2015 easia Awards. Service of the Pre-Calculation of Individual Income Tax Returns

Transcription

1 2015 easia Awards Service of the Pre-Calculation of Individual Income Tax Returns The Fiscal Information Agency of M.O.F, Taiwan 1

2 Contents Project Profile... 3 Abstract... 3 Executive Summary... 3 Project Content... 8 Project scope... 8 Goals and objectives... 8 Challenges Strategies & Methodology Re-engineering Declaration process re-engineering Standards Economic benefits, achievements, and impacts Next step onward Resources The cost rationality Please be notified that the project profile submitted should not exceed 30 pages

3 Project Profile Project Title: Service of the Pre-Calculation of Individual Income Tax Returns Project Leader Name: Chun-Jung Su Organization/Company: The Fiscal Information Agency of M.O.F Nominated by: Dr. Gary Gong, HOD, Chinese Taipei Abstract As the withholding system for individual income tax is mature enough in Taiwan, it is now ready to make it easier for taxpayers to pay the individual income tax from the passive taxpayers collecting and keeping all the receipts themselves every tax year to the government actively gathering and providing the information to taxpayers with few paper sheets. Service of pre-calculation of individual income tax returns is a unique tax-relevant service in Taiwan. This new policy of the government is using a simplified tax declaration processes and improving the policy implementation efficiency of our taxation bureaus. The National Taxation Bureaus use basic tax-relevant information of the previous year and the current tax year earning details, tax-free credits and withholding tax credits to do the tax pre-calculation for current tax year; and then taxation bureaus will mail the pre-calculation form to qualified taxpayers. Taxpayers can simply meet their tax obligation when they confirm the pre-calculation form and pay the tax. In 2011, the pre-calculation of individual income tax service was launched; it earned a great deal of responses in terms of public service and the simplification of levying process. In 2012, the government decided to continuously expand this service to the taxpayers. Executive Summary 1. The Purpose: A. The difficulty of original tax declaration system: The original system of individual income tax in Taiwan required taxpayers to do the calculation and declaration of their income tax based on their tax year earnings in specified period; especially, taxpayers had to deliver the declaration form to the taxation bureaus to accomplish the declaration process. In fact, taxpayers have 10 different income classifications, 6 different tax-free credits, common withholdings (including the standard withholding method or enumerable withholding method, from which taxpayers can choose either one for their own advantage), 6 special withholdings and 3 deductible tax withholdings. All of the above are complicated and make it difficult to complete the income tax declaration process. The biggest problem for taxpayers is to deal with all the declaration information written in complicated clauses by paperwork or any electronic declaration tools. It has been 3

4 a problem every year; even the taxation bureaus and Fiscal Information Agency (FIA) have to do as much as possible to provide the online declaration service to simplify the declaration process. B. The Opportunity of Promotion: i. The income tax and withholding system for individual income tax is consummate: The law and regulations for the withholding system are consummate. Most of the incomes are defined in the withholding statement; more than 90% of institutions, which accepted the withholding system, are adopting electronic data interchange to declare their withholding statements. These facts actually helped reduce the data processing time for government agencies. ii. The opportunity of the tax system adjustment: The standard withholding credit was greatly increased in This resulted in more than 80% of taxpayers taking the standard withholding to replace the enumerable withholding to complete the tax declaration process. The amount of complicated cases, which adopted enumerable withholdings with receipts and certificates, were also reduced. iii. Information technology is becoming more advanced: The extremely huge amount of data can now be successfully processed in less time with limited resources and manpower. 2. The implementation process: A. The planning concept: The concept was to customize a simple tax declaration service for taxpayers. The service includes the active tax relevant data collection, tax pre-calculation, and the tax declaration process accomplished by tax paying or pre-calculation confirmation. B. The Practice: The project team, for collaborative planning and implementation, is constituted by the Taxation Administration of the Ministry of Finance (M.O.F), five National Taxation Bureaus, and the FIA. i. The establishment of an operation standard: ii. iii. a) Established The Pre-calculation of Individual Income Tax Service Operation Guidelines to regulate the operation standard. b) Amended The Tax Violation Case Penalty Mitigation Standard to exempt penalty for taxpayers if any tax evasion or omission due the provided incomplete pre-calculation information. The production of the pre-calculation form: There are more than 840 thousand organizations involved to provide data. The collecting and consolidating tax-relevant data reached 125 million sets, producing more than 3 million pre-calculation. Home delivery for pre-calculation information: According to the levying information, the taxation agencies produced the taxrelevant information, which suited the taxpayers personal situations for qualified 4

5 iv. taxpayers; then the taxation agencies would automatically send the precalculation form by registered mail. Taxpayers, who had the citizen digital certificate issued by the Ministry of the Interior, or other digital certificates ratified by the Ministry of Finance, could be notified by aerogramme or obtain the pre-calculation form by using their digital certificate to download the electronic file. The simplification of declaration process: a) Taxpayers can now choose any one of the following 6 different approaches to pay their tax, such as financial institutions, convenience stores, tax payment drawing authorization letter, smart financial card, credit card, or ATM. The tax declaration process is accomplished after paying. b) Tax refunds or zero tax payment cases can choose the online confirmation or written confirmation for returning the confirmation to taxation bureaus to complete the tax declaration process. For tax refund cases, taxpayers can designate a bank account or with certificate for fund transfer of tax refund. For those cases, which use the same bank account as for the previous tax year, or those with zero payment cases, can dial the toll-free number for voice service ( ) and follow the voice steps to finish the tax declaration process. v. The diverse matching services provided: vi. vii. a) The application for inapplicable service and application for withdrawing service. b) The application for delivery address modification service. c) The application for pre-calculation form reissuing service. d) The applicable inquiry service. The simplification of the levying process: a) Use of the barcode reader to recognize the unique barcode on each precalculation form and access the declaration information. b) Daily declaration data conversion for the facilitation of statistics and inquiry process. Using a network application process with an identity verification function, such as citizen digital certificate issued by the Ministry of the Interior or other digital certificate issued by civil institutions, for providing more secure service. 3. The results of implementation: The service of pre-calculation of individual income tax makes the providing of information needed for income tax declaration from taxpayers shift to the taxation bureaus. The individual income tax declaration can be as easy as paying a phone bill. Since the service has been implemented, the satisfaction survey from qualified taxpayers presented 90% satisfactory results and it greatly improved the operation efficiency of the taxation process. 5

