AN Asian Development Bank (ADB) study has suggested that developing
countries engaged in tax reforms should consider adopting the semi-autonomous
body with oversight board model, which is used in Hong Kong, China, Malaysia and
Singapore.
The
study, to be precise, The Governance Brief, says: “When this model is introduced
in a developing country, a good governance system that prevents political
intervention in the enforcement process and a sound tax intermediary sector,
including legal and accountancy services, will be keys for the oversight board
to function effectively. In addition, in the process of tax administration
reforms, it will be useful to review not only the tax administration body's
organization structure, but also its degree of autonomy with respect to internal
organization design, budget, and human resource issues. However, such reforms
are not likely to be made simply within the tax administration body, but will
also require working on the government's organization and civil service
systems.”
Released on 30 December, the Brief compared the conventional model of tax
directorate operating as an internal organization within the finance ministry
with the semiautonomous directorate models and found the latter type better than
the former one on different counts.
The
Brief titled ‘ Institutional Arrangements for Tax Administration in Asia and the
Pacific' says: “The average tax revenue per GDP ratio in 2010 for the seven
countries with the ministry directorate model was 9.2%, and the same figure for
the nine countries with the semiautonomous body model was 16.8%.”
It
compared the degree of autonomy granted to semiautonomous directorates in nine
countries on five parameters. These are: (i) design internal organization,
including office network; (ii) allocate budgeted administrative funds across
administrative functions; (iii) set staffing levels and mix of staff; (iv) hire
and dismiss staff; and (v) negotiate staff remuneration levels.
The
Brief found that “Australia, New Zealand, and Singapore have the most autonomous
tax administration bodies, with autonomy granted in all five categories.
Indonesia has the least autonomous tax administration body with no authority in
any of the five categories, followed by Japan, which only gives autonomy to its
tax administration body to hire and dismiss staff.”
The
Brief has pointed out that reform of tax administration bodies' institutional
arrangements alone will not be a panacea for improved performance of the tax
administration. Reform of institutional arrangements of tax administration
bodies, including their increased degree of autonomy, are an indispensable step
for achieving an efficient and effective tax administration, yet the process
should be regarded as a platform for comprehensive tax administration reforms,
rather than a stand-alone panacea.”
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