#etaxation

[govtechrity]

E-filing taxes in Tajikistan: a shield against extortion, but not so much a sword against collusion

Palace of Nations, Dushanbe, Tajikistan  cc: RyansWorld

Tax collection is a hotspot for corruption offering multiple opportunities to lower tax burdens in return for bribes to inspectors. Electronic filing of taxes promises to reduce the human element - can it therefore also help reduce corruption? 

An interesting experiment from Tajikistan suggests so, however with some qualifications. Firms were offered the opportunity to file their taxes online and the ones that reported being victims of extortion from tax officials did so in greater numbers. However, firms that are prone to tax evasion appear to shun the system, suggesting that there will be some adverse selection unless e-filing can be made mandatory for all. 

Oyebola Okunogbe and Victor Pouliquen (2017):  Using Technology to Improve Governance: Evidence From the Introduction of Electronic Tax Filing in Tajikistan, abstract available here

[govtechrity]

Electronic tax filing and advanced IT systems for tax authorities are widely viewed as cornerstones of reforming public revenue systems,  as for example proposed in the wake of the recent financial crisis and described in my related working paper. But is going electronic sufficient or even necessary? Here comes a very interesting case study from South Africa that suggests that it might not be a priority in all contexts.

Compiled by the Princeton-based Innovations for Successful Societies the case study documents the remarkable success of South African tax authorities that managed to nearly double the number of income-tax payers over the last decade.  How did they do this? Here an excerpt from the conclusions:

"success was a “people story,” not a technology story. “Part of our broader strategy was that this would be a non-technology change,” [one of the main architects of the reforms ] said. “So although there will be adaptations to some of our existing legacy systems, we would not focus on technological investment at this point in time. It was more about processes and people and changing the service approach and ultimately also changing the enforcement approach of [the tax authorities]."

One should of course be cautious and not generalise from this single case study. Yet, this account certainly provides a broader perspective on the toolbox for tax system reforms where e-taxation might offer itself as an important, but not always as the most central element.