## cr18305 ## Source details **Canonical URL:** [cr18305](https://www.imf.org/-/media/files/publications/cr/2018/cr18305.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2018/cr18305.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2018/cr18305.pdf.json) --- ### EXECUTIVE SUMMARY — Key findings and implications - RMS implementation and revenue outcomes - GDT completed 71 out of the 86 RMS tax administration measures; 15 measures remain under active progress. - Of the Top 10 high impact priority measures agreed with the MEF: six are complete; three are considered 95 percent complete (including introduction of e-filing and e-payment, expected to be complete in 2018); the remaining measure to update taxpayers’ profiles is assessed as 75 percent complete. - Since 2012, GDT has routinely exceeded its revenue targets; year-on-year revenue growth has far exceeded annual economic growth. - Cambodia’s 2017 tax-to -GDP ratio (GDT and GDCE combined) reached 17.2 percent. - Operational improvements achieved under RMS (selected) - Improved human resource policies and management; staff establishment expanded to over 1,900 staff. - Early steps towards full automation: 22 IT systems implemented and 15 smartphone applications available. - Centralized registration database introduced; strengthened verification checks. - E-payment capability deployed; new service halls and taxpayer service initiatives introduced. - Increased audit activity and revised arrears management procedures. - Improved large taxpayer management; re-established internal audit; established investigation function; three-stage dispute resolution system established. - Strategic development for 2019–23 - MEF developing new tax system reform strategy for 2019–23; GDT will play a major role. - FAD recommendations to incorporate: (i) tax policy reforms (taxation of business income, expansion of personal income taxation, taxing immovable property, VAT and excise improvements); and (ii) GDCE enforcement, risk management, and post-clearance audit reforms. - Future environment will include continuing pressure to sustain recent revenue growth, need to improve tax culture, planned major tax policy reforms, and increased focus on fiscal governance and accountability. - Key risks and constraints - Concerns growth to date may be unsustainable; need new administrative approaches to secure future revenue. - Identified capacity inhibitors: - Weak understanding of tax base and cross-cutting risks; narrow taxpayer base. - Over-reliance on audit; need fully risk-based compliance strategies. - Limited strategic long-term focus; organizational structure not aligned to risk/compliance management. - Limited timely access to third-party data and automatic sharing internally. - Budget constraints for modernization and full automation; no current funding for full-scale commercial off-the-shelf (COTS) IT system. - Implementation capacity constraints for major policy reforms (example: PIT implementation requirements below). - Vision and modernization agenda - Vision: develop an organization to collect sustainable revenue via enhanced capacity for strategic initiatives; strengthened organizational arrangements and HR; improved core tax function management; adoption of fully risk-based compliance management; and integrated IT. - GDT has reached a stage to adopt more sophisticated tax administration and compliance management approaches. ### High-Level Tax Administration Modernization Agenda for 2019–23 (selected) - Narrow tax base - Update taxpayer register—expand and integrate to capture all taxpayers for all tax types. - Systematically detect and pursue unregistered entities. - Timelines: Short; Medium. - Addressing low compliance - Establish a risk management unit to move GDT to risk-based decision-making. - Develop a comprehensive Compliance Improvement Plan. - Ensure LTD and SMTD focus solely on delivering compliance improvement activities, including industry-based teams. - Timelines: Short; Short; Medium. - Strengthen core tax functions (selected) - Improve VAT refund processes to reduce waiting time for valid refunds. - Develop a national audit plan identifying treatment strategies for key risks. - Use the investigation unit to target tax crimes, not as an additional audit team. - Acquire software and training for electronic audit capability on taxpayer electronic records. - Timelines: Short; Short; Short; Long. - Strengthen tax culture - Develop a national Taxpayer Service Strategy. - Timeline: Short. - Organizational and strategic strengthening - Establish a Strategic Management Unit; assign formal ownership of core tax functions below Deputy DG level. - Develop Key Performance Indicators for business units and core functions. - Timelines: Short; Medium. - Access and integrated technology - Establish real time links with other government agencies and third parties (Long). - Business case and funding for new integrated IT solution; enhance e-payment arrangements (Short; Medium; Long). - Human resources - Enhance code of conduct training; implement full staff competency framework (Medium; Long). ### PROGRESS UNDER RMS 2014–18 — Implementation status and achievements - RMS implementation status - GDT reports 71 of 86 RMS measures completed; 15 underway in 2018. - Top 10 priority measures: six complete; three 95 percent complete (e-filing/e-payment expected complete in 2018); one 75 percent complete (taxpayer profiles update). - Selected operational achievements (verbatim/figures preserved) - Staff expansion to over 1,900 staff. - 22 IT systems implemented and 15 smartphone applications available. - Centralized registration database established; online registration portal launched (2014); single simplified registration form for all taxes introduced. - Deployment of e-payment capability; new service halls; simplified forms and procedures; new call center and Live Chat on website. - Remaining data and coverage gaps - Only 32,364 taxpayer records verified as complete and transferred to the central database; a further 3,906 taxpayers have provided updated details. - Taxpayer population continues to appear very small relative to visible economic development. - Results of national street survey to identify unregistered businesses were not made available to the mission. ### LARGE TAXPAYER MANAGEMENT (LTD) — status, challenges, targets - Role split and recommendation - LTD managed registration, assistance, returns processing, desk/limited audits, and arrears pursuit for large taxpayers; DEA conducted “comprehensive” audits. - Split led to duplication and risk of gaps; FAD recommends a single LTD with full responsibility for all large taxpayer management including audit, intelligence and risk assessment. - Key figures and performance - Large taxpayer segment represented over 70 percent of GDT’s total revenue in 2017. - LTD reported 3,774 active taxpayers under its portfolio in 2017 out of a total of 5,821 taxpayers (Table: 2017 Total Taxpayers 5,821; Active Taxpayers 3,774; Filed on time 3,154; Filed late 621; Did not file 2,047; Percentage on time filers (active) 83.6%; Percentage non-filers (total) 35.2%). - LTD staff: 196 (increased from 112 in January 2015). - Approximately 10 percent of total GDT staff managed 72.62 percent of total GDT revenue collections in 2017. - Challenges - Too many taxpayers to actively manage; limited workforce. - LTD handling non-core activities (e.g., tax agent registration). - Manual filing/payment processing; manual risk analysis; limited access to third party data. - Fragmented audit function; limited use of full enforcement powers; extensive face-to-face interactions. - Targets by 2023 (selected) - Revise LTD selection criteria to ensure manageable portfolio—focus on companies in critical economic sectors and those with investment incentives. - Centralize audit responsibility for large taxpayers within LTD; structure LTD along industry lines and tax functions including transfer pricing. - Introduce performance management to monitor compliance across taxes. - Remove non-core activities from LTD responsibility; develop industry-based compliance projects. - International good practice reference: LTD should manage largest taxpayers contributing 60–70 percent of revenue, likely numbering 500–700 taxpayers. ### REGISTRATION, FILING, PAYMENT & ARREARS — findings and targets - Registration - Pre-RMS: no centralized registration; separate registration for different taxes; weak authentication; ‘estimated tax regime’ issues. - Current: centralized national registration database; online registration portal; single simplified registration form; more rigorous authentication checks; national street survey underway. - Remaining: incomplete register (32,364 verified records; 3,906 updated), Registration Bureau not yet setting national registration policy. - Targets by 2023: - Registration Bureau to maintain national registration database and set formal registration/de-registration policy. - Single taxpayer register to integrate registers for all revenue types (including property and vehicle ownership registers); registration IT sub-system to interface with other core sub-systems. - Tax return filing - Management not a high priority due to register and automation issues. - Early VAT filing rates reported as 50.5 percent; limited capacity to measure on-time filing historically. - In 2017 LTD on-time filing 83.6 percent (up from 78.2 percent in 2014); in 2017 35.2 percent of large taxpayers identified as “Did Not File”. - Nearly 200 staff nationally process tax returns (data Jan 2017). - Targets by 2023: - Link filing obligations to taxpayer register; develop specific Taxpayer Role Types; implement strategies for stop and non-filing behavior. - Payment and arrears - Pre-RMS: payments nearly all manual; tax debt high—tax debt rose from Riel 1.22 million at start of 2009 to Riel 2.09 million at end-2011. - Current: arrears management improved with OTA support—computerized national debt data, arrears manual, staff training; introduction of instalment payment procedures; electronic payments available via certain banks (often still requiring a receipt attached to return). - National debt data not provided to mission; payment and arrears lack central owner after abolition of Department of Taxpayer Services and Tax Arrears. - Targets by 2023: - Expand e-payment options nationally; identify and track late/non-payment with analytics to select highest risk cases; develop overall collection strategy including formal write-off procedures; active arrears inventory management by value, age, collectability with dedicated specialist staff. ### ACCURACY OF REPORTING (AUDIT & VERIFICATION) — findings and targets - Pre-RMS: fragmented audit program (LTD, DEA, local branches); no national audit plan; manual processes; focus on revenue raising and cross-checking. - Current: - Number of auditors increased from 337 in January 2015 to 443 in January 2017. - Targeted training by JICA and OTA; OTA delivered audit technique manuals for selected high-risk sectors. - Audit function remains fragmented; DEA does not have overall management of national audit program; overlapping and duplicate audits persist. - Case selection uses basic transactional analysis; lack of third party data and limited automation constrain risk assessment. - Targets by 2023 (selected) - Develop a national audit plan covering highest compliance risks and core taxes and key segments. - Organize audit by taxpayer type and relative risk; DEA to be headquarters owner of core audit operations; LTD to manage all large taxpayer audits. - DSMT to manage small and medium taxpayer audit plans regionally. - Develop audit case management system and acquire audit software to improve audit quality and capability. ### VAT REFUND MANAGEMENT — status, issues, targets - Good practice summary (verbatim): process should fast-track low-risk claims, use automated risk assessment, apply pre/post-refund checks, pay at least 80 percent of claims by number and value within 30 calendar days. - Current situation - VAT refund process improved slightly but still averages 63 weeks to receive a refund. - An audit is still undertaken on almost all claims. - LTD staff suggested at least 80 percent of claims were allowed in full and approximately 65 percent of the value of the remainder being refunded. - Delays driven by: mandatory audits for claims above $5,000 (minimum 3 months), internal GDT approvals up to DG level, referral to MEF for ministerial approval, and manual MEF payment processes tied to budget timing. - Counterparty non-filing leads to routine disallowance of claims, penalizing honest taxpayers. - Targets by 2023 - Implement a mandatory electronic recording system for VAT and VAT counterparty transactions to enable real time cross-checking at filing. - Develop a