6 A. The service effect obtained high public praise and the number of taxpayers, who adopted the pre-calculation service is increasing year by year: In 2011, the first implementation year, more than 1.62 million households adopted the pre-calculation service accounting for 30% of the total national declaration number, an annual growth of 31% as compared with The National Taxation Bureau of Taipei hired a civil institution for satisfaction survey in 2013; it revealed 98% satisfactory results. B. Simplifying the tax declaration process and reducing the time spent in data collection, filling out of tax declaration form, and tax payment calculation: In the past, every year when the tax declaration duration started from May 1st to May 31st. The Taxation Bureaus were always crowded with a lot of taxpayers. The taxpayers needed to wait in long lines for inquiry services for income and withholding information. The pre-calculation service has changed the situation since the first service implementation in First year Year Counter Inquiry Service Case Number Statistics in the Last 5 years Number of information Inquiry in Taxation bureaus (case) 2,232,935 1,761,836 1,702,135 1,939,000 2,069,351 Growth rate (%) 7. 59% % % % 6. 72% Data source:individual income tax and withholding inquiry system(iwi) Output date:june 04, 2014 C. Simple and easy tax declaration process at home: The service was first implemented in It aimed to create a convenient tax declaration environment for taxpayers. Taxpayers could stay at home and make the confirmation of the pre-calculation results or pay the tax at home through network connection; they could use the convenience stores near their home to pay their tax. This provided taxpayers with tax declaration and case receiving service 24 hours daily. Taxpayers could also declare their cases in writing and mail the confirmation documents back to the taxation bureaus. In case taxpayers had tax refunds, or zero payment, they could process their tax declaration by voice service to attain the goal of diversified service. D. Reducing consumption of paper usage to attain the aim of environmental protection: The tax declaration form is directly printed out by government agencies. Taxpayers now need not print out any paper during the tax declaration process. Moreover, the tax declaration processes using written form and through the paper work 6

7 procedure such as 2-D barcode and manual methods are greatly decreased because e-filing method have replaced them. Users Number Variation of Different Tax Declaration Policies. E. Simplifying the internal process of levying agencies to reduce the levying operation costs: Taxpayers can follow the pre-calculation results to declare their individual income tax. The taxation bureaus won t have many taxpayers waiting in line to ask for manual service or process their tax declaration by hand. This also reduces the burden on taxation bureaus employees and the cost of manual filing. F. Reducing the error rate of tax declaration and making a common consensus between taxpayers and taxation bureaus: Tax declaration accuracy will be improved because taxpayers follow the precalculation results given by the government agency. It actually reduces the conflicts between taxpayers and taxation bureaus. Compared with the situation before and after the pre-calculation service implementation, the number of cases, which needed a supplementary declaration or tax refunds is 350 thousand cases fewer. 4. Future prospects: The function of the taxation agency nowadays is not only limited to the existent thought of levying enough tax. It is about providing taxation service to taxpayers. The service of pre-calculation of individual income is an out of traditional thinking; taxation service will no longer passively receive tax declarations from taxpayers only. This service-oriented concept actively provides high-quality and high-efficiency declaration approaches for taxpayers. In the future, the Taxation Administration of the Ministry of Finance, the five National Taxation Bureaus, and the Fiscal Information Agency will continuously improve the quality service for taxpayers. A. Increasing the service scope and improving the usage rate to make more taxpayers adopt this convenient declaration service. B. Planning diverse application and taxpaying approaches to satisfy different needs from taxpayers. 7

8 C. Integrating smart mobile device and developing apps for mobile device to improve service efficiency and experience. Project Content Project scope In Taiwan, the total tax levying of individual income tax is about 1 billion dollars (USD); the amount of declaration cases is about 6 million. To provide a superior service, the Ministry of Finance incorporated a project team for Individual Income Tax Declaration Service Policy Enhancement. It is based on the experiences accumulated by network declaration, income, and withholding data inquiry services to further use information technologies and network technologies to attain cross-domain data exchange and integration, even to cooperate with civil institutions. The project of the Service of the Pre-Calculation of Individual Income Tax was thus established in It actively picked taxpayers whose individual income tax declaration was simple based on their tax declaration history as qualified taxpayers; then the taxation bureaus actively calculated their tax payment and mailed pre-calculation forms to them. After the qualified taxpayers verified the contents of the pre-calculation form, they could complete their tax declaration process by paying the tax or making a confirmation by voice service. This service uses information technologies with innovative thinking and adopts the folksonomy-based service to provide an active and 24-hours taxation service. This reduces a lot of burden for taxpayers; especially, it makes taxpayers unnecessary to go to the taxation bureaus to process their tax declarations. It also reduces effectively the costs of tax compliance and enhances harmony between tax collector and taxpayer. Furthermore, it improves the traditional national tax information process platform via the additional systems for service of pre-calculation of individual income tax case receiving and declaration data processing. The additional systems also joined the original national taxation information process platform to bring the adding values of simplification on the tax declaration case receiving and filing process. Goals and objectives The service of pre-calculation of individual income tax is about collecting integrated tax-relevant information and establishing the system with those collected data to help the administrative tasks of national taxation bureaus. The service collects and uses more than 128 million data sets. It not only uses such a huge amount of data, but also combines many other complicated systems. For the aim of establishing a smooth implementation and pre-calculation database, the imported information and communication service will be differentiated into two different parts, one as a foreground pre-calculation system and the other as a 8

