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In an insightful analysis, Michael Keen from the Fiscal Affairs Department of the International Monetary Fund highlights five critical aspects of tax administration. He emphasizes that potential revenue bases are often concentrated within a limited number of firms, posing risks for tax collectors. Furthermore, there is a time consistency issue in enforcement, impacting long-term compliance and reputation. Keen also notes that effective tax collection strategies must ensure that administrative costs do not exceed revenue benefits. Finally, he points out that good administration cannot compensate for flawed policy, as tax evaders tend to outsmart administrators.
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5 key things about tax administration Michael Keen Fiscal Affairs Department International Monetary Fund
Potential revenue base is highly concentrated in a relatively small number of firms • There is an inherent time consistency problem in tax administration—an incentive to enforce less ex post than announced ex ante. Reputation matters • $1 of revenue is not worth spending $1 to collect • Good administration is no substitute for bad policy • Evaders/avoiders are smarter than administrators