comprehensive refund risk module to fast track low-risk claims (risk-based refund management). ### AUTOMATION AND IT — status and targets - Integrated Tax Information System (definition and components) - Core system, compliance performance system, management information system; should support registration, returns processing, accounting, payments, electronic filing, case management, risk analysis, taxpayer service, revenue forecasting. - COTS packaged core system solutions are available. - Pre-RMS: database disparate; paper-based processes; limited integration, making decision-making and data extraction difficult. - Current situation - IT Masterplan being implemented; provincial offices linked to headquarters via wide area network. - 22 new IT systems implemented (examples: registration, single invoice payment management, HR management, audit and debt management, document tracking, vehicle tax management). - Development staged due to funding constraints. - Targets by 2023 (selected) - Fully integrated technology-driven tax system supporting all aspects of taxpayer administration and service. - Establish a business case and secure funding for a new integrated system; develop business requirements to enable GDT to meet policy and taxpayer base changes. - Implement information collection strategy; real time links with other agencies and third parties; capacity for multi-platform electronic interactions. - Example functional IT requirements (verbatim highlights) - Taxpayer Registration, Payments Processing, Form Processing, Taxpayer and Revenue Accounting, Events Calendar, Arrears Management, Case Management, Audit Support, Taxpayer Services, Revenue Reporting and Forecasting, Analytical capability — detailed functional capabilities listed in Annex 1 and Box 15. ### COMPLIANCE IMPROVEMENT PLAN — purpose, process, and examples - Purpose and scope - Single document detailing significant risks to revenue and intended responses across taxpayer segments and parameters (individuals, micro/small/medium/large businesses, non-profits, HWI/HII, tax types, sectors, regions). - Outlines compliance issues, segment-specific risks, mitigation strategies and monitoring/evaluation processes. - Risk management cycle (verbatim steps) - Evaluate previous outcomes; understand operating context; identify risks by segment using internal systems, other tax administrations, government agencies, third-party intermediaries, professional bodies, community, open sources; assess and prioritize risks (likelihood and consequence; consequence not revenue alone); analyze compliance behavior; determine treatment strategies across service and enforcement; plan and implement strategies; evaluate effectiveness and refine future plans. - Illustration: Typical industry-based compliance improvement project (verbatim approach) - Engage industry associations; publicize verification program; identify tax agents; conduct sample audits; communicate and offer seminars and advisory visits; allow voluntary disclosure and flexible payment; follow-up audits and prosecute worst offenders; publicize results; measure effectiveness (voluntary disclosures, tax paid changes, surveys). - Example high-level objectives for LTD (verbatim actions) - Encourage voluntary compliance through transparency, high-quality service, simplified procedures, binding rulings; detect/deter non-compliance via improved staff understanding, coherent risk assessment, targeted interventions; protect revenue via legislative clarifications and litigation as needed; minimize costs for low-risk taxpayers via risk-based strategies; invest in staff capabilities and industry collaboration. ### IMPLEMENTATION CAPACITY FOR MAJOR POLICY REFORMS (example: PIT) - Requirements for implementing a comprehensive personal income tax (PIT) (verbatim) - A 2-year design and implementation project. - Assignment of a team of full-time staff, removed from their normal duties. - A project team with a range of skillsets—legislative drafting, project management, business process design, IT system development, taxpayer communication, training. - Automation of tax administration to manage the expanded taxpayer base. - Sufficient budget allocated for delivery of the full implementation plan. ### SUMMARY OF TIMELINES (categories used) - Short-term targets: to be completed by mid-2020. - Medium-term targets: by end-2021. - Longer-term targets: by end-2023. *Source: cr18305* ### PREFACE _________________________________________________________________________________________ 6 ### PREFACE ### Mission context and composition - At the request of the Senior Minister of the Ministry of Economy and Finance (MEF), His Excellency Dr. Aun Pornmoniroth, a Fiscal Affairs Department (FAD) technical assistance mission from the International Monetary Fund (IMF) visited Phnom Penh from March 14 to 27, 2018. - The mission reviewed GDT progress implementing the Revenue Mobilization Strategy 2014–18 (RMS) and identified priority tax administration modernization measures for 2019–23. - Mission team: Ms. Debra Adams (head), Messrs. Charlie Jenkins and Patrick De Mets (FAD technical assistance advisors), and Mr. Stephen Wilcox (FAD external expert). - Key meetings: MEF (including His Excellency Mr. Vongsey Vissoth, Secretary of State; Mr. Hem Vanndy and Mr. Chan Sothy, Under Secretaries of State); GDT (including His Excellency Mr. Phiyorin Tep, Director General; Mr. Kong Vibol, DG; Ms. Bun Neary, Mr. Ming Bankosal, Mr. Van Puthipol, and Mr. Um Seiha, Deputy DGs); development partners JICA and STA; business community representatives. - Findings presented to His Excellency Mr. Vongsey Vissoth at a closing meeting on March 27, 2018. ### Report coverage - This report consists of an Executive Summary and six sections: (I) Introduction; (II) Progress Under Revenue Modernization Strategy 2014–18; (III) Planning for 2019–23; (IV) Institutional Framework; (V) Core Tax Functions; and (VI) Support Functions. ### Acknowledgements - The mission records appreciation for cooperation from MEF and GDT officials and support from the IMF Resident Representative, Ms. Yong Sarah Zhou, and her staff. ### Glossary (selected acronyms preserved verbatim) - COTS; CRM; DEA; DG; DSMT; FAD; GDCE; GDT; HR; IMF; IT; JICA; LTD; LTO; MEF; OTA; PIT; Riel; RMS; RMU; STA; TA; TADAT. --- ### EXECUTIVE SUMMARY — Key findings and implications - RMS implementation and revenue outcomes - The GDT has completed 71 out of the 86 RMS tax administration measures; the remaining 15 are under active progress. - Of the Top 10 high impact priority measures agreed with the MEF: six are complete; three are considered 95 percent complete (including introduction of e-filing and e-payment, expected to be complete in 2018); the remaining measure to update taxpayers’ profiles is assessed as 75 percent complete. - Since 2012, the GDT has routinely exceeded its revenue targets, and year-on-year revenue growth has far exceeded the annual levels of economic growth. - Cambodia’s 2017 tax-to -GDP ratio of 17.2 percent is now comparable with many regional countries. - Operational improvements achieved under RMS (selected) - Improved human resource policies and management. - Early steps towards full automation of tax administration processes. - Introduction of a centralized registration database. - A range of taxpayer service initiatives and introduction of e-payment options. - Increased audit activity and revised arrears management procedures. - Improved large taxpayer management. - Re-establishment of internal audit and establishment of an investigation function. - Establishment of a full three-stage dispute resolution system. - Strategic development for 2019–23 - MEF is developing a new tax system reform strategy for 2019–23; GDT will play a major role. - FAD recommendations to be incorporated include: (i) tax policy reforms (taxation of business income, expansion of personal income taxation, taxing immovable property, VAT and excise improvements); and (ii) reforms in GDCE to strengthen enforcement, risk management, and post-clearance audit. - The future environment (from 2019) will include: continuing pressure to sustain recent revenue growth levels; need to improve tax culture while supporting pro-growth and investment policies; planned implementation of major tax policy reforms; and increasing focus on strengthening fiscal governance and accountability. - Risks and constraints - Concerns that recent high revenue growth may be unsustainable; new administrative approaches required to secure future revenue from the tax base. - Identified issues that could inhibit GDT capacity from 2019: - Understanding the tax base and risks to the revenue, and expanding the base. - Understanding cross-cutting approaches to manage improved taxpayer compliance, using risk-based strategies beyond current reliance on audit. - Limited strategic long-term focus, with efforts directed at collecting today’s revenue. - Organizational constraints: current GDT structure does not clearly support development of risk and compliance approaches; need for clear “business process owners” for each core tax function. - Limited access to data in a timely and usable form, and limited automatic sharing across relevant units to support risk assessment and decision-making. - Budget constraints to implement modernization reforms and deliver full range of core functions. - Full automation of the GDT is a fundamental requirement for future development of tax administration capacity. - Capacity to implement reform will be needed for successful implementation of planned tax policy reforms. - Vision and modernization agenda - The mission developed a tax administration modernization agenda for 2019–23 to position GDT to deliver sustainable revenue and meet development objectives. - Vision: develop an organization that supports collection of sustainable revenue via enhanced capacity for strategic initiatives, strengthened organizational arrangements and human resources, improved core tax function management, adoption of fully risk-based compliance management, and introduction of integrated IT. - GDT has reached a stage of development to adopt more sophisticated tax administration and compliance management approaches. --- ### High-Level Tax Administration Modernization Agenda for 2019–23 (selected items from Table 1) - Narrow tax base - Update taxpayer register—with expansion and integration to capture all taxpayers managed by GDT for all tax types. - Systematically detect and pursue unregistered entities. - Timeline: Short; Medium. - Addressing low compliance - Establish a risk management unit function that moves the GDT to risk based decision-making. - Develop a comprehensive Compliance Improvement Plan detailing how the GDT will improve core functions. - Ensure LTD and SMTD focus solely on delivering compliance improvement activities for respective sectors, including development of industry-based teams. - Timelines: Short; Short; Medium. - Strengthen core tax functions - Improve VAT refund processes to reduce waiting time for valid refund requests. - Develop a national audit plan that identifies treatment strategies for key risks. - Use the investigation unit to target tax crimes, not as an additional audit team. - Manage taxpayer filing against the client register, emphasizing stop and non-filing strategies by segment. - Develop an arrears management strategy focusing on current debt stocks. - Continue to leverage dispute management to identify risks and educate taxpayers. - Acquire software and training to enable electronic audit capability to undertake compliance on taxpayer electronic records. - Timelines: Short; Short; Short; Medium; Medium; Medium; Long. - Strengthen tax culture - Develop a national Taxpayer Service Strategy to deliver structured and systematic service and educational initiatives. - Timeline: Short. - Develop longer-term strategic focus - Establish a Strategic Management Unit to develop and oversee GDT strategic direction. - Develop a comprehensive set of Key Performance indicators to assess business unit and core function performance. - Timelines: Short; Medium. - Organizational strengthening - Assign formal ownership of core tax functions through delegation of responsibility and accountability to individuals below the Deputy DG level. - Identify workforce changes required under next reform phase, GDT Strategic Plan, and IT changes. - Revise LTD selection criteria and assign appropriate staff to LTD. - Reorganize audit function by segment and core tax function owner. - Timelines: Short; Short; Short; Short. - Access and use of data - Establish real time links with other government agencies and third parties. - Timeline: Long. - Integrated technology solution - Establish a business case and secure funding for a new integrated IT solution to support GDT. - Enhance e-payment arrangements; consider making them mandatory. - Implement an electronic management system for overseeing core tax functions and business processes. - Timelines: Short; Medium; Long. - Develop human resources - Further enhance and train staff on the code of conduct and ethical behaviors. - Use internal audit and internal affairs to improve GDT integrity and taxpayer perceptions. - Implement full staff competency framework. - Timelines: Medium; Medium; Medium. --- ### I. INTRODUCTION — Purpose and approach - The mission reviewed GDT progress under RMS 2014–18 using FAD’s 2012 and 2013 assessments as baseline. - The report provides guidance for improvements to be targeted by 2023 and frames what Cambodian tax administration should look like by 2023. - Targets are based on international good practice; “Good Practice” boxes reference practices observed across strong international tax administrations and TADAT Performance Outcomes. --- ### II. PROGRESS UNDER REVENUE MOBILIZATION STRATEGY 2014–18 — Implementation status - The GDT reports that 71 of its 86 RMS measures have been completed, with 15 still underway in 2018. - Of the Top 10 high impact priority measures agreed with the MEF: - Six are complete, including introducing the simplified accounting formula for small businesses and developing an information technology (IT) masterplan. - Three are considered 95 percent complete, including introduction of e-filing and e-payment (expected to be complete in 2018). - Remaining measure to update taxpayers’ profiles assessed as 75 percent complete. - Note: Figures and further detail are supported by attachments referenced in the report (Boxes, Figures, Table, and Appendices). *International Monetary Fund — Fiscal Affairs Department technical assistance mission report (March 14–27, 2018).