The TADAT Framework:

Transcription

1 A Public Service to Support Domestic Revenue Mobilization The TADAT Framework: An Overview Prepared by the TADAT Secretariat September Website: 1

2 The TADAT brand is trademarked under U.S. Trademark SN : TADAT: Reference No. S20515 and is administered by the TADAT Secretariat which must certify all output based on the TADAT brand. The TADAT Secretariat does not guarantee the accuracy of unauthorized translations of the Field Guide or this Pocket Guide. 2

3 Contents Page Part 1: Overview 4 Purpose of the TADAT framework 5 Key TADAT design principles. 6 Applying the TADAT framework, its hierarchy, performance outcome areas (POAs), performance indicators, scoring rules and methods 7 TADAT assessment phases 14 Profile of a TADAT assessment team. 15 Part 2: POAs Elaborated 16 Desired outcome, examples of good international practice. 17 Part 3: Select TADAT activities 26 Completed TADAT assessments 27 Emerging lessons from completed assessments.. 29 Emerging lessons for the TADAT framework itself. 32 3

4 Part 1: Overview Purpose of TADAT Design principles TADAT framework, hierarchy, performance outcome areas (POAs), performance indicators and scoring rules TADAT assessment phases Profile of an assessment team 4 4

5 Purpose of the TADAT framework The Tax Administration Diagnostic Assessment Tool (TADAT) is designed to provide an objective assessment of the health of key components of a country s system of tax administration. This framework is focused on nine key performance outcome areas (POAs) that cover most tax administration functions, processes and institutions. The assessment of these performance outcome areas is based on 28 high-level indicators that are each built on 1 to 4 dimensions that, together, add up to 47 measurement dimensions, making TADAT a comprehensive but administrable diagnostic tool. TADAT assessments are particularly helpful in: Identifying the relative strengths and weaknesses in tax administration systems, processes, and institutions. Facilitating a shared view on the condition of the system of tax administration among all stakeholders (e.g., country authorities, international organizations, donor countries, and technical assistance providers). Setting the reform agenda, including reform objectives, priorities, initiatives, and implementation sequencing. Facilitating management and coordination of external support for reforms, and achieving faster and more efficient implementation. Monitoring and evaluating reform progress by way of subsequent repeat assessments. 5 5

6 Key TADAT design principles 1: Standardized assessment 2: Focus on outcomes 3. Preference for quantitative over qualitative measurements to allow comparative analysis in the future 5. Evidence-based and verifiable information for consistency and objectivity 7. Measurement dimensions should be within the control of the tax administration 4. Measurement dimensions are tied to outcomes to avoid manipulation through behavior of the tax administration 6. Only information reasonably available in the tax administration system should be used 8. Dimensions and indicators should not be specific to legal or other traditions 9. Dimensions and related indicators measured only once, but can be related logically 6

7 Applying the TADAT framework TADAT focuses on performance of the major national taxes: corporate income tax (CIT), personal income tax (PIT), value added tax (VAT) (or its indirect tax equivalent such as sales tax), and Pay As You Earn (PAYE) amounts withheld by employers (which, strictly speaking, are remittances of PIT). Social security contributions (SSCs) may also be included in assessments where SSCs are a major source of government revenue and are collected by the tax administration, as is the case in many European countries. Trained assessors apply the TADAT methodology. They are guided by approved and standardized terms of reference and standards set out in the TADAT Field Guide available at The TADAT Secretariat quality assures and certifies all performance assessment reports (PARs) to ensure that standards are met and consistency is maintained. The TADAT Secretariat encourages the open publication of PARs. Client countries can publish their PARs on their websites and, on authorization to the Secretariat(as some countries have done), they are also published on the TADAT website ( 7 7