9 background declaration receiving system, to coordinate and establish the accessorial process system. 1. Integrating the data-offering institutions to establish the pre-calculation database. To make the pre-calculation results suit taxpayers declaration needs, the first priority is to increase the integration and correctness of tax-relevent data. The service uses the e-government resource sharing and cross-organizations data exchange for information collection and integration to complete the database establishment. Covering Scope of Pre-Calculation Database. 2. Establishing the pre-calculation system to customize service provision. The ultimate goal of the pre-calculation service is to use taxpayers income tax declaration history to produce tax-relevant information and actively provide this to taxpayers for tax declaration and reduce the taxpayers burdens. To realize this purpose, the system established an integrated income tax pre-calculation system and input the gathered tax-relevant information and tax declaration information into the system. Then the system would use the information operation technology and ICT service to produce the pre-calculation service result for qualified taxpayers. 3. Providing diverse declaration channels to suit different choices and needs of taxpayers. A. The tax payment declaration approaches The service provides 7 approaches and allows taxpayers to choose for themselves. Through the financial data interchange mechanism, the taxpayers tax declaration information will be sent to the Fiscal Information Agency for processing. The system will directly confirm the relevant information and transmit to the taxation bureaus with jurisdiction over the declared cases. 9

10 Diverse Tax Paying Approaches. B. The tax refund and zero payment tax declaration approaches For tax refund and zero payment cases, taxpayers can adopt any of the following three approaches: online service, written form filling, or voice service. Through the network transmission system, office automation data interchange system, and voice service data interchange mechanism, all the tax declaration information from taxpayers will be transmitted to the Fiscal Information Agency for processing. The service system will mark up successful tax declaration information for each case and transmit the tax declaration results to the taxation bureaus with jurisdication over the case. C. Joining up the civil resources Chart 1 represents the situation about juining up of the service of pre-calculation of individual income tax and the civil resources. It includes the integration of the network identification and certificate, such as the citizen digital certificate issued by Ministry of the Interior, or other digital certificates issued by civil financial institutions or security traders, to set up a metwork declaration verification and review mechanism, and reguest the civil financial insititutions to help set up a tax payment information report system, as well as to juin up with the post office s mail address modification service system channel to facilitate the taxpayer in receiving the pre- 10

11 calculation of tax payment sent by the raxation bureau after his/her address was changed. Services of pre-calculation of individual income tax joined society resources list in 2014 Resource Join Services Frequency (times) Citizen digital certificate issued by the Ministry of Interior Other digital certificate issued by financial institution, security trader and insurance company Application for service cancelling; application for mail address modification; application for online declaration service. Application for service cancelling; application for mail address modification; online declaration service. 34,762 5,162 Telecommunication carriers Voice service for declaration process 121,917 Tax payment transmission by smart financial card Tax payment transmission by ATM Cash payment at financial institutions and convenient stores Tax payment transmission by credit card Mail address modification notice service by Chunghwa Post Co., Ltd. Tax payment transmission by smart financial card 13,081 Tax payment transmission by ATM 11,104 Granting the authority to financial institutions and convenience stores for tax payment deposit Granting the payment for service of pre-calculation of individual income tax Application for mail address modification 630, ,502 3,263 Challenges The individual income tax system in Taiwan asks taxpayers actively to declare their tax year earnings once a year. Taxpayers usually feel the tax declaring obligation wastes their time, and is bothersome, complicated, and trivial. It is because taxpayers may not be familiar with the tax declaration process and the regulation of the law; they may not be able to collect all the receipts of income and withholding completely. Those are the reasons taxpayers would miss the best payment way for calculation, and they even have to worry about extra tax payment because of an incorrect calculation or about paying fine because of tax evasion. 11

12 To help taxpayers to declare the individual income tax, the National Taxation Bureaus have to spend a lot of resource on the tax declaration process to help taxpayers from May 1st to May 31st every year. The average number of taxpayers in Taiwan is 5.5 million. Each taxpayer has to spend 4.5 hours on the tax declaration process, including the tax-relevant information collection, calculation for tax amount and filling up of declaration form. In this situation, the National Taxation Bureaus need to put in thousands of employees to focus on the tax declaration process. The situation can be even worse because taxpayers always like to file their tax declaration on the last few days of the whole period; it causes the taxation bureaus to become more crowded during that time. The capabilities of taxation bureaus will never be enough to serve those people, even if the taxation bureaus put every single employee and all the resources to provide declaration consultation and help, resulting in complaints from the public. The Cause-and Effect diagram analysis represents the difficulties of taxpayers declaration process: Cause-and Effect Diagram of Difficulties During the Tax Declaration Process. Moreover, as to the levying practice, due to the complexity of tax system, incorrect tax declaration repeatedly happens because of taxpayers negligence; for example, taxpayers might fill in the declaration form with the wrong identification number, missing a few earning records, or making tax calculation errors. That is why all the tax declarations need to go through the verification and correction process by the taxation bureaus. If the tax declaration case is approved for tax refund or extra-tax payment, the taxation bureaus have to inform the taxpayer; it will increase the levying cost. According to the Fiscal Information Agency s statistics result, the number of individual income tax declarations in 2010 was 5,509,478 cases, with 908,466 cases of incorrect tax declaration results. To solve the difficulties above, since 2009, the Taxation Administration of the Ministry of Finance began planning to use the electronic environments and facilities which belong to the taxation bureaus and the Fiscal Information Agency to provide 12

13 service to taxpayers before they ask for it. It changes the behaviour of taxation bureaus from passive service to active. The government is able to provide professional service directly with the information it collected. According to taxpayers personal tax declaration histories, taxation bureaus are able to provide tax-relevant information and help taxpayers choose the best tax calculation formula for them. Also, the service includes sending the pre-calculation results to taxpayers. If they agree with the precalculation results, a confirmation reply will complete the declaration process. If they disagree with the pre-calculation results, taxpayers are still able to adjust the declaration contents by taking the pre-calculation result as references, and then do the tax declaration by themselves. It not only greatly reduces the taxpayers load from the declaration processes, but also reduces the possibilities of making declaration errors. It helps to reduce the costs from extra tax charging and refund processes for both taxation bureaus and taxpayers. Strategies & Methodology To solve frequent errors and problems of tax declaration, and to simplify the tax declaration process to reduce the tax declaration cost, in September 2009, the Taxation Administration of the Ministry of Finance, Taxation Bureaus and the Fiscal Information Agency began to probe the possibility of providing taxpayers precalculation information. The SWOT analysis of the project presented the result as follows: SWOT Analysis Diagram of Tax Pre-Calculation Service. 13

