Workshop
Forecasting tax revenues
Data collection, data quality, data
matching, and data sharing
Iris Claus
20 April 2016
Apia, Samoa
Three uses of tax data
1.
Readily available and reliable data is
crucial for detecting taxpayer noncompliance.
Quantifying
(non-)
compliance
•
Data is essential for developing systems and
policies that support voluntary compliance
Final comment
•
… and for identifying compliance risks.
2.
Readily available and reliable data is
crucial for tax revenue forecasting.
•
Government spending typically involves
multi-year programs and projects−requiring
medium-term fiscal planning.
•
Data is essential for evaluating and costing
tax policy proposals.
Uses of tax
data
Tax gap
measures
Data collection, data quality, data matching, and data sharing
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Three uses of tax data
Uses of tax
data
Tax gap
measures
3.
Readily available and reliable data is
crucial for compiling national statistics.
•
Statistics offices heavily rely on
administrative tax data to measure the
output produced in a country−gross
domestic product, GDP.
•
GDP is often used as an indicator of a
country’s ability to repay its debt.
•
It can determine how much and at what
terms countries can borrow to finance
essential infrastructure
•
… for economic development and
ultimately improving people’s lives.
Quantifying
(non-)
compliance
Final comment
Data collection, data quality, data matching, and data sharing
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Tax gap
Uses of tax
data
•
“Broadly defined, the tax gap is the difference
between the taxes that would be paid if all
obligations were fully met in all instances, and
those that are actually received and collected
(voluntary compliance). As a concept, it can
encompass revenues lost to tax evasion, taxpayer
error, and unpaid liabilities.” Emphasis added.
•
The tax gap is a concept
•
… that, in practice, is not terribly useful.
•
Overall tax gap measures have extremely
large margins of error
•
… and they don’t identify the sources of
non-compliance.
Tax gap
measures
Quantifying
(non-)
compliance
Final comment
Data collection, data quality, data matching, and data sharing
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Tax gap
Uses of tax
data
Tax gap
measures
•
There are data constraints in measuring tax
gaps.
•
E.g. we cannot use consumption from the
national accounts to measure the gap in
value added tax (VAT) collections
•
… because VAT is a key input into
measuring consumption in the national
accounts.
•
Tax gap measures from random audits are
somewhat more reliable.
•
But random audits are very costly
•
… and yield substantially lower pay-offs
than targeted audits.
Quantifying
(non-)
compliance
Final comment
Data collection, data quality, data matching, and data sharing
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Tax gap
Uses of tax
data
Tax gap
measures
Quantifying
(non-)
compliance
Final comment
•
So, when is comes to tax gaps
•
… try to resist the urge or pressure to
estimate an overall tax gap
•
… and ministries of finance and treasuries,
please, do not consider evaluating the
performance of your tax administration
based on a tax gap measure!!
Data collection, data quality, data matching, and data sharing
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Measuring (non-)compliance
•
Quantifying
(non-)
compliance
Industry classification and segmentation of
taxpayers is a far more effective strategy
for detecting, measuring and treating noncompliance
•
… and hence raising tax revenues.
Final comment
•
Ideally we forecast how much tax revenue
we would expect to collect
•
… and compare actual outturns against
forecasts.
•
Any shortfall suggests non-compliance.
•
Any tax collection above forecast suggests
a possible improvement in compliance.
Uses of tax
data
Tax gap
measures
Data collection, data quality, data matching, and data sharing
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Measuring (non-)compliance
•
Tax gap
measures
Compliant taxpayers can provide useful
information to detect non-compliance.
•
Quantifying
(non-)
compliance
Large deviations from industry standards or
industry norms may raise a red flag.
•
We can monitor economic indicators.
•
E.g. a positive correlation is expected
between cement sales or building permits
and activity in the construction sector,
•
… exports and VAT refunds,
•
… tourist arrivals and the hospitality sector.
Uses of tax
data
Final comment
Data collection, data quality, data matching, and data sharing
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Measuring (non-)compliance
Uses of tax
data
•
As data collection, data quality and
capacity to interrogate data improve, we
can consider matching taxpayer data to
information from external sources.
•
So ensure legislation provides powers to
request data from third parties.
•
Consider ways to enhance data sharing
across institutions within laws and regulations
governing taxpayer confidentiality.
•
E.g. adopt the same industry classification as
the statistics office,
•
… provide a confidentialized dataset that
does not identify taxpayers to your ministry of
finance / treasury.
Tax gap
measures
Quantifying
(non-)
compliance
Final comment
Data collection, data quality, data matching, and data sharing
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Final comment
Uses of tax
data
Tax gap
measures
Quantifying
(non-)
compliance
Final comment
•
Data collection, data management and
data use are investments.
•
They require a vision of what is possible
•
… and a strategy for achieving the vision.
•
They will incur an upfront cost.
•
They will require on-going maintenance.
•
The rates of return in terms of additional tax
revenue collected can be tremendous.
Data collection, data quality, data matching, and data sharing
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