Maximizing the Value of
Investments in Tax Administration
Terry Lutes
Principal, M Group
Agenda
• Goals of Tax Administration Modernization
• Obstacles to Success
• Policy, Business Process, and IT
Components
• Keys to Success
• IT Modernization Models
• Background and Concepts of the SAP
Solution
Agenda
• SAP Solution Functionality Overview
• Live Demonstration
– Registration
– Adobe Component
– Taxpayer View
– Bread & Butter Functionality
• Wrap Up and Q & A
The Big Question
If we understand our goal so clearly, why do
we so rarely achieve it?
What Do We Want?
• Increased revenue
– Broaden taxpayer base
– Improve compliance
• Lower costs
– Reduce the costs of revenue collection
• Improved services
– Leverage technology, external organizations (e.g. banks),
information available elsewhere
• Greater transparency
– Meet concerns of stakeholders – internal and external
Why Don’t We Get There
• Sheer physical and budget constraints
• Environmental factors
– Changing economy – shift to services in systems designed to tax
products
– External forces impacting domestic tax policies
• Large cash/informal economies
• Personnel challenges
• Organizational transition challenges
– Focus on day to day revenue targets vs. longer term reforms
– Imbalance between budget reality and reform potential
• Capacity to absorb change
Myths About How to Get There
• We just need IT modernization
• Policy isn’t important to IT investment
• We will organize our work around the IT
systems
• We can do it quickly
• It will be a priority for the tax administration
• We can do it a piece at a time
What IT Can and Cannot Do
• IT solutions are not an acceptable alternative to efficient
and effective business processes
• With effective planning, IT systems can increase the
effectiveness and efficiency of tax administrations by, for
example:
– Easing burden of receiving and processing data from taxpayers
and third parties
– Providing a holistic view of taxpayers across tax administration
functions improving service and compliance
– Providing easy access to data not traditionally used in tax
compliance efforts
– Providing automated analysis of data beyond the depth and
breadth possible in a manual or second generation IT world
benefiting both policy development and tax compliance
Is IT the Answer?
•
•
•
•
•
•
Integrated Tax Information
Systems provide tools to
support tax administration.
Tax administrator gets data
on all financial transactions in
An interconnected world
Taxpayer has little to gain and
a lot to lose from noncompliance
IT reduces cost for
administration
Automation of processes
allowing quick and ready
information for policymakers
Technology allows
developing/transition nations
to leap over to latest
standards.
Policy, Process and IT
Compliance
activities
Back office
processes
Taxpayer
services
Audit
Business Process before IT
•
IT solutions are not an acceptable alternative to
efficient and effective business processes
•
Service Assessment and Improvement
–
–
–
•
Measurement: Tax administration/Taxpayer perspective
Distribution channel analysis
Analysis of gaps (Face-to-face, Telephone, E-government)
Improvement strategy
–
–
–
Tax administration goal setting
Comprehensive mapping of business components and
processes
The strategic business input to IT planning
Key Issue: Tax Administration
Reform Level
• Piecemeal reform of individual business
processes
• Comprehensive tax administration reform
• Comprehensive financial reporting reforms
to include tax reporting
Other Issues
• Policy issues
– Ensuring policy and administration are in sync
– Balance between tax types in revenue collection
objectives
– Degree of centralisation
– Unified administration of tax types (direct tax, VAT,
customs, property)
• Implementation issues
–
–
–
–
–
Personnel
Degree of outsourcing
Acceptance of timelines
Legacy records transition
Validation of earned value
Process Design Requirements for
Desired State
•
•
•
•
Supports all taxes
Has common identifiers for taxpayers
Automates routine tasks
Allows risk management and supports
efficient allocation of scarce resources
• Enables effective case management
• Supports internal controls
Reengineered Tax Administration
Framework
Identity management
E-Tax Administration
Tax Web Portal
E-Tax Self Services
o Registration
o Filing
o Payment
o Compliance
o Self Audit
o Taxpayer Service
o Research Policy
E-Data Store
Compliance
Management
Core Tax Processing System(s)
Transaction
Processing
o Registration
o Returns
o Remittances
Revenue
Accounting
o
o
o
o
o
Taxpayer
Accounting
Personal
Income
Business
Income
Sales
Withholding
Misc. Taxes
Workflow Management or CRM
Correspondence and Document
Management
Authoritative Taxpayer
Account Data
Strategy/Policy
Development
Performance
Measurement
Taxpayer Behavior
Modeling
Decision Engine
o
o
o
o
Compliance
Components
Collection
Audit
Fraud Detection
Legal
Compliance Data
Warehouse
Technical framework (variety of vendor solutions)
Back office systems (personnel, finance, internal audit, asset management)
Example of Functional
Components (Philippines)
Work flow
Electronic
access via
telephone,
kiosk and/or
Internet for
- filing
- paying
- inquiry
T
a
x
p
a
y
e
r
s
Customer Service
- Telephone
- Internet
- Correspondence
Paper
submission
for
- filing
- paying
- inquiry
- Returns processing
- Revenue processing
- Account maintenance
- Master file
Electronic
Processing
Interface w/
Accounting systems
Paper Processing
I
n
t
e
r
f
a
c
e
Tax Accounting Systems
- Internal
Databases
Image / scanning
Compliance Research / Case Selection
- Internal Data / Information
- External Data / Information
- Case selection
- External
Databases
- Laws and
regulations
Intranet
Compliance
Processing
From present to reengineered state
Current environment
• Laws and regulations
• Rule changes decided
by governments
• Decisions by revenue
boards
• Initiatives of revenue
officials
• Revenue targets
• Notifications
• Paper/hybrid records
• Manual, sub-optimal
work management
• Limited use of IT for
assessment and
accounting
• Functional stovepipes
within administration
Registration and
Taxpayer services
Returns Processing
Compliance Tasks
& Projects
Collection &
Disbursement
Case Management
Back-office Services
Records
Management
Rules Framework
Assessment systems
IT Development Models
•
In-House Development
– Likely lowest cost
– Usually not based on best practices and technology
– Usually not well integrated
•
Customized Development
–
–
–
–
•
100% Tailor made
Long and complex development track
High risk
Expensive
“Reusable” Solutions
– Solution generally not initially designed for reuse
– More development then reuse which adds to cost
– Limited track record creates risk
IT Development Models (cont.)
• ERP/CRM-Based Solutions
– Expensive
– Strong financial modules
– Proprietary technology for configuration, customization, and
support
– Strong workflow components
– No source code (source code possibly in escrow)
• Commercial Off The Shelf (COTS) Solutions
–
–
–
–
–
–
Based on Best Practices in its domain
Proven solution /w track record and generally configurable
Faster implementation
Requires adjustment of agency processes
Less expensive but an integration challenge
No source code (source code possibly in escrow)