Even as late as 1991, for economists at the World Bank, the dominant motivation for taxation in developing countries was to finance public administration and the public provision of economic and social services. Secondary motivations the redistribution of income and the correction of market imperfections. Tax reform was seen as a component of broader fiscal reform at the heart of the stabilisation and adjustment process, and continued involvement of the Bank with tax reform was considered necessary in the circumstance of its work on trade and tariff reform, on the reform of public pricing in various sectors, on public expenditure reviews, and on issues of resource allocation and equity in structural adjustment.
By 2010 though, the world tax community had reckoned the rapidly changing environment (in which) revenue bodies are being asked to do more with less, to take on new tasks, and at the same time ensure that governments have the revenues they need to finance important programmes that benefit their citizens, and the OECD had begun to focus on dialogue among tax officials on tax administration issues, (to) identify opportunities for revenue bodies to improve the design and administration of their tax systems. And, newer challenges for tax administration in developing countries were seen as combating capital flight, reducing the size of informal economy and helping tax authorities to monitor compliance and collect taxes.
Appositely, the keynote address by Jeffrey Owens, director, Centre for Tax Policy & Administration, OECD, at the 67th Annual Meeting of Tax Foundation, Washington DC, defined the roadmap for tax reforms: Fundamental tax reform must by definition go beyond piecemeal changes, and beyond lowering (or raising) tax rates. It involves changing the way the tax system works. He did not dispute that tax systems are all about collecting tax dollars in the most efficient and fair manner to pay for public services, but he went on to list three main objectives of tax reforms: (a) simple tax system; (b) fairer tax system; and (c) system that promotes rather than inhibits growth.
Another recent document of OECD outlined the broad contours of ways in which information-communications technology (ICT) is changing the working of tax administration. Quite predictably, the internet has come to play a major role in delivery of information and services to taxpayers across national tax systems. Even while dependence on ICT tools including call-centres is increasing by the day, considerable potential exists for improving efficiency and effectiveness of tax systems through appropriate deployment of technology. Use of ICT leads to segmentation of taxpayers, because it allows customisation and personalisation for enhanced experience. Alongside the need for service delivery standards is being recognised. Yet again, remote access made possible by ICT redefines the role tax intermediaries can play in assisting national tax systems, and potential for collaboration and sharing makes it possible to think of sectoral re-engineering for cost effectiveness and optimising operational efficiency of the whole of the government.
Yet further, a more recent report of OECD underscores the role social media technologies can play in tax administration, Social media technologies (SMTs) are the new and personalised face of the internet their arrival and development bring promises of stratified personal contact and new forms of communication and interaction with potentially large and growing numbers of tax system stakeholders, and OECD goes on to recommend, revenue bodies are strongly encouraged to study (and) learn more about SMTs (and) use SMT (in a manner) compatible with general strategies of the revenue body.
Simply put, ICT is causing dramatic change in our lives, it changes the way we think, the way we communicate and the way we work. Use of ICT in in public sector is globally recognised as a big challenge, and is an even bigger challenge for us. It is a challenge because deployment of ICT requires smarter decisions made at a fast pace which often have to be taken without adequate inputs or decision-support systems. So, what is the way forward The first step is to recognise that incremental change is not enough, ICT mandates a radical, nay dramatic change. Second, we need to acknowledge that retrofitting manual processes based on stand alone systems and face-to-face interactions, designed for an old world legal and administrative framework, on to technology platforms is inefficient, impractical and anachronistic. The definition of the new world order should use the language of technology to design a new architecture, to be followed with a re-writing of legal and administrative rules and so on with the citizen as the king. If this sounds too radical, it indeed is and to borrow the expression of Owens, fundamental reform must by definition go beyond piecemeal changes. Reform of tax administration in India must look at the scope for sectoral re-engineering, collaboration and sharing of resources as a strategy for improving efficiency and effectiveness of tax systems, and service to taxpayers. For this, it will be useful to look around and learn how the private sector is adapting technology for both better service to clients and better bottom lines. Maybe it could be possible to adopt e-commerce solutions to e-governance
The author is a former chief commissioner, income tax. He handled various e-governance initiatives of the department including PAN