8 The TADAT framework s hierarchy Focuses on 9 critical performance outcome areas (POAs) Assessment results into a Performance assessment report (PAR) 28 high level indicators 47 measured and scored dimensions (scale of A to D ) Comprehensive Field Guide to support assessors TADAT PARs are published on after authorization by country authorities. All indicators have between 1 to 4 dimensions Each dimension is separately assessed Overall score for an indicator is based on the assessment of the dimensions related to that indicator Scores A B C D A is set as "internationally accepted good practice", with the lower grades indicating increasing deviations from this baseline A D score denotes that the minimum standards set under C have not been met 8

9 Performance outcome areas (POAs) 9

10 TADAT performance indicators at-a-glance POA 1: Integrity of the Registered Taxpayer Base P1-1. Accurate and reliable taxpayer information. P1-2. Knowledge of the potential taxpayer base. POA 2: Effective Risk Management P2-3. Identification, assessment, ranking, and quantification of compliance risks. P2-4. Mitigation of risks through a compliance improvement plan. P2-5. Monitoring and evaluation of compliance risk mitigation activities. P2-6. Identification, assessment, and mitigation of institutional risks. POA 3: Supporting Voluntary Compliance P3-7. Scope, currency, and accessibility of information. P3-8. Scope of initiatives to reduce taxpayer compliance costs. P3-9. Obtaining taxpayer feedback on products and services. POA 4: Timely Filing of Tax Declarations P4-10. On-time filing rate. P4-11. Use of electronic filing facilities. POA 5: Timely Payment of Taxes P5-12. Use of electronic payment methods. P5-13. Use of efficient collection systems. P5-14. Timeliness of payments. P5-15. Stock and flow of tax arrears. 10

11 TADAT performance indicators at-aglance POA 6: Supporting Voluntary Compliance P6-16. Scope of verification actions taken to detect and deter inaccurate reporting. P6-17. Extent of proactive initiatives to encourage accurate reporting. P6-18. Monitoring the extent of inaccurate reporting. POA 8: Efficient Revenue Management P8-22. Contribution to government tax revenue forecasting process. P8-23. Adequacy of the tax revenue accounting system. P8-24. Adequacy of tax refund processing. POA 7: Effective Tax Dispute Resolution P7-19. Existence of an independent, workable, and graduated dispute resolution process. P7-20. Time taken to resolve disputes. P7-21. Degree to which dispute outcomes are acted upon. POA 9: Accountability and Transparency P9-25. Internal assurance mechanisms. P9-26. External oversight of the tax administration. P9-27. Public perception of integrity. P9-28. Publication of activities, results, and plans. 11

12 TADAT scoring rules A B C D Tax administration demonstrates performance that meets or exceeds international good practices a tested and proven approach applied by most leading tax agencies. Tax administration shows sound performance fairly close to internationally accepted good practices in that dimension. Tax administration just meets the minimum performance standards in that dimension. Inadequate performance, where the minimum standards set in C are not met. OR Insufficient information to determine level of performance. 12

13 TADAT scoring methods Scores allocated to each dimension are combined into an overall score for an indicator using one of two methods: Method 1 (M1) used for single-dimensional indicators and multidimensional indicators where poor performance in one dimension (the weakest link) undermines the performance of the other dimensions in the indicator the lowest score is used. For example: If four dimensions making up an indicator are assessed at A, B, D and B, the weakest link is D and the overall indicator score will be D ; or If the indicator has only one dimension and is assessed at A, the overall score will be A. Method 2 (M2) used for multi-dimensional indicators where none of the dimensions in an indicator undermines the performance of another. An average of all the scores is used. For example: If four dimensions making up an indicator are assessed at A, B, D and B the overall indicator score (derived from Table 2 of the Field Guide, p. 7 and reproduced on the next page of this guide) will be B. Table 2 of the Field Guide CANNOT be applied to indicators using scoring method M1: 13