14 The difficulties encountered and the responding solving strategies in the project practice are represented as follows: 1. In term of business A. Difficulties encountered: i. It is impossible for taxation bureaus to gather all the tax-relevant information for taxpayers. There are still kinds of information that have to be declared by taxpayers themselves. ii. Some tax-relevant information may not be gathered in time. iii. The existing tax declaration process needs to be changed, as well as readjust and plan the tax declaration process details. B. The solving strategy: i. The taxpayers who have simple tax declaration contents are qualified for precalculation service : Because of resource usage efficiency and in line with the amendment Income Tax Act on 26th December 2008, which greatly increases the standard withholding tax credit, the taxpayers who adopted the standard withholding tax credit are more than 80%. Those taxpayers were classified into simple tax declaration objects, which suited the pre-calculation service, because they had to provide nothing to prove their enumerated withholding tax credit. Also, the pre-calculation service rejected other cases that need evidentiary documentation, such as the indirect related dependent, the special withholding tax credit for investments, or the withholding tax credit from China, so as to increase the accuracy of the pre-calculation service. ii. To implement the pre-calculation service smoothly, all the tasks have their own schedules. The pre-calculation service implementation has to coordinate with all the income and withholding information providing divisions and organizations to provide tax-relevant information in a specified time to make the pre-calculation service perform smoothly. iii. Incorporating the project team with skilled business supervisors and senior employees for planning the relevant task processes, simplifying the taxpayers declaration processes and taxation bureaus case receiving processes. 2. In term of IT A. The difficulties encountered: i. Because the levying data is huge, and all the pre-calculation systems, such as the gathering information system, calculating system, and pre-calculation results producing system, are given only a few months to pass through the whole process, how to produce the high-quality pre-calculation results in time with limited manpower is a great challenge. ii. All tax-relevant information shall be secured, controlled, and managed with strict criteria during all the processes from the tax-relevant information 14

15 gathering to the result provided to taxpayers for the reference of tax declaration. B. The solving strategy: i. Concentrating the responsibility and authority for establishing the precalculation system to the Fiscal Information Agency of the Ministry of Finance, the Fiscal Information Agency had to build up a verification team with senior employees of taxation bureaus in each district to request the pre-calculation results to be produced in time, and ensure the accuracy and integration from system operation logistics. ii. For the purpose of increasing the information security and making taxpayers free from worry, the taxation bureaus and the Fiscal Information Agency all established a set of strict information security policies. They designated some employees to take responsibility to ensure that all the tax-relevant data were secured in the transmission process from leaking. iii. For quality assurance, some parts of tasks with intensive manpower and resources are outsourced to civil institutions, which have international information security standard certificates; and those outsourced tasks are all under the supervision of the taxation bureaus. 3. In terms of other items A. The difficulties encountered: i. The pre-calculation service is a whole new policy; it establishes an all-new tax declaration process which is quite different from the traditional process. Taxpayers may not understand and accept it. ii. Taxation bureau employees worry that the new policy will increase the work load and make the pre-calculation service difficult to promote. B. The solving strategy: i. The service coordinates with other relevant services to suit the different needs of taxpayers: ii. a) Applying for changing the mailing address: Taxpayers can apply for a new mailing address for pre-calculation data, if they have their mailing address changed. b) Applying for pre-calculation service cancellation: Some taxpayers who don t want the pre-calculation service can apply for service cancellation. c) Providing the pre-calculation service application inquiry service: The system provides the inquiry service to allow users to inquire if they are qualified for the pre-calculation service. The internal training enhancement of taxation bureaus: This adopts multilevellearning-system and holds seed training lectures by core members of the original project team. Each taxation bureau designate employees as seeds to join the seed training; after the seed training, all the seeds should go back to their original division as instructors and hold lectures to train their frontline 15

16 colleagues and make these frontline colleagues familiar with practice process provisions to answer questions from taxpayers. iii. For the depth and breadth of the project propagation, the Taxation administration of the Ministry of Finance designed a propagation plan for all taxation bureaus to follow. Taxation bureaus should adjust their propagation plan to suit their situations and coordinate with local government and relevant activities to enhance the propagation effect. iv. For the purpose of coordinating the project practice, the project team creates a perfect system to make the administrative tasks friendly and easy to use and reduces the work load for the employees. Moreover, the pre-calculation service can also relieve the crowd of taxpayers who are waiting in line for income and withholding inquiry service or tax declaration service. The project implementation can make taxation bureaus employees invest more resources for providing professional and effective services. To facilitate the implementation of the project, after September 2010 when the project planning had been accomplished, the Taxation Administration of the Ministry of Finance, all taxation bureaus, and the Fiscal Information Agency cooperated with each other to create a special project in October The special project team included regulation division, a Secretariat, a business division, a propagation division and an IT division; each division took charge of different tasks and responsibilities and controlled the work progress. Unscheduled meetings were held for task planning and problem solving. Until the end of December 2012, the special project team separately held 7 meetings after the ending of individual income tax declaration period in 2011 and The meetings reviewed the project implementation and planned improvements to make the service content closer to taxpayers needs. Re-engineering Declaration process re-engineering With the traditional declaration process system, the taxpayers had to gather all relevant tax information. They had to fill in the form, calculate the tax payment, and go to taxation bureaus to turn in their payment receipts and declaration forms. The whole tax declaration process bothered taxpayers a great deal until the service of precalculation of individual income tax project began in The pre-calculation service breaks through traditional thinking to greatly modify the tax declaration process. The taxation bureaus began to actively provide customized tax declaration services to taxpayers, including delivering the pre-calculation results to taxpayers. In this service, taxpayers do not need to collect income and withholding data, to fill in the tax declaration form and calculate tax amount. Taxpayers can easily accomplish the declaration process by paying the tax or make a reply confirmation. To ensure its smooth adoption, the relevant tax declaration process details had to be planned and deliberated very carefully. They needed cross-organizational cooperation with 16