* ### 5. The GDT has made extremely positive revenue growth and collection in recent ### 5. The GDT has made extremely positive revenue growth and collection in recent ### Key recent achievements - Since 2012, the GDT has routinely exceeded its revenue targets, and year-on-year revenue growth has far exceeded the annual levels of economic growth, making a significant contribution to achieving the RMS revenue objective. - Cambodia’s 2017 tax-to -GDP ratio, including the contribution of the GDT and the GDCE, reached 17.2 percent. - Improved human resources (HR) policies and management, including for recruitment, training, and performance management, and expansion of staff establishment to over 1,900 staff. - Early steps towards the full automation of tax administration processes with 22 IT systems implemented and 15 smartphone applications available. - Introduction of a centralized registration database and strengthened verification checks. - Service improvements: new service halls, simplification of forms and procedures, increased information and educational offerings, and introduction of some online services. - Deployment of e-payment capability, reducing the need for taxpayers to attend GDT offices. - Increased audit activity generated revenue gains, with a caution that this may come at the potential expense of efficient and consistent enforcement approaches. - Documentation of and training on revised arrears management procedures. - Improvements in large taxpayer management to protect over 70 percent of GDT revenue. - Re-establishment of internal audit and establishment of an investigation function. - Establishment of a full three-stage dispute resolution system. ### Context and concerns looking ahead (2019–23) - The MEF is developing a new tax system reform strategy for 2019–23 in which the GDT will play a major role; the strategy will cover tax administration, revenue policy, revenue legislation, customs administration, and management of non-tax revenues. - While GDT achieved a high rate of revenue growth, there are concerns the revenue growth to date is unsustainable; new administrative approaches are required to secure future sources of tax revenue from the tax base. - Administrative improvements may not provide the full level of required revenue mobilization; Government will therefore likely need to consider tax policy changes, such as the introduction of new taxes, and potentially significant investment, particularly in technology. ### Expected environment from 2019–23 (major elements) - Continuing pressure to sustain revenue levels: - Recent rate of year-on-year tax revenue growth is not sustainable. MEF focus is shifting to achieving an “optimal” level of revenue collection (this term is currently undefined), reflective of fairness and equity in the tax system. - The need to improve the tax culture in Cambodia: - Cambodia continues to face a weak tax culture across society; need for tax system to be fair and equitable and for public understanding of the role of taxation and compliance behaviors. - Support the Government’s pro-growth and investment policies: - Tax administration should implement business-friendly approaches, including consolidation of tax laws into a single updated tax code, simplification of forms and procedures, expansion of e-services, and shifting to service-oriented, “taxpayer-focused” approaches. - Planned implementation of major tax policy reforms: - MEF is considering major tax policy changes in 2019–23, which could include the introduction of a comprehensive personal income tax (PIT), changes to capital gains tax, and restructuring of property taxes; implementation of such large-scale reforms requires significant planning, resources, and time. - Fiscal governance and accountability: - Growing accountability demands on government spending and need to focus on fairness and social justice aspects of the revenue system; continued need to address governance and integrity issues in the revenue system. ### Issues inhibiting GDT’s capacity to respond - Tax base and risk: - GDT needs a deeper understanding of the tax base in Cambodia and the fundamental risks to the revenue presented by various participants, segments, and sectors; the tax and taxpayer bases also need expanding. - Compliance management: - GDT needs a broader understanding of cross-cutting approaches to manage improvements in taxpayer compliance; reliance on audit is insufficient—need a wide range of fully risk-based strategies including policy and legislative changes, new procedures, targeted education and service initiatives, and costlier deployment of risk-based audit and enforcement for serious non-compliance. - Limited strategic long-term focus: - Efforts are directed at collecting today’s revenue, leaving insufficient time and resources for longer-term strategic planning to develop the organization for future needs. - Organizational constraints: - Current structure does not support development of risk and compliance approaches; many core tax functions do not have a clear “business process owner” at headquarters; design constraints of Cambodia’s civil service limit rapid structural response. - Access to data: - Although technically entitled to access third party data, in practice GDT has limited access; even with ministerial approval, data is not provided in a timely or usable form, and there are challenges converting data to information and enabling automatic access for relevant units. - Budget constraints: - GDT faces budgetary constraints for modernization and delivery of core functions; to implement the modernization agenda, GDT will need a detailed budget and appropriate funding; some core areas, such as taxpayer service, have insufficient budget. - Automation: - Full automation of the GDT is a fundamental requirement; there is no current funding provision for full-scale automation, for example, to invest in a commercial off-the-shelf (COTS) IT system that would support all aspects of tax administration. - Capacity to implement reform: - Successful implementation of planned tax policy reforms requires a new approach to reform implementation and management; reforms cannot easily be done alongside day-to-day operations. For example, implementation of a PIT in Cambodia will require at a minimum: - A 2-year design and implementation project. - The assignment of a team of full-time staff, removed from their normal duties. - A project team with a range of skillsets—legislative drafting, project management, business process design, IT system development, taxpayer communication, training. - Automation of tax administration to manage the expanded taxpayer base. - Sufficient budget allocated for delivery of the full implementation plan. ### Tax administration modernization priorities 2019–23 (summary) - Purpose: - Put the GDT in a significantly stronger position to tackle the changing environment from 2019 onwards and address capacity challenges; enable delivery of Government anticipated revenue targets and other development objectives. - Timeline categories used: - Short-term targets (to be completed by mid-2020). - Medium-term targets (by end-2021). - Longer-term targets (by end-2023). - Institutional framework (Section IV) priorities: - Short-term: - Establish a Strategic Management Unit to develop and oversee the strategic direction of the GDT. - Assign formal ownership of core tax functions through delegation of responsibility and accountability to individuals below the Deputy DG level. - Establish a risk management unit function to move the GDT to risk based decision-making. - Revise LTD selection criteria and assign appropriate staff to LTD. - Reorganize audit function by segment and core tax function owner. - Medium-term: - Develop a comprehensive set of Key Performance Indicators to enable senior management to assess performance of each business unit and core function. - Ensure the LTD and SMTD focus solely on compliance improvement for their respective sectors, including development of industry based teams. - Long-term: - Implement an electronic management system for overseeing core business processes. - Core functions (Section V) priorities: - Short-term: - Develop a comprehensive Compliance Improvement Plan detailing how GDT will improve management of core functions. - Develop a national Taxpayer Service Strategy to deliver structured and systematic approaches to service and broader educational initiatives. - Develop a national audit plan that identifies treatment strategies for key risks. - Improve VAT refund processes to reduce waiting time for valid taxpayer requests for refunds. - Update taxpayer register—with expansion and integration to capture all taxpayers managed by GDT for all tax types. - Systematically detect and pursue unregistered entities. - Use the investigation unit to target tax crimes, not as an additional audit team. - Medium-term: - Manage taxpayer filing against the client register, with emphasis on specific strategies for stop and non-filing cases in each segment. - Enhance e-payment arrangements; look to make them mandatory. - Develop an arrears management strategy that focuses on managing current debt stocks. - Continue to leverage dispute management to identify risks and to educate taxpayers. - Long-term: - Acquire software and training to enable electronic auditing capability of the GDT to undertake compliance on taxpayer electronic records. - Support functions (Section VI) priorities: - Short-term: - Identify workforce changes required under the next reform phase, the GDT Strategic Plan, and changes in IT. - Establish a business case and secure funding for a new integrated IT solution that will support GDT. - Medium-term: - Use internal audit and affairs to improve GDT’s integrity, thereby improving taxpayer perceptions. - Further enhance the code of conduct, distribute it, and train staff on ethical behaviors. - Long-term: - Implement full staff competency framework. - Establish real time links with other government agencies and third parties. - Implement an electronic management system for overseeing core tax functions and business processes. ### Strategic planning status and targets by 2023 - Pre-RMS: - Little formal strategic planning undertaken; a GDT strategic planning document for 2012–14 was not institutionalized and did not drive developments. - Current situation: - GDT’s strategy for 2014–2018 drawn directly from the RMS; GDT did not prepare its own strategic plan and lacks a dedicated unit responsible for strategic planning and monitoring. - Many RMS measures focused on actions and outputs rather than outcomes; RMS monitoring and evaluation done part-time under a Deputy DG. - GDT focused on revenue collections as main target, with few other performance targets measured. - Draft Strategic Plan for 2019–23 has been developed by a working group using good practices including a “Strengths-Weaknesses-Opportunities-Threats” analysis; the Plan will be finalized under the Government’s new revenue mobilization