14 Phases of a TADAT assessment Phase 1: Assessment initiation: the client country sends a formal request either to a sponsor or the TADAT Secretariat directly. The Secretariat (copied into all requests) notifies all TADAT partners, technical assistance providers and interested parties on the upcoming assessment and provides guidance on the next steps. Phase 2: Pre-assessment: the assessment team s planning and preparation phase that begins 6 to 8 weeks prior to the in-country assessment phase (Phase 3). It includes formal communication with the client country by the team leader on various issues including sending the pre-assessment questionnaire to the country focal point, meeting schedule and logistical arrangements. Phase 3. In-country assessment: Typically takes 2-3 weeks and may be preceded by two four-day training of country officials. The key task is to assess the health status of the country s system of tax administration, and document the results in a Performance Assessment Report (PAR). Phase 4. Post-assessment: The PAR is finalized during this phase country comments are incorporated and the TADAT Secretariat certifies the PAR. The final PAR is transmitted to the client country within 45 days of the end of the in-country assessment. 14

15 Profile of a TADAT assessment team Typically comprises 3 or 4 trained assessors (could be more), one of whom is the designated team leader. The trained assessors are responsible for determining the TADAT assessment ratings. Shall include at least one (but preferably two or more) trained assessor(s) with at least five years of tax administration experience. The team leader must be a trained TADAT assessor who has: led at least five technical assistance mission teams and participated in at least one TADAT assessment; or participated as a trained assessor in at least three TADAT assessments and taken the leadership training course May also include some analysts in a supporting role to assist in data collection, evidence gathering, and analysis the analysts cannot be involved in determining TADAT assessment ratings Note: The TADAT Secretariat runs an online certification course and exam for prospective assessors (see details at courses (and related exams) are also conducted during in-country workshops. 15

16 Part 2: POAs Elaborated Examples of good tax administration practices 16

17 POA1: Integrity of the registered taxpayer base Desired outcome: All businesses, individuals, and other entities that are required to register are included in a taxpayer registration database. Information held in the database is complete, accurate and up-to-date. Examples of good international practice: Use of a unique taxpayer identification number that facilitates routine identification of taxpayers for administrative actions, third party information reporting and data matching, and exchange of information with other government agencies. Maintaining a database of sufficient accurate and reliable identifying information to assist interactions with the taxpayer and tax intermediaries, especially in relation to filing, payment, and assessment matters. Identifying and flagging dormant registrations and keeping the database clean of inactive, invalid, and duplicate records. Undertaking initiatives to detect unregistered businesses and individuals, especially those representing high revenue risks. 17

18 POA2: Effective risk management Desired outcome: Risks to revenue and tax administration operations are identified and managed effectively. Tax administrations face numerous risks that have the potential to adversely affect revenue and/or tax administration operations. Managing risks is essential and requires a structured approach to identifying, assessing, prioritizing, and mitigating risks. This is done as an integral part of multi-year strategic and annual operational planning. Examples of good international practice: Managing compliance risk: Gathering risk-related information from a range of internal and external sources to build knowledge of taxpayer compliance levels. Identifying, assessing, and ranking risks within a framework of taxpayer segments, core taxes, and key obligations (registration, filing, payment, and reporting). Managing risks through a compliance improvement plan comprising risk mitigation strategies and actions (including taxpayer education and assistance, audits, improvements to laws etc). Monitoring and evaluating the impact of mitigation activities. Managing institutional risk: Maintaining a register of institutional risks that potentially pose a threat to tax administration operations. Having a plan for continuity of operations in the event of a disaster that destroys part or all of the administration s assets and resources. Training staff in disaster recovery procedures. Taking preventive measures, such as offsite backup of data. 18

19 POA3: Supporting voluntary compliance Desired outcome: Taxpayers have the necessary information and support to voluntarily comply at a reasonable cost to them. To promote voluntary compliance and public confidence in the tax system, tax administrations must adopt a service-oriented attitude toward taxpayers, ensuring that taxpayers have the information and support they need to meet their obligations and claim their entitlements under the law. Examples of good international practice: Provision of generic and targeted information through a variety of user-friendly products and public education programs. Delivery of services through means convenient to taxpayers and cost effective for tax administrations. Customizing information to meet the specific needs of particular taxpayer segments, such as small traders. Regular updating of information products to reflect changes in the law and administrative procedures, and initiatives to raise taxpayer awareness of the changes. Introducing measures to reduce compliance costs for taxpayers, such as simplified record keeping and reporting requirements for small businesses and pre-filling of declarations for individuals. Monitoring taxpayer perceptions of service, and seeking taxpayer feedback on information products and services. 19