17 government agencies and civil institutions for information gathering and declaration process integration. The process integration structure is presented as follow: 1. Incorporating the special project team for taking the responsibility of promotion. The task scope covered the enactment of laws and regulation, cross-organizational information usage cooperation and integration, pre-calculation data verification, precalculation form delivery, and propagation works, and its operation involved with the Taxation Administration of the Ministry of Finance, the Fiscal Information Agency, all the National Taxation Bureaus, sub-taxation bureaus, levying points, service points, and financial institutions; to enhance and maintain the implementation, the Taxation Administration of the Ministry of Finance established the Individual Income Tax Declaration Service Policy Enhancement implementation plan in September This implementation plan included the task planning phase (from September 2009 to September 2010), and the task implementation phase (from September 2010 to now). 2. Verifying the task regulation and formulating responsibilities. For the innovative service policy and relevant task processes, and to legitimize all the extended authorities and obligations, the Taxation Administration of the Ministry of Finance provided the legitimate background environment by amending and legislating the laws as follows: A. Stipulating the task regulation-formulated The pre-calculation of individual income tax service operation guidelines The service operation is a kind of national policy. It involves more than 5 million taxpayers and all the taxation bureaus with 83 sub-taxation bureaus; levying points and service points are also involved. B. Formulating income tax evasion responsibility amended The Tax Violation Case Punishment Mitigation or Exculpating Standards In case income tax evasion happened to taxpayers as a result of adopting the pre-calculation service, the Taxation Administration of the Ministry of Finance amended the Tax Violation Case Punishment Mitigation or Exculpating Standard, and reported the adjustment results to the Executive Yuan for public announcement. According to Article 3, Paragraph 2, Subparagraph 2 of the Standards, taxpayers won t be charged if they follow the pre-calculation service to declare their individual income tax with any income tax evasion. Because evasion is caused by the incomplete tax-relevant information provided by the government, it can t be blamed on the taxpayers. After the punishment-free provision was announced, the doubts from taxpayers were greatly decreased. In the meantime, the Taxation Administration of the Ministry of Finance and all national taxation bureaus also explained the punishment-free provision to the public to reduce obstacles from promotion. 3. Innovated personalization service and home delivery of tax declaration data. A. Providing personalized service for different needs. B. Avoid outgoing trip with active home delivery service. 17

18 C. With the designation of mailing address and mail claiming service the precalculation data won t be missed. D. Taxpayers who have the citizen certificate or other financial certificates ratified by the Ministry of Finance can use their certificates to access passes to download the tax pre-calculation form online instead of receiving it via mail. 4. Tax declaration process is easy to complete by computer. A. Finishing the declaration with payment. According to the traditional declaration process, taxpayers had to follow the tax calculation results to make their tax payment and then deliver the tax payment receipt and declaration form to taxation bureaus to complete the declaration process. To make the tax declaration process easier, the project of pre-calculation service concentrated all the steps into one. Taxpayers can accomplish the tax declaration process after they pay the tax. They don t have to go to taxation bureaus to turn in the tax payment receipt with the tax declaration form. The government will actively gather the tax declaration records and mark up all completed tax declaration records to close the cases. As to the payment channels, the pre-calculation service provides 6 different approaches for taxpayers, including the special tax bill for paying the tax payment in financial institutions or convenience stores, tax payment drawing and authorization letter for transferring tax payment, making the tax payment by ATM, and even to use the smart financial card or credit card for tax payment. Taxpayers can choose any of these approaches as they please. B. Finishing the tax declaration process by returning the confirmation. For the pre-calculation result with tax refund, taxpayers can designate a bank account for a tax refund deposit, or taxpayers can use a tax refund check for either encashment or deposit. In the case above, taxpayers only need to sign up on the confirmation form and send the form back to the taxation bureaus or use the electronic tax declaration service website ( to fill in the relevant information to complete the process. No other form is necessary to fill out. The same is true for cases that have no tax payment and tax refund. To provide an easier confirming approach, free voice service was implemented in Taxpayers who choose to use the same bank account for their tax refund as the previous tax year or have no tax payment or tax refund, they are now able to use the free voice service ( ) for the tax declaration process. Taxpayers only need to enter the identification number and verification number by following the voice. It is a kind of finger usage experience which is very easy to follow. Taxpayers can stay at home to carry out the whole tax declaration process with a simple phone call; the policy has actually avoided the crowds of people in the National Taxation Bureaus. Standards (especially developed by UN/CEFACT or other international 18

19 standard organizations) For facilitation of tax-relevant data gathering from data providing organizations, the Ministry of Finance legislated the Electronic Tax Declaration Process Guidelines to unify data format for all returning data. The Electronic Tax Declaration Process Guidelines is the national standard of tax-relevant data format regulation in Taiwan; this guideline stipulates identification, declaration approaches, data category, data storage method and data format. In order to make the taxation bureau which has jurisdiction over the declaration case easier to integrate the data and extract needful part to provide the pre-calculation service of income tax, all the data providing organizations which adopt the electronic tax declaration have to comply with this guideline. The regulations of The Electronic Tax Declaration Process Guidelines are as follows: 1. Identification: Electronic data providing organization can use the certificate issued by the Ministry of Economic Affairs Certificate Authority (MOEACA) or the unified business number (VAT number) as the identification. As the identification method, the unified business number is more complicated than certificate issued by MOEACA. The organization using unified business number to substitute for certificate also needs the ID number of responsible person of organization and passwords to complete the identification process. 2. Declaration approaches: The organization can use compact disk (CD) to record their tax declaration data, and then return the CD to taxation bureaus which has jurisdiction over the declared cases; it can also use specified declaration system to complete the tax declaration process by network. 3. Data category: The Electronic Tax Declaration Process Guidelines stipulates the data category, including withholding and non-withholding tax statement, dividend statement, income statement of transferring tax-deferred stocks, trust property tax statement, trust property income statement of transferring tax-deferred stocks, statement of incidental trading activities, income details statement of beneficiary, personal insurance payment tax statement and structured product trade tax statement. 4. Data format and storage method: The tax-relevant data need to be formatted in ASCII code and stored in CD which has capacity at least 640MB and diameter size of 8 or 12 cm to return to the taxation bureau which has jurisdiction over the declared cases. Economic benefits, achievements, and impacts 1. The external benefits A. Actively building the home delivery service to make it easier for taxpayers to complete the tax declaration process. It breaks through the traditional case receiving method, which was passively waiting for taxpayers to come in to declare. The tax relevant information and precalculation results will be actively sent to taxpayers by the government. In one simple tax payment step, or confirmation step, the tax declaration will be completed. This 19

