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Diagnostic assessment

As shown in the table, some patterns, gaps, and policy recommendations emerge from the assessments, recognizing that tax administration maturity levels vary from country to country. Hosting a TADAT assessment can help revenue authorities plan reforms that enhance effectiveness, efficiency and accountability.

Emerging patterns from completed TADAT assessments

Tax administration strengths that stand out

Prominent areas needing attention

·       Tax administrations strive to bring into the net those who are outside it.

·        Information about taxpayer obligations is generally wide in scope, current and easily accessible by taxpayers.

·       Dispute resolution processes and procedures are generally available and well designed.

·       Internal audit and external oversight are generally strong.

·       Financial and operational results are generally published.

·       Data is unreliable—a major crosscutting weakness that impacts all outcome areas.

·       Taxpayer registration databases are inaccurate.

·       Management practices for compliance and institutional risk are weak.

·       On-time filing and payment rates are poor.

·       Tax debt management practices are weak.

·       Wait times for resolving taxpayer disputes are unnecessarily long.

·       Revenue accounting systems are inefficient; size of suspense accounts is often unknown.

Source: IMF.

TADAT is one of the programs currently in use to assess transparency and accountability of tax administrations, however its mandate resides with the steering Committee - the European Union, Germany, Japan, Netherlands, Norway, Switzerland, and United Kingdom along with the IMF and the World Bank.

A country’s transparency standards may be verified according to whether they, for example, (i) make use of electronic payment methods (see further information on Africa here), (ii) administer effective collection systems, by applying taxes at source, (iii) whether the tax administration stimulates cooperative compliance and other proactive forms of assessment which stimulate the timely payment of taxes (such as tax rulings); and (iv) whether the country runs an effective tax dispute resolution system. Box 3 provides overall scores for countries according to these 4 criteria.

TADAT is the revenue counterpart to the Public Expenditure and Financial Accountability (PEFA) framework that assesses the condition of country public expenditure, procurement and financial accountability systems – so the two together are meant to provide a comprehensive view of a country’s whole fiscal picture. Like PEFA, TADAT is an international tool that will be available for use by country authorities and those assisting them to improve public services and social outcomes. Its design closely mirrors that of the PEFA performance measurement framework, in terms of both the broad intention of providing a standardized assessment of institutional performance and key methodological features, such as the scoring system.

TADAT is not a program designed for developing countries only. Any country can engage in the program upon request. TADAT works by evaluating a tax administration in each of nine ‘Performance Outcome Areas’ (POAs), shown on the TADAT ‘wheel,’ as demonstrated in Box 4 below. The evaluation starts with taxpayer registration — making sure all are in the tax net who should be, and that records are up to date – and goes all the way to looking at how tax disputes are handled and whether the tax administration is working transparently. A score is given for each dimension. Dimensions for a given indicator are aggregated, either as average or based on the weakest link, to form the score of the indicators. The POAs themselves are not scored. The TADAT Field Guide describes in detail the methodology used.

Tax Administration Diagnostic Assessment Tool performance outcome areas

The figure shows the use of certain practices in the tax administrations in the 36 countries that had undergone TADAT assessments through October 2016. It shows that out of the 36 countries assessed to date, 61 per cent use electronic payment methods, 86 per cent routinely apply withholding income taxes and 77 per cent have tax dispute resolution systems in place and make use of those systems routinely. Of the categories analysed, cooperative compliance is the one who seems to be lagging behind, with 47 per cent of the countries failing to apply it entirely, and 30 per cent of the countries using it only on an ad hoc basis.   Since TADAT information is private; it is not possible to relate the information to the assessed countries’ geographic location or economic grouping. 

 

An extract of the TADAT assessment report on Jordan is available. It summarises how Jordan copes with the use of electronic payment methods, the use of efficient collection systems such as withholding income taxes, whether it engages into proactive Initiatives to Encourage Accurate Reporting such as tax rulings, and whether it has an Effective Dispute Resolution system in place. Since this is a diagnostic tool, the report does not prescribe an immediate recommendation or advice. The objective is for countries to make countries themselves identify their own tax administration’s relative strengths and weaknesses, and develop reform strategies accordingly.

Targeted reports such as this can put the figures reported under RAF-IT under perspective, to the extent they are made public. For example, the fact that some large taxpayers may receive some enhanced levels of service in Jordan, might lead a tax administration to claim it runs a large taxpayer Office, and therefore provide a yes in a RAF-IT type survey. However, a closer analysis of the subject would reveal that the special services offered are limited, thus detracting from the taxpayer-tax administration type of relationship one would expect in a country with a specialized office. Going forward, countries and policy makers might benefit from a more extensive analysis, such as the one at hand.