strategy for 2019–23. - Targets by 2023: - GDT will be responsible for developing its own strategic plan to support achievement of the Government revenue strategy 2019–23, an expected period of significant change in GDT policy and operating environment. *Italic source: cr18305 - 5. The GDT has made extremely positive revenue growth and collection in recent* ### introduction of new taxes and more sophisticated technology, in combination with a broader ### cr18305 - introduction of new taxes and more sophisticated technology, in combination with a broader ### Strategic goals and draft Strategic Plan 2019–23 - The GDT has identified three Strategic Goals and associated Objectives in its draft Strategic Plan for 2019–23. - The draft indicates a strong taxpayer service focus representing a strategic shift from the past emphasis on audit and compliance enforcement. - FAD has recommended the adoption of a broader range of indicators to measure the overall performance of the tax administration. - Recommendation: Goals and Objectives should be reviewed in the light of the advice in this report and to ensure they support the aims of the Government’s final revenue strategy 2019–23. - Key organizational questions to review after finalizing the Strategic Plan: - Does the organization structure support the goal of providing quality taxpayer services, through the inclusion of a headquarters function to develop service policies and national service programs? - How will the Department of Finance and Personnel be able to determine the allocation of staff between service and compliance activities to reflect their relative importance in the Strategic Plan? - How to design, develop and deploy a new integrated IT solution to enable the delivery of the goals of the Strategic Plan? Including the acquisition of the requisite funding and the development of the business requirements. ### Goals and Objectives (as presented in draft Figure 2) - GOALS: Promote voluntary compliance and minimize tax burden by providing quality services; Ensure that taxpayers meet their tax responsibilities by fairly and firmly enforcing the tax law; Deliver high performance by insitutional strengthening. - OBJECTIVES (selected, verbatim): - Reduce taxpayer burden by developing simple and efficient tax administration processes - Provide taxpayers with uninform, timely and accurate information through multichannel services - Enhance taxpayer education through strengthening outreach, education and tools - Achieve fair andtransparetn administration by respecting rights and interest of taxpayers - Design tailored service approahes to taxpayers' needs, preferences and compliance behavior by conducting consultation, survey and research - Foster strong partnership with private sector and related stakeholders through dialogue engagement - Identify non-compliant taxpayers in high-risk sectors through internal and external information gathering processes - Reduce tax evasion and tax avoidance by fairly and firmly enforcing the law - Strengthen tax arrears collection through the implementation of tax arrears enforcement measures - Increase work productivity through the support of standardized and modernized information technology - Empower employees with the tools and training to further develop skill proficiency and improve work performance - Strengthen institutional capacity development of staffs ### Organization and Management — findings and targets - Good practice summary: A hybrid model (function-based organization plus segmentation for large taxpayers) is recommended; strong headquarters management and an effective delegation framework are essential. - Pre-RMS findings: - Organization structure did not reflect good practice in planning, functional definition, reporting, or governance; principal reason was lack of strategic vision and goals beyond revenue collection targets. - Absence of a specialized planning and monitoring capability. - The role of a tax headquarters was not clearly understood or defined; many headquarters staff were largely engaged in operational level activities; clear ownership of core tax functions in headquarters was missing. - Headquarters grouped unrelated functions and omitted others; Service and compliance functions were combined in the Department of Taxpayer Services and Arrears; no provision for tax investigations. - The internal audit function had been suspended; no internal mechanism for assessing and reporting on process and systems effectiveness, procedural compliance, and integrity. - Current situation (post-December 2017 organization chart): - The Department of Small and Medium Taxpayers (DSMT) established to provide headquarters’ oversight of the non-large taxpayer segments; Phnom Penh Municipality Tax Division acts as a regional oversight office for the city’s tax Khan branches. - Tax crime investigation elevated to Department level. - Internal audit re-established as a headquarters function. - National Taxation School established at Department level for training and staff development. - Bureaus for Consultation and Public Relations established under the Department of Administration and General Affairs. - International Tax Cooperation Bureau established under the Department of Law, Tax Policy and International Cooperation. - Remaining concerns with new headquarters structure: - Risk assessment as a basis for planning is understated; no business owner for risk or compliance established. - Some core tax functions lack a single business owner at headquarters; for others, including audit, national role in terms of setting strategies and providing oversight is very limited. - Audit function remains fragmented: responsibility divided between the Department of Enterprise Audit (DEA) and Large Taxpayer Department (for large taxpayers) and between the DEA and the Khan and Provincial Tax Branches (for small and medium taxpayers). - Units with responsibility for strategic planning, monitoring, and project/change management are not included in the new structure. - Specific responsibilities for the Deputy DGs are not defined; reported that each Departmental Director reports to two Deputy DGs. - Internal audit does not fall directly under the office of the DG. - Operationally, many day-to-day decisions and approvals are routinely routed through the DG’s office, slowing operations and risking disempowerment of lower levels. - Targets by 2023 (organizational questions to address): - How to build capacity to implement and monitor major strategic initiatives, separately from the management of day-to-day operations? - How to deliver effective delegation of duties to provide a clear pathway to good governance and transparent decision-making? - Assignment of formal ownership of the core tax functions to business owners at headquarters to take responsibility for development and management of core tax functions and cross-cutting risk issues. - Implementation of organizational performance management with a set of key performance indicators for each core business function. - How to establish a central risk assessment function and technical expertise in this area? - What will be the impact of technological developments on the organization structure? ### Effective Risk Management — findings, current situation, and targets - Good practice summary: - Compliance and enforcement strategies should be fully based on risk management with formal governance at senior management (active risk management committee). - Risks classified as (i) compliance risks and (ii) institutional risks. - Structured compliance risk assessment linked to annual business planning; documented compliance improvement plan; documented institutional risk register and Business Continuity Plan. - Pre-RMS findings: - GDT had not adopted comprehensive good practices for compliance risk management (CRM). - Little systematic information gathering or consistent use of analytical indicators; no controlled testing of emerging findings on “new” risks. - Absence of an integrated IT system constrained risk analysis; activities performed using manually-generated spreadsheets; data for risk assessment very limited and not supplied automatically by other parts of the GDT. - Limited risk analysis to select audit cases; no formal case selection guidelines; audit selection and programs not coordinated across functions; audit outcomes not routinely shared to feed back into risk assessment. - Current situation: - GDT has not transitioned to a comprehensive “risk-to-revenue” approach; limited understanding and analysis of compliance risks among key taxpayer segments and sectors and of their impact on revenue performance. - No central GDT risk assessment function; use of risk-based approaches mainly restricted to audit case selection and not yet applied across other core tax functions. - Ongoing RMS measure highlights need for a computerized, automatic risk analysis system. - DEA and each tax branch undertake independent risk analysis with little interaction or sharing of results. - LTD uses basic risk assessment techniques for improved audit and debt case selection, mainly using “tax income losses” and “high value” as priority criteria for case selection. - STA is providing advice and support to develop GDT’s risk capability; a general risk overview has commenced; a small list of high risks identified and the cash sector selected for priority follow up action. - STA will support a project to install cash registers in selected cash-based businesses to improve their reporting compliance. - Institutional risk approaches are in their infancy; example of progress: establishment of the GDT’s new data management center to better secure taxpayers’ data. - GDT has made significant progress in IT capability and is well-positioned to leverage technological advancements toward a strategic risk-to-revenue approach. - Targets by 2023 — planned CRM components (verbatim items): - The GDT will move to a modern CRM approach in the short-term. Sustainable increases in tax revenue could be obtained over time through increased voluntary compliance using compliance and enforcement strategies that are fully based on risk management. As set out in detail in Appendix 1, this will include development of: - Formal structure (including central risk assessment function as noted at subsection B above) and governance arrangements and key functions at senior management level to approve risk mitigation strategies and monitor progress with implementation. - A structured approach to identifying, assessing, prioritizing and mitigating compliance risks within a framework of taxpayer segments (with fully documented procedures). Increasing the LTD’s understanding of the segments of the taxpayer population and their behaviors is fundamental. - A “GDT Compliance Improvement Plan” to address the underlying causes of non-compliance, not just the symptoms. The Compliance Improvement Plan should outline the most significant risks to the tax system, as well as how the GDT intends to respond to those risks through “mitigation strategies” (to be delivered by each of the core tax functions outlined in Section V below). The Plan should also explain the process to monitor and evaluate the mitigation strategies put in place enabling the GDT to measure their performance. - A “Business Continuity Plan” to mitigate institutional risks where tax administration functions may be interrupted if certain external or internal events occur. Institutional risks that potentially pose a threat to the continuity of GDT are documented in an institutional risk register. Staff will be trained in disaster recovery procedures. ### Taxpayer Segmentation and Large Taxpayer Management - Principle: Tax administrations must tailor different service and compliance strategies for small, medium, and large taxpayers for effective risk management. - GDT structure relevant points: - GDT has a well-established LTD and has recently established a DSMT. The DSMT will focus on designing and implementing strategies for the management of the small and medium taxpayer segments. - Large Taxpayer Management — Good Practice (verbatim highlights): - Large taxpayers generally account for 60 to 70 percent of the revenue collected by the tax administration. - The large taxpayers’ office (LTO) provides the full range of services and tax administration functions for all large taxpayers, irrespective of their legal status. - Level of trading turnover generally used as criterion for determining whether a business is a large taxpayer; where a company is part of a corporate group, the determining factor should be the domestic turnover of the whole group. - Many countries now view 1,000 large taxpayers as the maximum size of their LTO. - Further segmentation by industry sectors (for example, banking, insurance, natural resources, telecommunications) is common and can yield efficiency gains. - More and more tax administrations include their High Wealth Individuals (HWI) in the LTO. - Taxpayers that should be included in the LTO are regularly reviewed; where warranted, there could be more than one LTO. *cr18305 - introduction of new taxes and more sophisticated technology, in combination with a broader* ### 39. The LTD handled some, but not all, tax administration functions relating to their ### The LTD handled some, but not all, tax administration functions relating to their ### Split of responsibilities and implications - The LTD managed: - registration of and assistance to taxpayers that meet the conditions to be administered by the LTD; - processing of large taxpayers’ returns; - selection for, and conduct of, “desk” and “limited” audits of large taxpayers; - pursuit of tax arrears of large taxpayers. - The LTD did not conduct “comprehensive” audits of large taxpayers; this work was undertaken by the DEA. - The split of taxpayer control and administration functions for large taxpayers led to: - duplication of activities; - risk of gaps in coverage, including potential for inefficient audit selection and activity. - FAD has recommended establishing a single LTD with full responsibility for all large taxpayer management, including audit, intelligence and risk assessment. ### Understanding of the large taxpayer base - Analysis of the large taxpayer group was largely confined to industry sector and/or extent of foreign ownership. - Analysis was not developed to provide understanding of: - compliance behaviors and tax planning opportunities within the large taxpayer group; - compliance risks arising from those behaviors and opportunities. ### Current situation (large taxpayer management) - The large taxpayer segment represented over 70 percent of GDT’s total revenue in 2017. - Improvements in 2017 included: - Organization of the LTD built around the core tax functions. - Data capture maintained for all large taxpayers’ return filing. - Enhanced and targeted taxpayer services, including outreach to encourage compliance and explain the GDT’s views. - Systematic follow up of non-filers and most tax debtors. - Improved audit case selection using basic risk assessment techniques. - Increased number of desk and limited audits, and a limited number of joint comprehensive audits with DEA. - Challenges facing the LTD: - Too many taxpayers to actively manage: the LTD reported 3,744 active taxpayers under its portfolio in 2017 out of a total of 5,821 taxpayers. - A relatively small workforce: the LTD currently has 196 staff, increased from 112 in January 2015. - Approximately 10 percent of total GDT staff managed 72.62 percent of total GDT revenue collections in 2017. - LTD has responsibility for non-core issues, including registration of tax agents, reducing time available for core large taxpayer management activities. - Inefficient tax filing and payment processing arrangements, including need to manually capture data from returns and supporting documents. - Limited specific industry focus. - Manually-based risk analysis and assessment methods with limited access to third party data. - Fragmented audit function, with the DEA selecting and undertaking comprehensive audits, albeit now jointly with LTD. - Limited utilization of the full range of powers to enforce payment of tax debt. - Too many remaining face-to-face interactions between taxpayers and GDT officials in the LTD office setting. ### Targets by 2023 (large taxpayer management) - GDT will manage the large taxpayer segment focused on risk-based compliance management, targeted audits, and improved taxpayer services. - Specific areas of focus: - Adoption of revised LTD selection criteria to ensure the LTD has a manageable number of taxpayers to supervise with an appropriate level of staffing. - Companies engaged in critical economic sectors should be under LTD supervision. - LTD should continue to manage all companies enjoying investment incentives. - Continued tailoring of service initiatives to meet the needs of large taxpayers with a focus on fast turnaround of technical advice related to large scale projects. - Introduction of a performance management system to monitor large taxpayers’ compliance with their basic obligations across different taxes. - Centralized audit function for all large taxpayers within the LTD. - Development of industry-based compliance improvement projects for high risk industries. - Removal of all non-core large taxpayer management activities from LTD’s responsibility. - International good practice suggests that the LTD should manage the largest taxpayers that contribute 60–70 percent of the overall revenue, which would likely number 500–700 taxpayers. ### Registration — pre-RMS findings - Good practice emphasizes a centralized database, unique taxpayer identification number, fraud prevention, and systematic detection of unregistered businesses. - Pre-RMS problems: - No centralized registration database capturing essential taxpayer details; no meaningful baseline for measuring performance across core tax administration functions. - Separate registration required for different taxes and the register was inaccurate. - Registration was cumbersome and inefficient for taxpayers and did not provide a single view of a taxpayer’s net tax position. - Authentication checks were weak; completeness and accuracy of details for registered entities were questionable. - Enforcement of registration obligations was weak; number of taxpayers who should have been registered was unknown. - Some larger taxpayers believed to be hiding true value of business activities by operating under the ‘estimated tax regime’. - The ‘estimated tax regime’ was abolished in 2016, but it was unclear how many taxpayers should have moved to the real regime. ### Current situation (registration) - Improvements achieved: - A centralized national registration database has been established. - An online registration portal launched (2014). - A single, simplified registration form for all taxes introduced. - More rigorous authentication checks, including identification and place of business checks. - A national street survey underway to identify unregistered businesses. - Remaining gaps: - GDT still does not have full knowledge of, or complete records for, the taxpayer base. - To date, only 32,364 taxpayer records have been verified as complete and transferred to the central database; a further 3,906 taxpayers have provided updated details. - The taxpayer population continues to appear very small relative to visible economic development in Cambodia. - Results of the street survey to identify new registrations were not made available to the mission. - The new Registration Bureau is not yet setting national registration policy and procedures; it is part of the Department of General Affairs and Administration following abolition of the Department of Taxpayer Services and Tax Arrears. ### Targets by 2023 (registration) - Strengthen management of taxpayer registration to ensure all entities required to register are included and the database is complete and accurate. Improvements will include: - Registration Bureau will take full responsibility for maintaining the national registration database and setting formal registration and de-registration policies and procedures. - Single taxpayer register will contain complete information for all taxpayers, supporting effective risk analysis of the tax base and integrating registers for all revenue types, including the property and vehicle ownership registers. - Registration IT sub-system will interface with other core tax administration sub-systems to provide a single, consolidated view of the taxpayer, their net tax position, and compliance history. - Formal procedures will be documented and in use at all offices to maintain the accuracy of the taxpayer register. - GDT will be able to detect unregistered entities who will be pursued through a variety of means, including use of third party data (such as business registration and labor force data, and the issuance of government contracts). ### Supporting Voluntary Compliance — pre-RMS and current situation - Pre-RMS: - Lack of organizational focus on taxpayer service. - Department for Taxpayer Service and Tax Arrears had limited resources; only six staff worked on service issues centrally. - Taxpayer service initiatives were ad hoc, reactive, and varied widely across offices. - Current situation and improvements: - National staffing for taxpayer service increased from 150 in January 2015 to 215 in January 2017. - Taxpayer service received technical assistance from US Treasury OTA, JICA, and STA. - Achievements include: - New taxpayer service halls with formal queuing systems. - Enhancement of the GDT website, including increased information, outreach, updates, and a new Live Chat option. - Targeted seminars and workshops nationally. - Establishment of a Public Relations Bureau. - Development of taxpayer education materials and FAQs, with JICA and OTA support. - Launch of a new call center with specially-trained customer service staff, supported by GDT technical officials (with STA support). - Simplification of tax forms and procedures, and launch of downloadable forms and online services, including for registration and tax returns. - Launch of e-payment options and user-friendly smartphone applications to support voluntary compliance. - GDT is enhancing role and quality of tax agents: formal registration process for tax agents managed by the LTD, plus training courses and examinations at the National Tax School. - Remaining issues: - Taxpayer service no longer has a central business owner following abolition of the Department of Taxpayer Services and Tax Arrears. - No taxpayer service strategy in place; many initiatives remain ad hoc and locally driven. - Budget constraints continue to hamper delivery of service initiatives. - LTD has made efforts to deliver more targeted services to its taxpayer population. ### Targets by 2023 (supporting voluntary compliance) - GDT will implement a structured and systematic national Taxpayer Service strategy to develop and deliver comprehensive national service and broader educational initiatives. - Service initiatives will be designed to help taxpayers obtain information and meet obligations in an easy and cost-effective manner; taxpayers will be made aware of changes in law or administrative policy through general communication well in advance. - Implementation of documented and consistent procedures and service standards across all tax branches, with dedicated technical staff to ensure current information on main areas of taxpayer obligations and entitlements, tailored to taxpayer segments, industry groups, and tax intermediaries. - GDT will continue to conduct surveys—based on a statistically valid sample of key taxpayer segments—through an independent third party, at least once every three years to monitor trends in taxpayer perceptions of tax administration services and products. ### Tax Return Filing — good practice (context) - Good practice emphasizes streamlined filing, pre-filling for uncomplicated tax affairs, self-service electronic options, risk-based filing compliance strategies, simple return forms, straightforward self-assessment, and standardized processes to achieve high on-time filing compliance (noted that in such environments filing compliance rates of 90 percent or higher on-time filing are achieved across all tax types). - Pre-RMS context for filing is provided but detailed pre-RMS filing findings are not included in the supplied excerpt. *Source: IMF country report excerpt (cr18305).* ### 58. The management of tax return filing was not a high priority. Given the challenges ### cr18305 - 58. The management of tax return filing was not a high priority. Given the challenges ### Management of tax return filing — Current situation and findings - The management of tax return filing was not a high priority due to challenges with the taxpayer register and lack of automation. - Early FAD missions were provided with overall VAT filing rates of 50.5 percent, with no capacity to measure on-time filing. - There was no business owner for the tax return filing function at headquarters; filing was not subject to a coordinated risk management methodology. - Follow-up of taxpayers was ad hoc, labor-intensive, and unstructured. Most filing obligations were managed locally, limiting headquarters’ line-of-sight on taxpayer performance. - Progress to improve filing management has been limited, in part because the registration system remains problematic and not fully automated; without expected filing rates, active management remains difficult. - The LTD achieved improved on-time filing rates through structured filing management: - RMS filing targets: 75 percent for the LTD, 70 percent for Khan tax branches, and 80 percent for provincial tax branches. - In 2017, 83.6 percent of active large taxpayers filed on-time, an increase from 78.2 percent in 2014. - In 2017, 35.2 percent of large taxpayers were identified as “Did Not File”; there is no reliable estimation of the status of these taxpayers. - LTD filing management approaches include formal reminder processes using letters and SMS to follow up with non-filers; LTD is not yet tracking the effectiveness of follow-up techniques or monitoring successes. - Downloadable return forms on the GDT website reduce administrative and cost burdens and are an important step toward electronic filing; however, the current inability to accept electronic forms creates inefficiencies. - Nearly 200 staff are involved nationally in processing tax returns (data provided by the Department of Finance and Personnel for January 2017). - There is no central GDT function responsible for national management of tax return filing; local offices lack easy and automatic access to lists of late or non-filers and there is no systematic follow-up taken against all non-compliant taxpayers. ### Management of tax return filing — Targets by 2023 - Strengthen management of return filing through active management of filing compliance for all segments by: - Linking filing obligations to the taxpayer register to enable effective management based on expectations and to implement risk-based priorities for follow-up, including specific actions for non-filers under the LTD. Specific Taxpayer Role Types (e.g., VAT, Income Tax, etc.) will be developed so expected filing can be managed centrally and filing patterns for tax products should be based on the need for information and the relative risk for the sector. - Developing specific strategies to deal with stop and non-filing behavior, linked to the taxpayer registration function to ensure taxpayers who no longer have a requirement to file are accurately recognized in the register. --- ### Payment and arrears — Pre-RMS findings - Tax payments were nearly all made manually; electronic payment options were not available and many tax payments were made in person at tax offices. - All tax returns submitted had to be accompanied by payment. - The level of debt in the GDT was very high by international standards. - The tax debt nearly doubled between 2009 and 2011, from Riel 1.22 million at the start of 2009 to Riel 2.09 million at the end of 2011 (source: GDT during FAD 2012 mission). - The GDT applied recovery procedures uniformly to all tax debts and taxpayers, regardless of size or risk; under this standardized approach, all tax debts proceeded through each step of the recovery process. - There was no provision to write off uncollectable debt. - The law provided for escalating debt collection powers, but the GDT was not using them systematically due to concerns about debt data accuracy and reluctance to initiate cumbersome administrative processes. - There were no provisions for taxpayers to arrange payment by instalment; partial payment was not an option. ### Payment and arrears — Current situation and findings - OTA assistance helped improve arrears management: computerizing national debt data, improving accuracy, developing a tax arrears collection manual, and delivering staff training. - LTD is using arrears manual procedures and actively managing its arrears cases. - The GDT continues to rely on reminder letters and invitations to pay; more graduated collection techniques are being employed but not systematically for all cases. - Introduction of procedures to accept payment by instalment has helped manage arrears where capacity to pay is an issue. - The mission was not provided with national debt data; with abolition of the Department of Taxpayer Services and Tax Arrears, payment and arrears functions no longer have a central owner at GDT headquarters. - Data compilation remains a challenge; only the LTD could provide arrears data for its taxpayer population. - There is still no route for regular identification and write-off of uncollectable debts; any solution requires full cooperation of the MEF for higher level approvals. - Electronic payment processes have improved: taxpayers can now pay electronically through certain banks and payment is allocated directly to due amounts in taxpayers’ ledgers. In many cases, electronic payment still requires a “receipt” to be attached to the return to prove payment. ### Payment and arrears — Targets by 2023 - Strengthen payment and arrears management through: - Expansion of e-payment options available to taxpayers nationally. - Ability to identify and track late or non-payment and report on payment and debt situations in detail. Priority debt cases will be selected centrally using analytics to select the highest risk cases within a target population of tax debtors. Special attention should be given to new, high value debts as the rate of recovery of tax arrears declines as arrears get older. - Development of an overall collection strategy focusing on early engagement with debtors, preventative messaging and interventions, ‘lighter touch’ assistance to help debtors become compliant, and timely, engaging, and consistent interventions for those who do not comply. The strategy should include formal write-off procedures for uncollectable arrears. - Active management of the arrears inventory by reference to value, age, and collectability of arrears cases by dedicated collection enforcement units with full-time specialist staff trained in collection techniques, debtor relationships, and negotiation. --- ### Accuracy of reporting (Verification and Audit) — Pre-RMS findings - The GDT audit program was fragmented across multiple functions (LTD, DEA, and local tax branches), resulting in taxpayers being subject to almost continuous auditing due to differing timeframes. - There was no national audit plan and audit and compliance data were incomplete; lack of a consolidated audit plan made it difficult to determine the effectiveness of the overall audit function. - Audit processes focused mainly on revenue raising with cross-checking as the major focus; risk analysis was limited to basic ratio analysis and identification of high value transactions for case selection. - Audit processes were manual with limited guidance on best practice techniques. ### Accuracy of reporting — Current situation and findings - Audit capacity improved: number of auditors increased from 337 in January 2015 to 443 in January 2017 (data provided by Department of Finance and Personnel). - Targeted training conducted by JICA and OTA developed field audit capacity; OTA provided detailed audit technique manuals for selected high-risk sectors and industries. - Operationally, GDT audit units are not structured around industry segments or risks; excluding the Transfer Pricing Bureau, all other audit teams are generalist with limited specialization. - There is continuing reliance on audit to generate revenue, but no clear central oversight of national audit operations and the audit function remains fragmented. - The DEA does not have responsibility for overall management of the national audit program; there is no centrally-developed audit program and each unit selects its own cases. - DEA continues to undertake comprehensive audits of all taxpayers, including LTD taxpayers; LTD and local tax branches undertake desk and limited audits on their own taxpayer populations. - Little evidence of nationally coordinated audit work targeted at improving specific taxpayer compliance behaviors; overlapping and duplicate audits are a major private sector concern. - Case selection is based on audit plans developed using basic transactional analysis without an overarching compliance plan; lack of access to third party data and limited automation constrain risk assessment. - Audit planning is undertaken by each office on a quarterly basis, with individual case lists sent to the DG for approval. - Little evidence that LTD data is being used to determine relative compliance levels and derive treatment strategies. ### Accuracy of reporting — Targets by 2023 - Develop the audit function to include a national audit plan covering the highest compliance risks and all core taxes and key taxpayer segments. Improvements will include: - Organize the audit function by taxpayer type and relative risk. - DEA will become the formal headquarters owner of core audit operations, with national responsibility for development and management of the audit function, including strategic audit and risk issues and national roll out of standardized audit procedures. - LTD will be responsible for all large taxpayer audit activities and will be structured along industry lines and specific tax functions, including transfer pricing functions. - DSMT will be responsible for management of small and medium taxpayers—focusing regional and local audit plans around the national compliance plan. Future development would include specialized teams focused on specific risks rather than generic regional audit teams. - Develop an audit case management system enabling the central audit business owner to oversee the effectiveness of the audit program. - Move GDT audit staff toward industry specialization using existing training and audit guidance to develop focus on specific industry risks and issues. - Develop audit tools and acquire auditing software packages to improve audit quality and capability to deal with growing taxpayer complexity. *Source: cr18305 - 58. The management of tax return filing was not a high priority. Given the challenges (PDF chapter/section).* ### Box 11. Good Practice: Value-Added Tax Refund Management ### Box 11. Good Practice: Value-Added Tax Refund Management ### Good practice summary - Legitimate tax refunds are paid promptly while safeguards prevent payment of fraudulent claims. - Good international practices for VAT refunds include: - Subjecting VAT registration applications to proof of identity checks to prevent fictitious traders from entering the VAT system. - Using purpose-built, automated risk assessment software to review all VAT refund claims against risk criteria to distinguish refund claimants with a good compliance history from those with poor or unknown compliance histories. - Subjecting high-risk claims to pre-refund audits or other verification, while lower-risk cases may be subject to post-refund verification. - Paying or offsetting legitimate VAT refunds against other tax liabilities within a reasonable timeframe (e.g., at least 80 percent of VAT refund claims by number of cases and value are paid, offset, or declined within 30 calendar days from the date on which a refund claim is made). - Giving preferential treatment to low-risk taxpayers (e.g., regular exporters with a sound compliance history). - Paying interest where legitimate refunds are delayed. - Allocating budget funds to meet all legitimate refund claims when they occur. ### Pre-RMS situation (before reforms) - All VAT refunds were subjected to 100 percent checking and cross-matching before the issue of any refund, creating: - A pool of unclaimed credits. - Taxpayers waiting long periods for refund processing. - The GDT process ensured refunds were not paid without being “verified,” contributing to delays. ### Current situation (findings) - The VAT refund process has improved slightly, but it still takes an average of 63 weeks to receive a refund. - An audit is still undertaken on almost all claims. - Detailed refund statistics were not made available to the mission; LTD staff suggested: - At least 80 percent of all claims were allowed in full. - Approximately 65 percent of the value of the remainder being refunded. - Long delays are due to a combination of factors, including: - All claims above $5,000 must be audited. It usually takes a minimum of 3 months to finalize the audit, longer when a taxpayer has purchases from taxpayers managed by other offices. - After completion of the audit, there is an internal GDT process to approve each refund, including approval of all cases at the level of the DG. - The GDT then refers the case to the MEF to seek ministerial approval for the refund payment. - Payment is made manually by the MEF based on budgeted amounts and government timing processes. - Taxpayers are routinely disallowed claims for VAT credits where the counterparty has failed to file a return. The main reason cited by LTD for refund claim adjustments is the counterparty to the transaction not having filed a return and paid the tax due, rather than taxpayer error or fraud. - This practice penalizes honest taxpayers and allows non-compliant businesses to retain VAT amounts until, if ever, followed up by the GDT. ### Targets by 2023 (policy actions and reforms) - The GDT will implement practices to ensure legitimate tax refunds are paid promptly with safeguards to identify fraudulent refund claims. This will include: - Development of a mandatory electronic recording system for VAT and VAT counterparty transactions to enable real time cross-checking at the filing stage. This would eliminate long delays in post-filing verification and allow for faster processing of refunds. - Development of a comprehensive refund risk module that would allow for rapid refunding of low risk claims. The development of a risk-based refund management approach, as outlined in Appendix 4, would enable the GDT to develop a methodology to fast track refund processing for low risk taxpayers. *Italic: Source: cr18305 - Box 11. Good Practice: Value-Added Tax Refund Management* ### Box 15. Good Practice: Automation ### Box 15. Good Practice: Automation ### Integrated Tax Information System — definition and core components - An integrated Tax Information System "brings together all information that tax administrations need for successful operational performance in a way that facilitates ease of access and use by the ultimate users." - Purpose: move the tax administration away from manual processing and direct resources to facilitating, monitoring, and enforcing compliance. - Functional coverage: "taxpayer interactions and service, registration, processing, accounting, work automation, case management, exchange of information, risk analysis, etc." - Leading-practice IT "landscape" includes: - (i) a ‘core system’ component; - (ii) a 'compliance performance system'; - (iii) a ‘management information’ system. - Role of the 'core system' component: provides technology support to and connects, at varying levels, all core functions: Taxpayer Registration, Returns Processing, Taxpayer and Revenue Accounting, and Payment Processing. - Supplementary systems supported by the core system include: electronic filing, case management and workflow for debt collection and audit, analytical capability to automatically detect and select audit cases, individualized taxpayer service, revenue forecasting, etc. - Voluntary compliance is facilitated by opening "multiple, interactive and electronic channels with taxpayers." - The 'compliance performance system' supports audit and collections functions "based on risk analysis" to collect and manage information on target areas where non-compliance poses greatest risks to revenues. - The 'management information system' "facilitates decision-making by getting the right information to managers and staff." - Commercial off-the-shelf (COTS) packaged core system solutions are available and "represent a modern systems suite designed with reference to other tax administrations, embodying the same level of knowledge and experience in their inherent business processes." - "A high-level set of requirements that any IT system should normally support to deliver the services required by a tax administration is in Appendix 5." ### Pre-RMS observations (paragraphs 98–99) - Systems focus prior to reforms: - "The general systems focus of the GDT was on the capture of transactions, and business processes were largely paper-based." - Most processes focused on personal engagement with taxpayers; limited capacity for electronic dealing with the GDT. - Except for the LTD, which had some basic IT systems, "there was a high level of paper-based processes, practices, and procedures." - Database and integration issues: - "The database structure was disparate with no real integration in systems, making it extremely difficult to extract data for decision-making purposes." - GDT "did not have an integrated IT infrastructure, meaning management reporting was a collation of individual regional reports." - Lack of integration created difficulties in managing the tax base and taxpayer risks. ### Current situation (paragraphs 100–101) - IT Masterplan and system capability: - "An IT Masterplan is being implemented and the GDT has focused efforts on the development of system capability and the deployment of a range of smartphone 'Apps' or tools to assist both taxpayers and the GDT in improving compliance." - "The provincial offices are now linked to headquarters through a wide area network." - Staged development due to funding: - "Due to funding constraints, development is being done in a staged approach." - Completed work has improved operations, increased management information (particularly on revenue performance), and enabled improved processes for taxpayers and the GDT. - New systems implemented: - "The GDT reported that 22 new IT systems have been implemented, including for taxpayer registration, single invoice payment management, human resource management, audit and debt management, document tracking and management, and vehicle tax management." ### Targets by 2023 (paragraphs 102 and related) - Overall target: - "The GDT will have a fully integrated technology-driven tax system that supports all aspects of taxpayer administration and service." - Planned actions: - Establishment of a business case for the GDT to source appropriate funding for a new, fully integrated system that will meet all the requirements of a modern tax administration. - Development of the business requirements of an integrated technological solution to support the GDT in administering the tax system; "The new technology solution needs to be designed to enable the GDT to meet changes in policy and changes in the taxpayer base." - Additional requirements (as noted for the GDT and linked to Appendix 5): - "an information collection strategy focused on identifying the data required on each form to enable the GDT to effectively determine and manage risk." - "real time links with other government agencies and third parties to enhance taxpayer management." - "capacity to deploy across multiple platforms allowing electronic interactions with the GDT for all tax types and online maintenance of the associated tax obligations." *Source: cr18305 - Box 15. Good Practice: Automation* ### Annex 1. Compliance Improvement Plan ### Annex 1. Compliance Improvement Plan ### Purpose and scope - A Compliance Improvement Plan is generally a single document detailing the significant risks to revenue identified in the tax system and the administration’s intended responses focusing on core taxes and key tax obligations. - The Plan: - Is structured around taxpayer segments and other parameters, e.g. individuals, micro and small business, medium business, large business, non-profit and Government organizations, high wealth and high-income individuals, tax types, industry sectors, geographic regions. - Includes an overview/summary for each taxpayer segment describing the economic, revenue and business environment (such as taxpayer numbers, entity types, role of intermediaries, tax performance and contribution). - Outlines major compliance issues and segment-specific risks. - Describes the risk mitigation strategies and action to be taken to address the underlying causes of non-compliance based on the various levels of risk. - Explains the process to monitor and evaluate mitigation strategies. ### Developing a Compliance Improvement Plan (risk management cycle) - Evaluate compliance outcomes of the previous plan, or if developing the first plan evaluate the separate treatment strategies that were applied previously. - Understand the operating context: align compliance risks and responses with the revenue agency’s broader objectives and organizational strategic plan. - Identify risks by segment (and often by sub-segments) using information from: - Internal IT systems and internally held information (e.g., results of compliance activities, taxpayer enquiries, return information). - Information held by other tax administrations. - Information held by other Government agencies. - Third-party intermediaries such as banks. - Professional bodies and industry groups. - The community. - Open source information. - Assess and prioritize the risks: rank risks according to priority considering likelihood and consequence of non-compliance; consequence should not be ‘revenue’ alone. - Analyze compliance behavior: analyze priority risks to identify drivers and attitudes of non-compliance to determine the required mixture of responses. - Determine treatment strategies: consider strategies holistically across the full range of service and enforcement activities based on perceived level of risk and compliance behaviors. - Plan and implement treatment strategies: roll out strategies supported by guidance and documentation; provide avenue for front line staff feedback into the risk management process. - Evaluate effectiveness of treatment strategies: evaluate performance against the plan and compliance outcomes; refine future Compliance Improvement Plans by incorporating new knowledge and results. ### Illustration: Typical industry-based compliance improvement project - Engage industry/business associations to explain high-risk designation and to understand industry operations. - Publicize the intention to conduct a verification program and seek association support in informing members. - Identify tax agents and practitioners with significant client bases in the industry; alert them and request they inform clients. - Conduct a sample audit program to confirm serious areas of noncompliance and quantify tax at risk. - Engage associations and practitioners to prepare advice to industry participants on identified noncompliance. - Communicate to taxpayers via letters, associations, and practitioners requesting review and self-corrections; inform about voluntary disclosure policy where applicable. - Offer free seminars and advisory visits, ideally jointly with the industry association. - Ensure GDT audit staff have scripted answers about the program, voluntary disclosure, seminars, and advisory visits. - Ensure collection enforcement staff apply more flexible payment arrangements to taxpayers who voluntarily self-correct. - Conduct a follow-up audit program with wider coverage targeting taxpayers who failed to self-correct; prosecute the worst offenders. - Publicize audit and prosecution results, highlighting data matching and other approaches; use representative case studies. - Measure project effectiveness, e.g., track number of voluntary disclosures, overall change in tax paid by taxpayers in the target industry, and survey industry and practitioners for observed changes in compliance behavior. ### Example high-level objectives for Large Taxpayer Department (LTD) and example actions - Help and encourage large taxpayers to comply voluntarily: - Work in a transparent relationship with large taxpayers. - Deliver high-quality service. - Offer simplified procedures and support for those seeking better compliance. - Provide greater certainty through binding rulings. - Help identify shortcomings in day-to-day tax compliance practices. - Detect, address and deter non-compliance or aggressive tax planning: - Improve LTD staff understanding of large taxpayer business and law. - Work within common risk priorities. - Develop coherent risk assessment across all taxes. - Target interventions to areas of significant risk. - Work closely in real time to provide earlier certainty and detect avoidance more quickly. - Take timely action to protect current and future tax revenues: - Identify areas where legislation or GDT technical guidance needs clarification or amendment. - Litigate important or substantial issues where differences in legal interpretation cannot be resolved by agreement. - Help taxpayers minimize costs of compliance, especially low-risk taxpayers: - Apply risk-based strategies across compliance work. - Avoid burdensome audit interventions for low-risk taxpayers. - Ensure audits focus on issues of substance. - Invest in staff capabilities for the large taxpayer segment: - Regularly enhance staff training and professionalism. - Improve staff understanding of major industries and prevalent revenue risks. - Collaborate with large businesses and associations to enhance mutual understanding. - Engage industry specialists to support front-line staff and risk assessment. ### GDT performance data (selected tables) - Table 1. GDT Large Taxpayer Return Filing 2014-2017 - 2014: Total Taxpayers 4,033; Active Taxpayers 2,684; Active - percentage of total 66.6%; Filed on time 2,100; Filed late 616; Did not file 1,349; Percentage on time filers (active) 78.2%; Percentage non-filers (total) 33.4% - 2015: Total Taxpayers 4,165; Active Taxpayers 2,920; Active - percentage of total 70.1%; Filed on time 2,189; Filed late 755; Did not file 1,245; Percentage on time filers (active) 75.0%; Percentage non-filers (total) 29.9% - 2016: Total Taxpayers 5,205; Active Taxpayers 3,348; Active - percentage of total 64.3%; Filed on time 2,639; Filed late 766; Did not file 1,857; Percentage on time filers (active) 78.8%; Percentage non-filers (total) 35.7% - 2017: Total Taxpayers 5,821; Active Taxpayers 3,774; Active - percentage of total 64.8%; Filed on time 3,154; Filed late 621; Did not file 2,047; Percentage on time filers (active) 83.6%; Percentage non-filers (total) 35.2% - Source: Department of Large Taxpayers - Table 2. GDT Tax Disputes 2011-2017 (selected annual flows) - 2014: Opening balance 181; New cases 22; Total 203; Transferred 0; Rejected 11; Solved 30; Total cases processed 41; Closing balance 162 - 2015: Opening balance 162; New cases 48; Total 210; Transferred 1; Rejected 10; Solved 83; Total cases processed 94; Closing balance 116 - 2016: Opening balance 116; New cases 77; Total 193; Transferred 1; Rejected 0; Solved 124; Total cases processed 125; Closing balance 68 - 2017: Opening balance 68; New cases 100; Total 168; Transferred 2; Rejected 0; Solved 110; Total cases processed 112; Closing balance 56 - Source: GDT Department of Law, Tax Policy and International Cooperation ### Potential approach for risk-based VAT refund management (high-level decision matrix) - 1. Green flagged taxpayers (approved large refund claimers): consistency desk examination - If claim consistent with usual refund pattern and general compliance level is high: Instant refund. - If one of the above conditions is not met: Further examination. - 2. Taxpayer not green flagged: - A. Low risk (small amount or closing enterprise) and average or unknown compliance: - If credit situation consistent with industry norms and taxpayer credit pattern: Instant refund. - If credit situation inconsistent but originates in reported operations (exports, investment): - If request unanswered or documents do not support claim: Written request for supportive documents (copy of invoices, export statements). - Desk assessment. - If credit situation unexplained: Request for a list of supplies. - If anomalies (insufficient gross margin ratio, expenses not related to business): Potential high assessment: field audit. If no prospect of high assessments: refund, desk assessment when possible. - B. Medium risk (medium amount, average compliance): - Good solvency prospect and credit consistent with norms: Instant refund. - Credit inconsistent but originates in reported operations (exports, investment, rate differentiation): Written request for supportive documents (copy of invoices, export statements). If unanswered or unsupported: Desk assessment, refer for future field audit. - Credit unexplained and prospect of high assessments: Comprehensive field audit. - Credit unexplained and no prospect of high assessment: Refund and refer for future audit. - Bad or unknown solvency prospect: Always request supportive documents and list of supplies. If claim fully substantiated: Refund. If not fully substantiated and origin known: Issue oriented field audit. If not fully substantiated and origin unknown: Full scope field audit. - C. High risk (large amount, high risk ratio): - Good compliance history and good solvency prospect: Desk examination. If credit explained: Refund, refer for future audit. If credit unexplained or tax fraud suspected: Comprehensive field audit. - Bad compliance history or solvency prospect: Instant comprehensive audit, consider precautionary enforcement measures. - Unknown compliance history: Instant comprehensive field audit, consider demanding guarantees. ### Example high-level IT system requirements (functional capabilities) - Taxpayer Registration system: - Issue and maintain national tax identification number and cater for business license activities. - Calculate and maintain a check digit and internal referencing. - Capture and store specific registration details for different tax types in a ‘whole of client’ view. - Integrate registration with returns and payment processing; deregister and archive with restore capability. - Allocate one identification number for a legal entity and link branches; link director/partner details. - Generate registration management information by entity type, office, region, sector, industry and audit trail of accesses and adjustments. - Payments Processing system: - Capture identification number, tax type, payment period, payment type, and payment amount. - Update taxpayer and revenue accounts automatically; interface with external payment methods. - Reverse payment data, manage retransmissions, process dishonored payments. - Process payments to a suspense account if taxpayer or account details not known. - Generate management information for reconciliations, revenue reports, payment statistics, suspense account activities, and an audit trail. - Form (tax returns) Processing system: - Process tax forms (returns) for all tax types; support self-assessment principles (identity checks, lodgment date, acceptance of declared liability, arithmetical checks, compare submissions with database, store return data). - Be configurable for new tax types or changes; reconcile third-party income details. - Receive forms electronically and generate electronic receipts. - Process amended returns or assessments; issue assessment notices and refunds electronically. - Raise default assessments when returns not lodged; archive nil-balance return data with restore capability. - Produce management information on forms received and an audit trail. - Taxpayer and Revenue Accounting system: - Develop and maintain account for all taxpayers; account for all debits and credits for all tax types in a ‘whole of client’ view. - Record all tax types in the same account style; identify information passed from payment and returns systems. - Calculate due dates; allow amendments via reassessments, adjustments, transfers. - Provide online enquiry and, with security, taxpayer web access to accounts. - Calculate and impose late/nonpayment penalties and interest; adjust penalties and interest automatically upon assessment amendments. - Structure account details to identify tax, penalties, interest, and present consolidated balances; age debts; archive nil-balance accounts with restore capability. - Generate statements of account; offset credits and debits within and across tax types; provide variety of accounting transactions (debits, credits, transfers, refunds, penalties, payments, adjustments, write offs). - Produce management information on overall account status, general ledger for the Department and wider government, and an audit trail. - Events calendar capability: - Determine whether a return should be expected for a taxpayer (including ‘nil return’) and automatically generate appropriate returns. - Determine due dates according to legislation and administrative arrangements; allow approved extensions. - Automatically generate demands for returns after nominated periods and stronger demands after further periods. - Allocate outstanding cases for manual follow up via the case management system and enable default assessments or prosecution where warranted. - Generate management information reporting how many returns were expected, received, outstanding, and the age of outstanding returns for all offices and nationally; provide an audit trail of accesses and adjustments. *Annex 1. Compliance Improvement Plan (content unit).* ### 6. An Arrears Management system that can: ### 6. An Arrears Management system that can: ### Arrears detection and automated demands - Detect cases where there is a debt outstanding and payable. - Automatically generate a demand for payment of the debt after a nominated period when the payment was not received, or has been made late. - Report all outstanding debts by taxpayer, so that coordinated action can be taken across all debts owed by the taxpayer in a ‘whole of client’ view. ### Escalation, workflow and case allocation - After a further period, automatically issue a stronger demand for the debt to be paid. Automatic retention of a taxpayer’s debt history must be updated to the database. - If after a further determined period and the debt is still outstanding, allocate the case for manual follow up via the case management system. - Rank debt cases for manual action based on risk assessment criteria, e.g. size of debt, age of debt, number of revenue types involved, taxpayer history etc. ### Collection, write-offs and reporting - Support collection of outstanding debts by installments. - Provide for the ability for cases to be cleared via approved write off processes. - Support the compilation of local and national debt collection plans. - Generate management information on level and composition of debt, the volume of new debt, the amount of debt collected and the amount written off, the age of debt, the number of taxpayers who are in debt, status of cases allocated via the case management system, and an audit trail of any accesses or adjustments made. ### 7. A Case Management system that can: - Handle all types of workflow that lends itself to be managed as an individual case, e.g. a. taxpayer audit, a taxpayer debt, disputes, an outstanding return and responding to taxpayer correspondence. - Prioritize cases to be created and allocated to predetermined risk assessment criteria. - Electronically assign cases by a supervisor to case officers based on relative priority. - Record case details, with the majority of this recorded at the time of case selection. - Display other cases involving the same taxpayer. - Recording of actions taken and date. - Generate standard letters and notices as initiated by the case officer. - Record case notes. - Permit re-allocation of cases. - Record time to action cases and maintain status of case, e.g. pending, closed etc. - Notify supervisors if cases are not being resolved in a timely manner. - Retain and retrieve case history indexed by the taxpayer identification number. - Generate determined management information for all case types, such as cases created, cases closed, cases still outstanding, and maintain an audit trail of adjustments made. ### 8. An Audit Support system that can: - Conduct financial analysis of return and other data to automatically select cases for audit. - Prioritize selected audit cases based on predetermined risk management criteria. - Allocate cases for manual action via the case management system. - Provide information for the preparation of the annual audit work plan. - Provide tools to assist with audit activities, e.g. software that can analyze taxpayer accounting records, links to other 3rd party information, and the ability to work remotely from a taxpayer site. - Record audit activities and results. - Update risk data according to outcomes of audit. - Generate determined management information on success rate of audit cases selected, changes to selection criteria and maintain an audit trail of any accesses or adjustments made. ### 9. A Taxpayer Services system that can: - Support the development of taxpayer services products. - Provide staff with access to rulings database, public information, standard questions and answers for frequently asked queries. - Ensure information and downloadable forms on the department’s website are accurately maintained. - Allow interaction from the taxpayer through the website and with proper security allow taxpayers to view their account detail on line. - Receive and record taxpayer correspondence which is then managed via the case management system. - Receive and record taxpayer disputes, appeals, objections and amendments which are then managed via the case management system. - Generate determined management reporting with an automated audit trail of any accesses or adjustments made. ### 10. A Revenue Reporting and Forecasting system that can: - Report on all revenue assessed across all tax types, nationally, by office, by sector and by industry and have the ability to analyze information at further levels if required. - Enable real time reports to be generated by department officials. - Track revenue collection against predetermined budgets for specific tax types and for the revenue as a whole. - Create and maintain revenue forecasting models that can determine ‘what if’ scenario planning outcomes for tax policy budget changes, and for determining the possible result of a specific compliance strategy intervention work activity. ### 11. An Analytical capability that can: - Receive and assemble data from multiple sources (including Customs data). - Cater for multiple views of data with multi-indexing capability. - Provide analysis tools for risk assessment, trend analysis, “what-if” scenario analysis etc. - Generate pre-defined reports. - Respond to requests for ad-hoc reports and analysis. *IMF staff report: cr18305 - 6. An Arrears Management system that can:* --- _Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18305.pdf_