20 service was first Implemented in May 2011; because it earned a lot of good response from taxpayers, the government increased the service providing scope to make more taxpayers enjoy the service in i. The satisfaction survey. To understand the satisfaction response in 2011, the National Taxation Bureau of Taipei hired the civil institution to conduct a satisfaction survey about the satisfaction of service of pre-calculation of individual income tax from taxpayers, and the result is presented as follows: Satisfaction Survey Result of Service of Pre-calculation of Income Tax in 2011 ii. User experience and suggestion response. There were diverse ways to gather suggestions from the service users. The Taxation Administration of the Ministry of Finance asked taxpayers to provide their suggestions and opinions with online confirmation or form confirmation together in May The result showed that most taxpayers had positive reply with the service. B. Customized professional service for taxpayers worry-free adoption. The pre-calculation service uses information technologies, e-government resource sharing (between the Taxation Administration of the Ministry of Finance, all Taxation Bureaus, and the Fiscal Information Agency), and cross-organizational levying information integration, to produce tax-relevant information for taxpayers personal use. Through a calculation logic which is in conformity with the Income tax Act, and adopting individual taxpayer s declaration condition in the previous year, to produce a suitable declaration which includes tax year earnings, tax-free credits, withholding information, and tax payment calculation results and actively provided to taxpayers. Pre-Calculation Service Process 20

21 C. Time and money savings with a simple declaration process. The service vision is to attain the 3 No s and 1 Without objectives to provide complete active service. NO taxpayers need to apply for the service before joining in; NO taxpayers need to go to taxation bureaus for income and withholding information inquiry, NO taxpayers need to calculate the tax payment and fill the declaration form; and taxpayers can declare their tax obligation anytime and anywhere WITHOUT time or space limits. i. Eliminating applications to join the service. ii. Reducing the cost on income and withholding information gathering and time used for going to and fro between taxation bureaus and home. The case inquiry amount variation is as follows: Item Year Amount of information inquiry in taxation bureaus (case) Counter Inquiry Service Case Number Statistics for the Last 5 Years ,232,935 1,761,836 1,702,135 1,939,000 2,069,351 Growth rate (%) 7. 59% % % % 6. 72% Data source:individual Income Tax and Withholding Inquiry System(IWI) Output date:june 04, 2014 iii. No more bothering to fill the tax declaration form and tax payment calculation. The declaration form, which the government actively sends to taxpayers, is already formatted for all needed columns and information, such as the income column, taxfree column, withholding column, and the pre-calculation result column. Taxpayers can easily and successfully fill in the tax declaration by paying the tax payment or returning the confirmation if they agree with the pre-calculation contents. Taxpayers 21

22 will successfully complete the tax declaration process without filling in forms. On the other hand, if each taxpayer had to spend more than 1.5 hours on tax declaration form filling and tax payment calculation, the pre-calculation service may save more than 3 million hours in the tax declaration month (1. 5 hours 2 million precalculation service cases). iv. Providing diverse tax declaration methods and tax declaration service anywhere. Taxpayers can directly declare their individual income tax by network connecting, confirmation returning, or paying the tax at convenience stores which located around their home. We provide direct tax declaration methods 24 hours whole day without time limits. Taxpayers can also use the mail service to return the confirmation form back to taxation bureaus to finish the declaration process. All the declaration methods are intended for the taxpayers to use easily and conveniently. Since 2011, the new voice service of the tax declaration process has been planned and implemented. Taxpayers only need to call the toll-free number ( ) and follow the voice instructions. Through this voice service, taxpayers can stay at home to complete the whole tax declaration process, and the pre-calculation service can truly attain its diverse and mobile service intent. D. Improving the levying service quality and government policy implementation efficiency. The service changes the traditional tax declaration process. It reduces the task costs from information gathering, integrating, form filling, and payment calculation for taxpayers. 2. Internal benefits A. Simplifying the tax declaration and case receiving process and reducing the levying manpower and resource usage. i. In taxation bureaus, the number of taxpayers who require service is reduced. The taxpayers who accept the pre-calculation service for income tax declaration can directly pay their tax or return the confirmation to finish the declaration process without staying in taxation bureaus for income and withholding information inquiries. Neither do they need to ask taxation bureaus to provide the assistance on form filling and tax payment calculation. It greatly relieves the crowding in all taxation bureaus and reduces the work pressure for taxation bureau employees. ii. Building receiving procedure with barcodes to replace manual filing. For the paperwork of tax declaration confirmations, taxation bureau employees can use barcode readers to scan the barcode for data filing. After the barcode scanning step, the receiving procedure will be completed without manual filing and registration; it saves a lot of time and helps our employees to increase their ability to work. If each case needed 6 minutes for manual registering and filing, the scanning function is able to help taxation bureaus employees save more than 200 thousand hours in the case receiving procedure (2 million cases 6 minutes /60minutes). The Case Receiving Comparison. 22

23 iii. Reducing tax declaration errors and harmonizing relations between taxpayers and taxation bureaus. iv. Because the traditional declaration process asked taxpayers to calculate the tax payment by themselves, the tax declaration error repeatedly happened with incorrect filling. It created a lot of arguments between taxpayers and taxation bureaus. The innovative service of pre-calculation actively provided by the government changes this situation. Taxpayers can directly return the confirmation to finish the tax declaration process after they verify the pre-calculation contents. Also, if the content is inconsistent taxpayers can refer to the pre-calculation contents to modify their tax declaration contents, and then declare by themselves. This reduces tax declaration errors and makes the relation between taxpayers and taxation bureaus become harmonious. According to the Fiscal Information Agency statistics results, after the service of precalculation policy was provided in 2012, the number of tax refund or increased tax payment cases by taxation bureau was reduced by 350 thousand cases; this means if each case needed 10 minutes to deal with, the pre-calculation service saved 58 thousand hours for all the taxation bureau employees. B. Building the experience inheritance approaches to promote organizational learning efficiency. Considering the service of pre-calculation for the individual income tax is a whole new policy; to decrease the obstacles and pressures at the beginning of its implementation and to avoid taxation bureau employees from having unfamiliar situations with the new policy details, the Taipei National Taxation Bureau was designated to invite some skilled senior employees to constitute a training group. The training group adopted a multilevel-learning-system to establish the internal communication channel and training system. This was really helpful on skill and 23