20 POA4: Timely filing of tax declarations Desired outcome: Taxpayers file tax declarations on time. Filing of tax declarations (also known as tax returns) remains a principal means by which a taxpayer s tax liability is established and becomes due and payable. Where filing is required, tax laws and administrative procedures specify who is required to file; the declaration form to be used; dates by which declarations must be filed; supporting documentation to be included with declarations; and filing methods. Examples of good international practice: Simplifying filing arrangements, including pre-filling of tax declarations. Being proactive in reminding taxpayers of approaching filing deadlines (through media campaigns, automated reminder messages etc). Outreach programs to assist specific taxpayer groups (such as elderly taxpayers and citizens with language difficulties) in understanding and meeting their filing obligations. Use of electronic filing facilities. Automated processes to quickly identify taxpayers who have failed to file declarations on time. Timely follow-up and enforcement action tailored to the circumstances and filing history of the non-filers concerned. 20

21 POA 5: Timely payment of taxes Desired outcome: Taxpayers pay their taxes in full on time. Taxpayers are expected to pay taxes on time. Tax laws, regulations, and administrative procedures specify payment requirements, including deadlines (or due dates) for payment, who is required to pay, and payment methods. Examples of good international practice: Having collection systems that reduce the incidence of unpaid taxes, especially withholding of tax at source and advance payment systems. Having suitable debt recovery powers, late payment penalties and interest, and authority to grant time-payment arrangements where appropriate. Use of electronic payment methods. Dedicated collection enforcement operations. Active management of the arrears inventory by reference to value, age, and collectability of arrears cases. 21

22 POA 6: Accurate reporting in declarations Desired outcome: Taxpayers report complete and accurate information in their tax declarations. Tax systems rely heavily on complete and accurate reporting of information by taxpayers in tax declarations. Tax administrations therefore need to regularly monitor tax revenue losses from inaccurate reporting, especially by business taxpayers, and take a range of actions to ensure compliance. Examples of good international practice: Implementing a program of verification activities that has far wider impact than simply raising additional revenue (programs of this kind focus on the highest compliance risks, have both corrective and deterrent effect, and support intelligence gathering of emerging risks). Building capacity in large-scale automated crosschecking of third party information with amounts reported in tax declarations. Adopting cooperative compliance approaches to manage risks of inaccurate reporting. Issuing tax rulings to provide taxpayers with certainty as to how the tax administration will apply the law to particular transactions. Monitoring the level of inaccurate reporting through various analytical methods. 22

23 POA 7: Effective tax dispute resolution Desired outcome: The tax dispute resolution process is fair and independent, accessible to taxpayers, and effective in resolving disputed matters in a timely manner. The process by which a taxpayer seeks an independent review, on grounds of facts or interpretation of the law, of a tax assessment resulting from an audit. A taxpayer should be entitled to dispute three elements of a tax assessment: (1) the accuracy of the facts relied upon by the auditor; (2) the correctness of interpretation of the tax law; and (3) the amount of penalties imposed by the tax administration. Examples of good international practice: Publishing clear explanations of taxpayers rights and legal avenues for review of decisions made by the tax administration. Minimizing the incidence of disputes. Requiring auditors to provide taxpayers with a clear explanation of: adjustments made, reasons for penalties imposed and rights and avenues of review. Having a simple, transparent, and graduated dispute resolution mechanism of administrative and judicial review. Prompt refunding of overpaid tax where a dispute is resolved in the taxpayer s favor. Monitoring key aspects of the dispute resolution process, including underlying causes, time taken to resolve disputes, and dispute outcomes. 23

