How can tax system performance be accurately compared? This article by the United States Agency for International Development (USAID) provides a series of indicators and benchmarks that can help to put such tax system assessments into an international perspective. They can also set specific targets for performance, reform and modernisation. Furthermore, they can be used to monitor progress over time.
Until recently, there has been only limited effort to develop comprehensive tools for assessing tax systems. International institutions, such as the World Bank, the International Monetary Fund and USAID, have been assessing tax system performance and capabilities without a solid international comparator basis for undertaking these assessments. This article goes beyond recent attempts and presents benchmarking as a tool for assessing both tax system performance and the inputs and systems of any tax administration. It is a means of comparing a set of specific indicators that capture the essence of most of the tax systems to either international best or perhaps most relevant practices.
The benchmarking system also helps to facilitate establishing goals and specific targets for tax system improvement and modernisation.
- Specific benchmarks can be tracked over time and can show how reform or modernisation efforts are being implemented and also how they contribute to performance.
- Benchmarking can be used to compare a country’s tax system with a regional or international set of norms or comparators.
- It can also be used to compare the condition and performance of the tax system over a period of time, either discrete snapshots in time or evolution of the benchmark or indicators over a number of years.
- The methodology can be generalised to all national-level tax systems throughout the world.
Every year an indicator or two has been added, corrected or removed from the overall system.
- Application of the methodology to other countries, as well as follow up applications in the countries that have already been studied, would help to validate the indicators used and demonstrate their usefulness as performance indicators.
- Performing a number of comprehensive benchmarking studies in specific regions and around the world would be useful.
- It would enrich the system and provide better guidance to individual countries with regard to their own performance enhancement and tax organisation and administration efforts.
- Regional comparisons are useful since tax administrators seem to want to compare their own systems with those of neighbouring or regional competitors.
- A broader set of comparative studies can be helpful since there is much that can be learnt about innovation and reform from outside of a particular region.
- In an ideal situation, data for all the benchmarking indicators would be collected for a large number of countries, regional and taxonomic groupings, and averages or norms could be calculated, and a book produced, perhaps on a periodic basis.
