International Tax Benchmarking

1. International Tax Benchmarking 2011 International Conference on Taxation Analysis and Research Paul Lanser, Steven Taylor, Corinne Wilkins1 December 2011

2. Overview • Project Background & Context (Steven) • Methodology (Corinne) • Findings (Steven & Paul) • Taking it forward (Paul)

3. Overview • Project Background & Context (Steven) • Methodology (Corinne) • Findings (Steven & Paul) • Taking it forward (Paul)

4. Context and Background

5. Context and Background

6. What is benchmarking? • “Benchmarking is a continuous, systematic process for comparing your own efficiency in terms of productivity, quality and practices with those companies and organisations that represent excellence” • (Karlof and Ostblom, 1993) ‘Benchmarking: A signpost in quality and excellence’, Karlof & Ostblom, 1993

7. Project Objectives • Measure our operational performance against other tax authorities. • Identify leading practice and opportunities for improvement. • Foster international cooperation.

8. Project phases • Feasibility study • 8 benchmarks, 3 countries • September 2008 to June 2009 • Second phase • 10 benchmarks, 10 countries • April 2010 to September 2011

9. Consultancy support (for the second phase)

10. Overview • Project Background & Context (Steven) • Methodology (Corinne) • Findings (Steven & Paul) • Taking it forward (Paul)

11. Benchmarking • What does benchmarking involve? Select and scope benchmarks Identify benchmark partners Analyse and interpret Implement for effect Gather information ‘Benchmarking: A signpost in quality and excellence’, Karlof & Ostblom, 1993

12. CA UK IE NL FR POL ES SA AUS NZ 1. Identify benchmarking partners

13. 2. Select benchmarks

14. 3. Scope benchmarks • Steps taken • Reviewed benchmark scope internally • Developed an analytical framework – ‘performance levers’ • Built a ‘straw man’ based on UK processes • Conducted workshops with each tax administration on each benchmark to map processes and data availability • Strategic interviews with senior stakeholders

15. 4. Gather information

16. 5. Analyse and interpret data – the model

17. 6&7. Analyse and interpret data - reporting • Steps • Initial comparative analysis – showed need for further data validation • Drafting of report chapters, benchmark by benchmark - checked internally, re-drafted etc… • Sharing of report with tax administrations – leading to further validation, amendments and re-interpretation • Sign off on a final report, and on wider sharing

18. Overview • Project Background & Context (Steven) • Methodology (Corinne) • Findings (Steven & Paul) • Taking it forward (Paul)

19. Findings • Detailed findings (Steven) • Compliance strategy - benchmarks 7 (& 8) • Single business identifier (cross-cutting) • Summary of other findings (Paul) • Customer contact - benchmarks 1 & 2 • Returns processing - benchmarks 3 & 4 • VAT registration - benchmark 5 • Dispute resolution with large business - benchmark 6 • Debt management - benchmark 9

20. Findings • For each benchmark: • Contextual differences • Performance comparison • Leading practice & opportunities for improvement

21. Note on the findings • 2008/09 and 2009/10 data • Cost comparisons are made in “International Dollars”

22. 7 Cost and effectiveness of GST/VAT risk assessment

23. 7 Cost and effectiveness of GST/VAT risk assessment Contextual differences • Underlying extent of non-compliance • Amount of information collected on return • VAT/GST rate, registration threshold • Number of returns received, frequency of returns • Number of audits / investigations

24. 7 Cost and effectiveness of GST/VAT risk assessment Contextual differences Mandatory GST/VAT registration threshold Number of returns received per annum

25. 7 Cost and effectiveness of GST/VAT risk assessment Contextual differences Number of GST/VAT field audits conducted by country

26. 7 Cost and effectiveness of GST/VAT risk assessment Effectiveness Audit hit rate (per cent) versus coverage rate (per cent)

27. 7 Cost and effectiveness of GST/VAT risk assessment Effectiveness Yield per dollar invested in risk assessment Yield as a percentage of taxpayer receipts 2009 data

28. Opportunities for HMRC – Compliance • HMRC appears to pursue a high coverage strategy for compliance audits, with lower ‘hit rates’ than other jurisdictions • Opportunities for HMRC, identified through the study, include: • Exploring the cost-benefit of alternative compliance strategies. • Improving bulk risking capacity. • Focusing SME field audits on high value taxpayers and those who exhibit the greatest risk of non-compliance. • Making it simpler for the willing and able to comply and increasingly focus field-based audits on fraud and evasion. Complement field audits with desk based checks, education, prosecutions, and publicity. • Develop a cross-tax audit capability

29. Opportunities for HMRC – Compliance Improving bulk risking capability: Leading practice: Ireland’s REAP risk engine. • Integrated, customer-centric approach • Unique customer number. • Linking of internal and external sources of data. • Risk profiling of all business customers, 3 times a year. • Risk profiles used for audit case selection. • Feedback loops.