24 POA 8: Efficient revenue management Desired outcome: Tax revenue collections are fully accounted for, monitored against expectations, and analyzed to inform government revenue forecasting. Legitimate tax refunds are paid promptly. Three key activities are performed by tax administrations in relation to revenue management: providing data and analytical input to the forecasting and estimating processes; maintaining a system of revenue accounts; and paying legitimate tax refunds promptly, while having safeguards in place to prevent payment of fraudulent refund claims. Examples of good international practice: Maintaining a taxpayer ledger that minimizes the scope for error and fraud, and ensures timely recording of payments and other transactions to the correct taxpayer accounts. Routinely reconciling of the taxpayer ledger to the broader set of government revenue accounts maintained by the Ministry of Finance. Regular monitoring and reporting to government of core tax collections to ensure early detection of deviations from revenue forecasts. Conducting regular internal audits of the revenue accounting system. Paying legitimate tax refunds promptly. Having a tax revenue analysis capability that provides input to government revenue forecasting and estimating processes. 24

25 POA 9: Accountability and transparency Desired outcome: The tax administration is transparent in the conduct of its activities and accountable to the government and community. Accountability and transparency are two of the central pillars of good governance. Their institutionalization reflects the principle that tax administrations should be answerable for the way they use public resources and exercise authority. To enhance community confidence and trust, tax administrations should be openly accountable for their actions within a framework of responsibility to the minister, legislature, and general public. Examples of good international practice: External oversight of the tax administration by the government auditor and other mechanisms. Independent and impartial investigation of taxpayer complaints concerning wrongdoing and maladministration of the tax administration. Having internal assurance mechanisms, including internal audit and other internal controls to protect the systems of administration from fraud, loss, and error. Engagement of citizens through stakeholder consultation and client surveys. Embracing of ethical standards and procedures aimed at preventing tax officials from misusing their positions and powers. Public reporting of the tax administration s financial and operational performance. 25

26 Part 3: Select TADAT Activities Completed TADAT assessments to October 2016 Emerging lessons from completed assessments Emerging lessons for the TADAT framework itself 26 26

27 Completed TADAT assessments to October 2016 # Country Assessment lead agency Date conducted Income classification 1/ TADAT Field Guide version PAR Published A. Pilot assessments (versions 1 5 of the TADAT Field Guide; version 5 was stable going into the rollout version 6) 1 Zambia IMF-FAD R1 November 2013 Lower middle income Version 1 N 2 Norway IMF-FAD R1 for initial, and TADAT Secretariat for followup assessment December 2013 and follow-up in December 2014 High income Versions 1 & 3 N 3 South Africa IMF-FAD R1 July 2014 Upper middle income Version 1 N 4 Paraguay TADAT Secretariat November 2014 Upper middle income Version 3 N 5 Fiji IMF-FAD R1 February 2015 Upper middle income Version 5 N 6 Mozambique IMF-FAD R2 March 2015 Low income Version 5 N 7 Kosovo IMF-FAD R1 May 2015 Lower middle income Version 5 N 8 Malawi TADAT Secretariat May 2015 Lower Income Version 5 N 9 Cote d Ivoire TADAT Secretariat June 2015 Upper middle income Version 5 N 10 Madagascar World Bank June 2015 Lower Income Version 5 N 11 Malaysia TADAT Secretariat July 2015 Upper middle income Version 5 N 12 Rwanda TADAT Secretariat August 2015 Lower Income Version 5 N 13 Uganda TADAT Secretariat August 2015 Lower Income Version 5 N 14 Egypt IMF-FAD R1 October 2015 Lower middle income Version 5 N 15 Montenegro IMF-FAD R1 October 2015 Upper middle income Version 5 N 16 Jamaica IMF-FAD R2 October 2015 Upper middle income Version 5 N 17 Philippines IMF-FAD R1 December 2015 Lower middle income Version 5 N 1/ Source: World Bank siteresources.worldbank.org/datastatistics/resources/class.xls 27

