THE NEW TECHNOLOGIES TO SUPPORT MANAGEMENT OF THE TAX ADMINISTRATION AND TO IMPROVE THE TREASURY-TAXPAYER RELATIONSHIP.

Tax collection has a very long history, and for all of this time tax collectors seem to have made use of the most effective technology they could obtain. Over recorded time, most things have been subject to taxation, and our predecessors have shown remarkable imagination in their selection of appropriate technology. The importance of an accurate tax roll, and the use of the simplest technology that will serve the required purpose have a long and sometimes colourful history in taxation. We can salute our predecessors for their ingenuity, but what useful lessons can we learn from their experience? While there are many lessons tax administrations can draw from the experiences of others and from history, it must be noted that even countries with apparently very similar legislation have different traditions and cultures that often make direct comparisons difficult.

Some Parameters of Tax Administration

The best technology is the simplest technology that effectively fulfills the operational purpose. Tax administrations now use technology from two or three different eras: our paper forms and printed explanatory brochures rely on the technology of the early twentieth century; our telephones and the large mainframe computers became tax collectors tools half a century ago; and, Personal Computers (PC) and automated telephony systems appeared in the last decade. While each of these technologies has its place in the tax collectors arsenal to serve particular purposes and segments of the client population, the multiplicity of technology and delivery channels poses a significant management challenge.

The client population for tax administration has become increasingly diverse. In the early part of the twentieth century, the fraction of the population who dealt with the tax administration was small. Tax paying was concentrated on a small number of comparatively sophisticated businesses, and a few wealthy individuals. Most government revenue was collected through Customs duties and by Excise taxes. Those paying the duties and taxes were either told the amount to be paid before their goods were released by Customs, or were large companies who were either closely monitored, such as distillers, or could employ experts to deal with their liabilities. For much of the twentieth century in Canada, the main tax on manufactured goods was the Manufacturer’s Sales Tax (MST) that was imposed on about 50,000 larger companies. By the time that the MST was replaced in 1991 by a value added tax, there were more than 20,000 exemptions that had to be administered.

A major reason for the introduction of the Goods and Services Tax (GST), Canada’s value added tax, was the distortion of economic activity caused by the large and growing erosion of this tax base. However, the effect of the change to the GST was that tax administration in Canada went from the management of relationships with 50,000 sophisticated, highly experienced businesses, largely an interaction with specialists, to dealing with more than 2 million mostly very small businesses, most often directly with the sole proprietor who had no wish to become an expert in taxation. This represented a massive shift in the level of expertise and motivations of the target audience for tax administration, from a situation of routine interaction with well informed experts whose job largely depended on keeping their organization compliant, to one that was much more complex.