Episode 11.1 : What's in your Toolbox?

Annette Schmitz: [1] Welcome, listeners, the first episode of our podcast series, What's in Your Toolbox? My name is Annette Schmitz from the TADAT Secretariat. To kick off the series, let's travel virtually to Norway. In 2017, the government of Norway relaunched its TFD program, a Tax For Development program. They relaunched this program as a response to obligations under the ATI the Addis Tax Initiative.

 

[2] The TFD program provides financial support to different multilateral organizations involved in tax reforms. Several organizations have developed tools to support tax administrations and tax system reforms. As the number of available tools continues to grow, so does the complexity in selecting the right tool or combination of tools.

 

[3] It's important to understand the characteristics and comparative advantages of the different tools and frameworks that are currently available or in development. With this background, NORAD, the Norwegian Agency for Development Cooperation and the NTA, the Norwegian Tax Administration, map the selection of analytical tools and frameworks developed to support tax administrations and tax system reforms.

 

[4] In the report, Reforms of Tax Administration and Systems, a mapping of current analytical tools and frameworks, the following tools were selected for mapping. Among the Revenue Administration Analytical Assessment Tools, the report includes the OECD’s FTA, the Organization for Economic Cooperation and Development’s Forum on Tax Administration Maturity Models, the IMF, the International Monetary Fund's RA-GAP, short for Revenue Administration Gap analysis, TADAT, the Tax Administration Diagnostic Assessment Tool.

 

[5] Also included are the European Union's Tax Administration Fiscal Blueprints, FB for short, and the World Bank's Tax Diamond, the development of implementation and monitoring directives for tax reform tool.

 

[6] The data collection and reporting tools included in Norway's mapping exercises are ATAF’s ATO, the African Tax Administration Forum's African Tax Outlook, the ATI’s indicators, the IMF's International Survey on Revenue Administration were often referred to as ISORA, and USAID CTD, the United States Agency for International Development Collecting Taxes database.

 

[7] The mapping includes a comparison of scope, coverage, and the relevant characteristics that are important to understand the differences, similarities and comparative advantages of the tools. A few country examples are included in the report. The country examples described the impact on the recipient tax administrations and tax administrations experiences with the assessment process.

 

[8] They also highlight how tax administrations have different approaches when selecting tools and utilizing results. Joining me today is Frode Lindseth, and he is senior advisor in the capacity building unit of the NTA, and the man behind this mapping exercise. Welcome, Frode.

 

Frode Lindseth: [9] Thank you, Annette, and thanks to you and the TADAT Secretary for giving me this opportunity to talk about this exercise further.

 

Annette Schmitz: [10] Frode, can you start by explaining what we mean when we say tools to support tax administrations and reforms?

 

Frode Lindseth: [11] Well, I haven't seen one clear definition, but I guess you can say that they're all designed around guidance and support for tax administrations for different purposes and to support different stages of the reforms. And I think it's fair to say that they're all designed around good international practice to guide improvements.

 

[12] Then they kind of separate when it comes to coverage, assessment and modality and involvement in the unit from the tax administration. And I just want to underline that this mapping exercise is about a selection of tools for tax administrations only PMF tools, tax policy tools, etc. are not included in this method.

 

Annette Schmitz: [13] So walk us through the process. Why did the NTA and NORAD decide to take on this initiative and conduct a mapping exercise of select tax administration analytical tools and frameworks?

 

Frode Lindseth: [14] Yes. OK, so just a short recap on the background. As you said, Norway relaunched its tax for development program back in 2017. This program includes financial support to different organizations, but it also includes an agreement with the Norwegian tax administration as a key component in the bilateral workstream in the program. This is basically where the NTA comes in.

 

[15] So when we decided to do this, the capacity building team in NTA, we realized that during our scoping and design of missions that there were quite a few tools out there, which was great because we got the pressure to reuse diagnostic results as input to our capacity building programs.

 

[16] But at the same time, we saw that the number of tools kept growing and so the complexity for all involved to understand and select the right tool or in some cases maybe combinations of tools. Also, at that time, we saw that it was not easy to find out if an assessment had been done and it was not always easy to get access to results.

 

[17] Further, we couldn't really find one easy to access source of information on all the tools, comparative advantages, and from NORAD's side as a donor, it was important to get a deeper understanding about the different tools and their differences.

 

Annette Schmitz: [18] So that was the why the mapping exercise was done. Can you tell us about how it was done? What was the selection criteria for the tools that were mapped out in this report?

 

Frode Lindseth: [19] Yes, in 2019, the PCT

 

Annette Schmitz:  and by PCT we mean the Platform for Collaboration on Tax

 

 

Frode Lindseth: The PCT published a progress report with a complete list of existing tools mapped by what stage they best supported in a reform. And this overview confirmed that there were quite a few tools in place. And we made a selection based on our thoughts about use and coverage.

 

[20] So we ended up with the nine tools that you listed in the beginning, and we classify them into groups basically following the same classification as in the PCT report. So, this was our starting point and we designed a survey where we believe that by systemizing the responses, we would get a more systematic and detailed information on different tools, which we thought would facilitate more informed decisions on what tool to select or combination.