24 reaction capacity enhancement for taxation bureau employees; it is also good for experience transmission. i. Providing comprehensive training lectures from the inside out. The cross-organizational seed lecturer training courses were held by core members from the project team. They explained the operational principles and details. After the trainees passed all the training lectures, they became the seeds going back to their original units as training instructors to train their frontline colleagues. Through the training procedure, the frontline employees have enough skills to give taxpayers the correct answers when taxpayers come. ii. Building a special area for case experience sharing for better experience inheritance. All taxation bureaus have to create special area for the calculation service on an internal website. This area is for employees to catch up with unscheduled precalculation service news updates. These news updates include the problems and case experiences; they can be shared via website and . The original concept of this sharing approach is experience transmission to provide better service to taxpayers. iii. Building the channel for opinion reaction to encourage innovative and reforming atmosphere in the organization. After the tax declaration period ended in May, the project team invited taxation bureau employees in all district to provide their problems and opinions from taxpayers during the service period. A review meeting would be convened to consider problems and suggestions for improvement. The review meeting was a tool to make problems become the case studies to lead the whole organization to learn thus creating the brainstorming in the organization to push for continuous innovation and reformation. 3. Benefits analysis The quantifiable benefits of the pre-calculation service implementation 2012 are listed as follows: Pre-Calculation Service Implementation Benefits Statistics. External efficiency (in terms of taxpayers) FREE gathering and integrating of tax declaration information (2 million cases) FREE information inquiry (530 thousand cases) FREE calculating and form filling (2 million cases) FREE mailing declaration form (1. 22 Million cases) Time usage saving (per case/postage) 3 hours 1.5 hours 1.5 hours 1 dollars(usd) 24

25 FREE dealing with overdue tax and tax refund verification. (350 thousand cases) 0.2 hours Time spending summary Internal efficiency (in terms of taxation bureaus) Reducing taxation consulting and information inquiry service Reducing tax declaration receiving service Reducing tax declaration information storage usage Reducing subsequent notice tasks for overdue tax and tax refund Reducing cases summary 6. 2 hours Service case/storage space million cases 2 million cases square meters 350 thousand cases million cases Taxpayers Aside from the quantifiable benefits listed above, after the pre-calculation service project was implemented, the declaration process also became easier; the tax declaration contents became more accurate; and the taxpayers burdens decreased. Also, it greatly enhanced the tax levying trust from taxpayers and reduced the taxlevying compliance cost. Government operating efficiency was also improved. Moreover, taxpayers no longer need to go to and fro between taxation bureau and home to ask for levying information, declaration explanation, declaration forms and tax payment bill. Taxpayers don t have to print or keep a whole year s receipts reducing the paper waste for environmental protection. Efficiency classification 1. Data gathering and integrating cost savings 2. Information inquiry cost savings 3. Form filling cost savings 4. Form mailing cost savings Tax Pre-Calculation Service Effectiveness Generation Analysis Cost(USD) Percentage of total efficiency Cost(USD) Percentage of total efficiency Cost(USD) Percentage of total efficiency 16,848, % 20,800, % 22,256, % 2,914, % 3,286, % 13,268, % 8,424, % 10,400, % 11,128,000 28% 874, % 1,220, % 1,348, % 25

26 Taxation bureaus 5. subsequent overdue tax and tax refund dealing cost savings 145, % 242, % - - Subtotal 29,178, % 35,948, % 48,000, % 1. Information inquiry cost savings 2. Declaration form receiving cost savings 3. Declaration form storage cost savings 4. Subsequent overdue tax and tax refund dealing cost savings 4,890, % 183, % 714, % 16,850, % 693, % 714, % 4,160, % 171, % 183, % 12,880, % 715, % - - subtotal 1,292, % 1,762, % 1,612, % Total 30,470, % 37,710, % 49,613, % Next step onward This new tax service was led by executives of the Ministry of Finance and implemented in In the first year, the service adopted by qualified taxpayers reached 1.62 million, about 30% of all taxpayers. After the tax declaration month was over, the satisfaction survey resulted in 93% good responses. In the tax year 2012, taxpayers using pre-calculation of individual income tax based on the improvement from 2011 increased by 35%. The satisfaction survey resulted in 98% good responses. Within all the government promoted citizen convenience measures, the service of pre-calculation of individual income tax is actually the best one of all. Even though the service was already much better than the original plan, the project team still wanted to improve it. After May 2012, when the income tax declaration month was over, review meetings were separately held on September 5 and December 28, 2012, to review and discuss the implementation results and to try to fix its problems from experience. The subjects of these review included the pre-calculation accuracy improvement and actively helping all the relevant levying units and organizations to offer correct and integrated information. Since the tax year of 2013, the scope of this service has been expanded to cover the income tax declaration initiates. The difficulties and relative solutions are as follows: 1. The difficulties: A. The initiates of taxpayers dealing with income tax declaration have no income tax declaration history as a reference resource. It will be difficult to predict their possible tax year earnings; and it will be difficult for the taxation bureaus to precalculate their tax payments. 26

27 B. Compared with taxpayers who had the experiences of tax declaration, the initiates may be more unfamiliar with the tax declaration process and tax-relevant provisions. It will be hard to lead initiates to understand the pre-calculation service and relevant policies. 2. The solutions: A. The government needs to formulate the conditions for identifying taxpayers who are qualified for the service. Qualified taxpayers can apply for the pre-calculation service in a specified period. Taxation bureaus will verify the applications to find qualified taxpayers and provide them with the pre-calculation service. B. For personnel in military service and education service, they have begun to declare the individual income tax since They may qualify for the conditions as first time declarer. The taxation bureaus will actively help those taxpayers to apply for the service. C. All taxation bureaus will use various propaganda media and websites to enhance the propagation effect. 3. The prediction number is around 200 thousand taxpayers will be qualified for this service. Plan for the Future the Pre-Calculation Service Provided for Initiates 27

