of government and are now insisting that they get value for money with regards to the taxes paid. Furthermore, there has been an increasing tendency for governments to be demanding more revenues in order to provide the social services so that taxpayers are being called upon to hand over more of their income to the state.
It is interesting to note that in the past, most tax administrators saw themselves as primarily responsible for the collection of the maximum revenues possible and not a great deal of emphasis was placed on the fact that they were a service agency providing services to the public. In other words, many tax administrators did not see themselves as a business providing services to customers and therefore did not seek to provide quality services comparable to what was provided by the best of the private sector. As a result, while they may very well have been fairly successful in tax collections, the feedback from taxpayers was that the quality of service was inadequate and this resulted in increased costs of compliance and less than optimal levels of voluntary compliance.
The purpose of this paper is to provide an overview of some of what is required in making sure that the management of the tax administration has in place the necessary structures and functions which will satisfy the public's expectations with regards to its interactions with the Revenue Services. Invariably, the process of reform will require fundamental behavioural change in the way the tax official work with taxpayers and with each other and will usually take a long time. However, it is important that these changes be carried out if the country is to attain the level of performance in tax administration that is required to compete in a globalized and extremely competitive economy.
COMMON PROBLEMS OF TAX ADMINISTRATIONS
A recent International Monetary Fund report entitled “Proposal for Caribbean Regional Technical Assistance Centre, Needs Assessment Report' made the following comments about tax administration in the Caribbean:
'Like customs administration, tax administration in the Caribbean tends to be weak and inefficient, resulting in low revenue yields. In several countries, revenue collection capability is stretched by the need to administer a large number of taxes, many of them low-yielding and economically insignificant. Also, while the private sector is served by professional accountants and lawyers, tax departments are generally deficient in these skills which put them at a severe disadvantage in complex tax matters. In turn, the inability to enforce tax laws has resulted in increasing revenue loss. Tax administration is further compromised by inadequate data systems and insufficient interface between various sources of taxpayer information'.
While not all tax administrations are alike, it is fair to say that the following are some of the problems of tax administrations in our region today.
(i) TOO MUCH EMPHASIS ON COLLECTIONS RATHER THAN ON SERVICE TO THE CUSTOMERS
If we accept the fact that the tax administration is a service organization providing services to taxpayers, then the objective should be to ensure that they receive service of the highest quality. In addition, taxpayers should be provided with access to relevant information and the required forms, etc., to make it as easy as possible for them to comply with the Laws and Regulations.
Whenever we are able to achieve these objectives, they will have no excuse not to comply and it is likely that there will be higher levels of voluntary compliance.
However, experience has shown that even when this is the situation, some taxpayers will be non-compliant and it is the duty of the tax administration to remind them of their responsibilities under the law and if necessary, assessments should be made to recover the amounts due.
(ii) LACK OF ADEQUATE TRAINING AND RESOURCES
In order to provide the quality service that taxpayers are demanding today, it is necessary to have well trained professional tax administrators who are knowledgeable and committed to the task. They should not only be qualified in the areas of tax laws, accounting, economics and public finances but must now be computer literate and be able to deal with the customers in a courteous and professional manner.
Because we live in a changing world, today's tax administrator must continue to acquire knowledge throughout his/her career to keep in touch with what is happening and be able to match skills with the practitioners who represent the taxpayers.
While it is important that the tax administrator be well trained, it is also very important that they be properly remunerated and that the resources that they need to efficiently and effectively carry out their functions are provided. A good example of such resources would be the provision of computer equipment which is a must today if an organisation is going to process in an efficient manner the volumes of information which flow within the tax administration.
(iii) USE OF OUTDATED SYSTEMS AND PROCEDURES.
One of the weaknesses of government departments including tax administration is the tendency for them to be using outdated systems and procedures in carrying out their functions. It is very easy for organisations to become complacent with systems and procedures which were adequate for years gone by but have not changed with the passage of time. In many cases, the volume of work has increased many times and new technology has caused certain activities to be done differently but very little may have changed in government. For example, it is noticeable that the private sector entities which are in the business of collecting funds have found ways and means of making it easy for their customers to pay by embracing modern technology and seeking to eliminate some of the paper work and time consuming procedures. On the other hand, governments have not been as quick to make the changes. However, as a result of the demands from customers, many tax administrations are now accepting returns electronically and through tele-banking facilities, thereby reducing the cost of compliance for both the taxpayer and themselves.
(iv) DUPLICATION OF EFFORT
Historically, tax departments were organised according to tax types and therefore one could find departments such as Income Tax, Value Added Tax, Customs and Stamp Duty and Transfer Tax. In some countries, each tax department had it's own register of taxpayers, sometimes with separate registration numbers. They audited their own taxpayers and also carried out their own compliance activities. This was in spite of the fact that in many cases such as for the Income and Value Added Tax, the taxpayers were basically the same persons and the gross sales for Income Tax was also the gross sales for VAT over a twelve months period. The chances are that the taxpayer who was non-compliant for one tax was also non-compliant for others and therefore the system whereby officers from separate departments were visiting taxpayers to carry out enforcement functions was truly inefficient and amounted to a great deal of duplication of effort.
All this was happening in an environment where resources are often times scarce. Furthermore, in the case of Jamaica, we had a situation where because the Income Tax Act specifically provided that income tax information could not be disclosed to other departments, this department could not tell the others what they knew about their taxpayers. Needless to say, a person could file Income Tax and VAT returns with vastly different sales figures but because the departments could not talk to each other, they would not know what was happening.
(v) WEAK MANAGEMENT OF THE TAX ADMINISTRATION
Because many tax administrations are not being managed in a business-like manner, there is a tendency for many high level managers to spend a great deal of their time carrying out technical functions and not sufficient time dealing with the managerial functions. This was due in some cases to the fact that lower level managers were not well-trained and therefore it was mainly the managers who had certain knowledge and could deal with problems which really were of a technical nature. In some cases it was also due to the fact that the organisation was too centralised and there was not sufficient decentralisation of functions so that only a few persons had the requisite knowledge, responsibility and authority to take action and solve the problems of the taxpayer.
At the same time, the real managerial functions of planning, organizing, directing and controlling suffered because too much of the manager's time was spent on non-managerial functions. It is interesting to note that many persons who were accustomed to this environment found it difficult to make the change and had actually become quite satisfied with holding on to the technical work which in many cases they were fond of doing. To make matters worse, the selection of managers was in many cases based on technical competence rather than managerial ability so that it was not those persons with the flair for management who were being selected as managers but the best technocrats.
