A
comparative study of tax administrations (TAs) in 22 countries in
Asia-Pacific by Asian Development Bank (ADB) has given an insight into
their strengths and weaknesses, thereby offering an opportunity for tax
reforms.
The study captioned 'A Comparative Analysis of Tax Administration in
Asia and the Pacific' shows that tax revenue as a percentage of gross
domestic product (GDP) was highest (31.7%) in New Zealand in 2011. It
was one of the lowest in India (9.7%).
The study notes: "collection is lowest in Indonesia, Cambodia, and India at around 10.0% of GDP."
The analysis is based on surveys of revenue bodies conducted in 2012
and 2013. The 22 economies in covered in the study are: Australia;
Brunei Darussalam; Cambodia; the People's Republic of China (PRC); Hong
Kong, China; India; Indonesia; Japan; the Republic of Korea; the
Kyrgyz Republic; the Lao People's Democratic Republic; Malaysia; the
Maldives; Mongolia; Myanmar; New Zealand; Papua New Guinea; the
Philippines; Singapore; Taipei,China; Tajikistan; and Thailand.
Noting that effective human resources management is a key requirement
for TAs, the study says that some revenue bodies, such as in Cambodia,
India, Indonesia, the Philippines, and Myanmar, seem to be
under-resourced and understaffed in proportion to the size of their
populations. Moreover, the survey results suggest that some revenue
bodies spend relatively few resources on human resources management,
and performance management systems are lacking in a number of
jurisdictions.
India, serving a population of 1.2 billion people or 31 million
personal income taxpayers, has the most scarce tax office network with a
total of 551 income tax offices, that is, 2.2 million people per
office.
The People's Republic of China is the largest employer among
comparator revenue bodies with 755,000 staff members. In contrast,
India, which is the second-largest economy in terms of population, only
employs 40,756 workers. The staff number in India is lower partly
because it only captures the number of people employed to collect
direct taxes. The second-largest employer in the Asia and Pacific
region, for which data are available, is Japan with 56,261 full-time
equivalent workers. Australia also employs a relatively large number of
people given its population size. This partly reflects that a large
proportion of the revenue body's workforce (16.5%) is engaged in nontax
functions.
Only New Zealand, at 31.3%, has a larger share of staff working on
nontax functions. In all other jurisdictions, almost all employees
(more than 90%) or all employees are involved in the administration of
national tax laws.
'Revenue bodies' survey responses suggest that the degree of autonomy
given by governments to tax administrations to carry out their
functions varies across the region. Australia, New Zealand, Papua New
Guinea, and Singapore have the most independent tax administrations,
with autonomy in human resources management, budget, and internal
organization.
Certain TAs including India's direct & indirect tax TAs, CBDT and
CBEC, can be classified as a directorate within the Ministry of Finance
with limited autonomy.
As put by the study, "Increasing
those revenue bodies' autonomy may help enhance their effectiveness
and efficiency. Autonomy protects from political interference in
day-to-day operations and gives tax administrations the flexibility in
policy choices that they need to be able to respond to the rapidly
changing challenges they face. Any extensive reforms, however, of the
institutional arrangements between revenue bodies and ministries of
finance cannot be carried out by the revenue body on its own, but
require working with the government, civil service systems, and other
public sector departments."
A significant finding of the study is that tax arrears tend to be a
more frequent occurrence in developing economies than developed
countries, reflecting lower enforcement capacity by tax administrations
and taxpayer compliance.
The study says: "many
factors influence the functioning of tax administrations, and the next
step is to use the data collected from the surveys of revenue bodies
in the region and OECD countries to determine which factors have a
statistically significant influence on revenue bodies' performance."
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