28 4. Conclusion Establish a perfect environment for tax declaration to keep the tax system being fair and reasonable. Increase the efficiency, expand tax foundation, and simplify the taxation policy. The function of a taxation agency is not just limited to levying enough tax to support national finance; it has to use a service-oriented concept to provide service for all citizens. A taxation agency has to move on toward the prospect of constructing a great tax service environment. The service of pre-calculation of individual income tax was an out of the box concept, from asking taxpayers to declare the income tax by themselves, toward actively providing taxpayers a high-quality tax declaration service. Taxpayers can easily stay at home to complete income tax declaration during the whole tax declaration process. In the future, the Taxation Administration of the Ministry of Finance, all Taxation Bureaus, and the Fiscal Information Agency will stand firmly with the service oriented concept to improve the quality of levying service continuously, so as to achieve the 4 demands of active service, customized service, home delivery service and efficient service throughout entire tax declaration process to provide taxpayers a better and more thoughtful levying service. Resources The cost rationality The service of pre-calculation of individual income tax is a national service. It involves with more than 2 million taxpayers. For the purpose of maximum efficiency and best resource assignment, the Taxation Administration of the Ministry of Finance, all Taxation Bureaus, and the Fiscal Information Agency put all their resources into this project from the planning phase to the implementation phase. Since the project has begun, all the involved organizations had more than 10 meetings on different subjects and problems. The project team invited skilled senior government employees from the front line for planning and implementation. Involved government agencies wished to provide a great service by the most professional, best design with diverse feasibilities and high accessibility, and reduction of possible weaknesses or problems. 1. The cost structure A. The pre-calculation system establishment cost includes the database, pre-calculation system, and other relevant application system development costs. It also includes the transition cost between the new and original national taxation systems. B. The operational cost of the pre-calculation system includes all service tasks such as web interface design, adjustment, process engineering, and other process dealing costs. C. The pre-calculation form printing cost. D. The pre-calculation form mailing cost. E. The mobile device APPs development cost. F. The voice service system operation and maintenance costs. G. Propagation costs. 28

29 Year Pre-Calculation Service Cost Structure Analysis Table 2011(1.62 million cases adopted) 2012(2 million cases adopted) Cost classification Cost Cost rate Cost Cost rate 1. Pre-calculation system development cost 81, % Pre-calculation system maintenance cost , % 3. Pre-calculation form printing cost 345, % 395, % 4. Form mailing postage cost 2,542, % 2,550, % 5. Mobile APP development and operation cost 6. Voice tax declaration system development and maintenance cost , % , % 7. Propagation task cost 74, % 102, % total 3,042, % 3,127, % 2. Cost efficiency analysis Based on implementation cost structure analysis, the implementation cost expense in 2011 was 3.04 million dollars (USD); and the implementation cost in 2012 grew to 3.13 million dollars (USD). Since 2012, for the purpose of making each precalculation form efficiently used to decrease the paper waste, the government agency vigorously began to augment the veracity for both pre-calculation results and mail delivery. It also provided the electronic file downloading service for qualified taxpayers to obtain their pre-calculation result via a network connection. The number of pre-calculation service qualified taxpayers in 2012 was 3.2 million; 36 thousand of those taxpayers downloaded their pre-calculation form using this method. The printing and mailing costs were decreased because of electronic archive downloading. In 2012, the 15-days post office claiming service had also begun. This was for the undeliverable mails. The mail would stay in post office for 15 days until claimed by the taxpayer. Those two approaches for acquiring pre-calculation result increased the success rate for mail delivery to 96% in 2012; in the tax year of 2012, the number of those adopting case of the pre-calculation service was 2 million cases. The adoption rate was 62.5% of all qualified taxpayers. Cost Implementation Effect Improvement via Tax Pre-Calculation Service in 2011 and 2012 Implementation effect Variation Implementation cost (USD) 3.04 million 3.13 million million The number of suitable 2.76 million 3.2 million +440 thousand 29

30 cases Mailing cases 2.76 million 2.84million +80 thousand Cases downloading by certification thousand +360 thousand Successful receiving by taxpayers 89% 96% +7% Adopted cases 1.62 million 2 million +380 thousand Adopted rate 59% 62. 5% +3. 5% Appraising the cost of 2.76 million cases in 2011 and 3.2 million cases in 2012, the cost for each case in 2011 was 1.1 USD. In 2012, each case cost was under 0.9 USD. Obviously, the cost was already efficiently reduced during the second implementation year. Cost Analysis of Tax Pre-Calculation Service in 2011 and In terms of energy and paper-usage reduction policies, adding the online precalculation result printing service not only reduced paper usage in 2012, but also decreased the declaration form and explanation paper copies to attain the goal of energy and paper usage savings. Tax Pre-Calculation Service Paper Usage Saving Analysis in Energy and paper usage reduction policy Added a new service for electronic file of precalculation form downloading with digital certificate Reduced A3 paper copies of tax declaration form and explanation form Implementation effect 360 thousand cases of pre-calculation service could save A4 paper usage about 1.8 million sheets (assuming each case needed 5 sheets of paper). Compared with 2010, the tax year before the pre-calculation service was implemented, paper usage had been reduced 7.59 million A3 sheets (or 15.8 million A4 sheets). In the future, the Taxation Administration of the Ministry of Finance, all National 30

31 Taxation Bureaus, and the Fiscal Information Agency will continuously pursue the goal of providing the best service quality, especially to augment the adoption rate and decrease the paper usage. Based on the above analysis, the total efficiency of this project was 37.7 million USD in tax year of 2012, it resulted 95% of the benefits accrued to taxpayers. This means the pre-calculation service can actually reduce taxpayers burden from the declaration process; simplified process makes it more convenient for taxpayers. Implementation Efficiency of Pre-Calculation Service in

32 According to the analysis above, the project implementation efficiency reached 37.7 million USD in 2012, compared with the implementation cost of 3.13 million USD, the net efficiency was thousand dollars (USD); the implementation efficiency was far more than the implementation cost. The total implementation efficiency reached 49.6 million dollars (USD) in2013. This means the project was actually worth implementing and augmenting. Please be notified that the project profile submitted should not exceed 30 pages. 32