 

[21] And we also thought that this mapping would contribute to reuse of results with the purpose to minimize the burden on all involved. We also hope that this mapping could add some input to future development of new tools or maybe modules in existing. So the main source of information for this mapping exercise are the written responses to this survey we received from the different tool owners.

 

Annette Schmitz: [22] And what did you discover through this exercise?

 

Frode Lindseth: [23] When we started this, we had this idea or this picture about a table listing all the tools and their characteristics organized in rows and columns, making it easy to identify differences and potential overlap. But we soon realized that there were so many dimensions in play that it was not possible to simplify and squeeze it all together in a simple table.

 

[24] And I guess that leads us to one of the main findings. They're all different. There is no tool that ticks all the boxes. And there is there are no perfect overlap between tools or modules. They are all different and have their special features when it comes to modules in play and coverage. When it comes to what stage in a tax reform process, the best support. And there are differences in assessment and modality.

 

[25] Some of the tools are designed for assessment by trained staff, others not. And there are huge differences in the main steps in the assessment process. And last but not least, there are differences in the involvement required from all involved, including tax administrations. I would like to point to the report for more details on what tools do and what they don't and how.

 

Annette Schmitz: [26] Frode, you've mapped out these select tools. What's next?

 

Frode Lindseth: [27] First, I just want to clarify that I am not a big fan of the idea of merging as many tools as possible and ending up with maybe only one or very few. I think there is, and it should always be a free market for good ideas on how to assess support and improve performance in tax administrations.

 

[28] And I think the main message after this mapping is that they are all different and should be selected and used based on specific needs and capacity. So what's next? Starting with the donors. Donors need to coordinate among themselves and make sure that the need for new tools are well-documented.

 

[29] My point is basically that when new tools are developed, this should not only be supply driven by one organization but should be done in consultations with all relevant stakeholders. And I guess TADAT is one example, a good one. The story about TADAT started with a feasibility study back in 2011 with the purpose to determine the need for developing a new tool for assessing the performance of tax administrations.

 

[30] Moving on to the tool owners, I think they should continue to coordinate and look for opportunities to merge definitions and data collection processes where possible. And I think ISORA is a good example on how several organizations came together and managed to merge the data collection process.

 

[31] Tool owners should continue to look for opportunity to publish reports or at least results or information about ongoing DRM activities. One example I would like to mention is a database just made available from PCT webpage that brings together all DRM activities by PCT partners. Next, I think tool owners need to do a regular stock take and update on available tools.

 

[32] And finally, I think it would be good with some guidance on how different tools complement each other and how they can be used together in different stages of a tax reform.

 

Annette Schmitz: [33] You recommend there should be guidance with how tools complement each other. What do you mean?

 

Frode Lindseth: [34] I think that selecting the right combination of tools is not easy and I think guidance on how this could be done is needed. In the report, we added a few country examples to show how different countries have different approaches when it came to selecting tools or combination of tools, and how they use the results.

 

[35] Peru and Uganda are good examples. They both had several assessments done over the last years using different tools, and they both had good learning effects from all assessments. And they found ways that they could use results from the different assessments to improve performance.

 

Annette Schmitz: [36] And what about tax administrations, what should they do?

 

Frode Lindseth: [37] Administrations should familiarize themselves with tools and frameworks available and then choose, if they can, based on their specific needs and capacity. And I think we need to help them on a regular stock take on available tools would be one of the things that should be done.

 

[38] As a good example, I would like to point to Poland, where the revenue administration considered different tools to support a specific need they had at a specific time, and they selected based on what they found to be the best fit for that specific purpose.

 

Annette Schmitz: [39] So Frode, since you've worked on and published this report, the world is quite different due to the covid-19 pandemic, are there any implications for your report?

 

Frode Lindseth: [40] At the time we did this, covid-19 was not an issue, but if it had, I think it would be interesting to know how, or, and if these tools had adapted to this situation. I understand that TADAT assessments are done remotely at the moment.

 

Annette Schmitz: [41] Correct. TADAT went virtual March 13th, 2020. Since then, we've conducted many virtual trainings, and Colombia, Georgia, Dominica and South Africa have undergone virtual assessments.

 

Frode Lindseth: [42] You cannot see it in another way. These tools will be more important given this new situation, and I guess it all boils down to how flexible they are and how easily they can adapt to the new situation.

 

Annette Schmitz: [43] So Frode, to sum up, what are the main takeaways from this report?

 

Frode Lindseth: [44] Looking at the landscape of tools there are quite a few of them. I think a regular stock take, an update on tools available, together with some guidance on how different tools complement each other, is needed to help tax administration choose and help donors prioritize. Access to the information on what the tools do and don't do, is needed. No tool ticks all the boxes, although some are quite close.

 

Annette Schmitz: [45] Tell me which ones come close Frode?

 

Frode Lindseth: [46] Well, I guess I can't tell you because you need to read the book to find out who the owner is, and you need to read there being a report to find out what tool is best for you.

 

Annette Schmitz: [47] Thank you so much for. It was a pleasure speaking with you today.

 

Frode Lindseth: [48] Thank you. And thank you for the opportunity to talk about this, being the report.

 

Annette Schmitz: [49] For a more in-depth look at the mapping exercise, please visit the NORAD.NO website. Thank you for listening, ‘til next time.