30. Single Customer Number • Opportunity for improvement across the whole tax administration. • UK only country not to have a single customer number (except South Africa) • Capability Review: “Data rich, intelligence poor” • Enables linking of all data, with high confidence levels. • In turn, enables many other examples of leading practice.

31. Findings • Detailed findings (Steven) • Compliance strategy - benchmarks 7 (& 8) • Single business identifier (cross-cutting) • Summary of other findings (Paul) • Customer contact - benchmarks 1 & 2 • Returns processing - benchmarks 3 & 4 • VAT registration - benchmark 5 • Dispute resolution with large business - benchmark 6 • Debt management - benchmark 9

32. 1/2 Cost & quality of telephone contact centres for PIT, CT and VAT [excludes Tax Credits] Contextual differences Total inbound calls to contact centres for PIT, CIT and VAT. Average number of calls per taxpayer

33. 1/2 Cost & quality of telephone contact centres for PIT, CT and VAT [excludes Tax Credits] Cost Average cost per call answered Average cost per call minute

34. 1/2 Cost & quality of telephone contact centres for PIT, CT and VAT [excludes Tax Credits] Quality Average call waiting time Average calls lost or abandoned

35. 1/2 Cost & quality of telephone contact centres for PIT, CT and VAT [excludes Tax Credits] Opportunities • Reduce demand • Development of agent portals • Resource management – flexible ‘over-flow’ centres • Customer based queues • Single customer view

36. 3/4 Cost and elapsed time to process and Personal Income Tax (PIT) return Contextual differences Number of personal income tax returns filed Percentage of PIT taxpayers required to file a PIT return

37. 3/4 Cost and elapsed time to process and Personal Income Tax (PIT) return Cost and elapsed time Average cost of processing a PIT return Elapsed time to process a return

38. 3/4 Cost and elapsed time to process and Personal Income Tax (PIT) return Opportunities Percentage of online filing by country • Increase on-line filing to 90%+ • Smooth demand – staggered filing dates? • Pre-filling / pre-population of tax returns • Multi-skilling of staff to enable redeployment between front and back office

39. 5 Cost of GST/VAT Registration Contextual differences Mandatory GST/VAT registration threshold Number of applications for GST/VAT registration

40. 5 Cost of GST/VAT Registration Cost and elapsed time Average cost to process a GST/VAT registration Average elapsed time to process a GST/VAT registration

41. 5 Cost of GST/VAT Registration Opportunities Percentage of online applications for GST/VAT registration • Increase (or mandate) online VAT registration • Use an intelligent registration form • Single registration process • Develop a single business register (single business number) • Better integrate information

42. 6 Elapsed time to resolve complex queries with Large Business Contextual differences Number of complex queries in 2009, by resolution method

43. 6 Elapsed time to resolve complex queries with Large Business Elapsed time Average elapsed time (in calendar days) to resolve a complex query

44. 9 Efficiency and effectiveness of debt management Cost Cost of collecting a dollar of debt (in cents) Average cost to collect debt per taxpayer

45. 9 Efficiency and effectiveness of debt management Effectiveness Debt collected as a % of total tax revenue Total debt written off per taxpayer

46. 9 Efficiency and effectiveness of debt management Opportunities • Develop better interventions to prevent payments becoming debt. • Improve risk focus of debt intervention activities • Review and implement new performance management metrics (e.g. roll rate) • Improve integration of customer information – single customer view.

47. Overview • Project Background & Context (Steven) • Methodology (Corinne) • Findings (Steven & Paul) • Taking it forward & conclusions (Paul)

48. Engagement • Influencing the senior level decision makers in HMRC: • Permanent Secretary for Tax (Project sponsor) • Chief Executive • Executive Committee • Exchequer Secretary • Non-Executive Board • Maintaining involvement of HMRC business areas • Directors / Steering Group • Eight business areas involved in benchmarking (process and data experts) • Development of ‘Action Plans’ for each benchmark

49. Development of Action Plans Action Plan for each benchmark / business, including sections on: • HMRC’s response • Alignment with business plan and SR commitments • Value / cost • Further collaboration • Delivery milestones and outcomes.

50. Other next steps • Publication of the report • Lessons learned evaluation • Planning for a third phase…