28 Completed TADAT assessments to October 2016 # Country Assessment lead agency Date conducted Income classification 1/ TADAT Field Guide version PAR Published B. Assessments using TADAT Field Guide launched in November Comoros World Bank January 2016 Low income Version 6 N 2 Tanzania IMF-East AFRITAC February 2016 Low income Version 6 N 3 Jordan USAID March 2016 Upper middle income Version 6 Y 4 Ethiopia IMF-East AFRITAC April 2016 Low income Version 6 N 5 Serbia IMF-FAD R1 April 2016 Upper middle income Version 6 N 6 FYR Macedonia IMF-FAD R1 May 2016 Upper middle income Version 6 N 7 Namibia European May 2016 Upper middle income Version 6 N Commission 8 Vietnam World Bank May 2016 Lower middle income Version 6 N 9 Zambia (repeat) IMF-FAD R2 May 2016 Lower middle income Version 6 Y 10 Georgia IMF-FAD R1 May 2016 Upper middle income Version 6 Y 11 Albania IMF-FAD R1 June 2016 Upper middle income Version 6 N 12 Liberia USAID June 2016 Low income Version 6 Y 13 Kyrgyzstan World Bank June 2016 Lower middle income Version 6 N 14 Sierra Leone IMF-FAD R2 August 2016 Low income Version 6 N 15 Congo, Dem. World Bank July/August 2016 Low income Version 6 N Republic 16 Romania IMF-FAD R1 September 2016 Upper middle income Version 6 N 17 Barbados IMF-FAD R2 October 2016 High income Version 6 N 1/ Source: World Bank siteresources.worldbank.org/datastatistics/resources/class.xls 28

29 Emerging lessons from completed assessments Georgia, Jordan, Liberia and Zambia agreed to publish their PARs (available on The distribution of assessment scores is shown in Figure 2. Key message: countries can learn from each other what and how they have done better. Figure 2. Distribution of TADAT Scores Georgia, Jordan, Liberia and Zambia Scores Breakdown: Georgia Scores Breakdown: Jordan D+ 11% D 14% C 46% A 11% B+ 0% B 18% C+ 0% D+ 4% D 21% C 29% A 18% B+ 3% B 21% C+ 4% Scores Breakdown: Liberia D 67% A 7% B+ 0% B 4% C+ 0% C 18% D+ 4% Scores Breakdown: Zambia C 40% D+ 0% C+ 0% D 5% B 20% A 20% B+ 15% 29

30 Emerging lessons preliminary observations 27 countries TADAT Assessment Scores--Health Status Across All POAs at the Dimension (the lowest) Measurable Level B - Good 17% A - Very good 17% D - of Great concern 38% C - Basics in place 28% 30

31 Emerging lessons key hotspots Code Yellow Code Red Code Orange Code Red Code Yellow Code Orange Code Red Code Red Code Red 31

32 Emerging lessons for the TADAT framework itself The outcomes approach is viable and some countries (including those not assessed) are using the TADAT framework for internal benchmarking how far away are the systems of tax administration from the highest maturity level or from the frontier tax administrations. A meaningful assessment requires the active involvement of country tax administration and related agency/ies staff in all phases of the assessment preassessment training for country staff (tax administration, Ministry of Finance and Auditor General) has proven to be very helpful. Rigor during assessments is an imperative it is a disservice to the country if the tax administration system s state of health is not called for what it is. TADAT is evidence-based and its standardized features should not be substituted/compromised for purposes of a favorable assessment. TADAT assessments have more value if translated quickly into better designed/ sequenced / coordinated / implemented and monitored tax administration reforms: donors/development partners and TA providers in general should complement each other using TADAT results as a baseline; and countries should develop ownership and take the lead in managing the reform effort as well as embedding the TADAT methodology into their regular performance monitoring, reporting and accountability frameworks 32

33 Contact us: TADAT Secretariat Tel: Website: TADAT Partners: