Globally much of the revenue required for government funding, comes from taxes, most frequently through taxes on income and on the purchases of goods and services. In order to minimise burdens on taxpayers from the collection of taxes and to ensure that everyone pays their fair share, it is important that tax administrations work as efficiently and effectively as possible, taking into account taxpayers’ rights and the needs of diverse taxpayer groups.
Tax administration
The role of tax administrations is to collect the revenue that helps to pay for public spending by governments. This might include support for education, welfare, pensions, health services, transport infrastructure and defence, among many other areas. To maintain public confidence, tax systems must be seen to be fair, efficient and effective, an area where international co-operation between administrations can play an important role.
Key link
Key messages
As taxpayers use digital technology in more and more areas of their daily life, their expectations of a tax administration are changing. In response, tax administrations are adopting digital tools to increase their efficiency and make it easier for taxpayers to understand what taxes they need to pay as well as to make it easier for them to calculate and pay their tax. For example, many administrations are using tools such as the internet, email and mobile applications to provide information to taxpayers allowing taxpayers to send their tax returns and payments in electronic form. At the same time, it is important that tax administrations continue to provide inclusive services for those who are less able to use digital tools.
Many taxpayers, including individuals and businesses, both large and small, now live, work and conduct business in different jurisdictions. As a result, understanding their tax obligations can sometimes be complicated. This can result in potentially significant burdens as well as risks that they are either taxed too much or too little. Tax administrations need to respond to these global challenges by working together and finding ways to assist taxpayers in these circumstances and helping them to get their taxes right. Co-operation between tax administrations is also crucial in tackling tax fraud and evasion.
Context
The scale, scope and impact of taxation
Tax administration is a big and complex operation affecting all parts of the economy. The main taxes collected by tax administrations to fund government spending are taxes on:
- personal income, for example tax paid on an individual’s wages
- corporate income, for example tax paid on the profits made by businesses
- taxes on purchases made by individuals or businesses, for example value added tax (VAT) or sales tax
There are also other types of taxes in most countries, for example taxes on property, wealth, and inheritance as well as excise duties which are paid on particular products such as alcohol, fuel and tobacco. In some countries, the tax administration also collects social security contributions which are the other major source of funds for government spending globally in addition to taxes. With such a broad impact across the economy, it is important that the administrative burden of complying with tax obligations is kept to a minimum for taxpayers.
The growing importance of digital tools
Tax administrations are increasingly using digital tools, to deliver services to taxpayers and to support tax compliance. These tools allow taxpayers to communicate more easily with the tax administration and to send and receive information and payments electronically, such as their tax returns and tax refunds. In order to reduce burdens on taxpayers, a growing number of tax administrations are now also using relevant income and expenses information provided by employers, banks and other sources to help fill in tax returns in advance. In addition, tax administrations are increasingly using electronic data and analytical tools to help uncover the underpayment of tax, including tax evasion and fraud.
Increasing co-operation between tax administrations
As individuals and businesses increasingly buy and sell goods and services internationally, co‑operation between tax administrations has become more important than ever to reduce burdens on taxpayers and to ensure that the right amount of tax is paid. This co‑operation now extends across many aspects of tax administration, covering areas such as the exchange of information, joint processes to avoid the under or overpayment of tax, assistance with recovery of tax debts and the sharing of knowledge on a range of topics to help make tax administration more effective, efficient and resilient to crises.
