ETaxation in Portugal Good Practices and Perspectives

1
E-Taxation in Portugal Good Practices and
Perspectives

• 5th Eastern European eIGov Days in Prague
• 11th 13th April 2007

Paulo Duarte Silva
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Agenda

• 2. Methodology
• 3. E-Taxation Practice Evaluation
• 4. Perspectives and Final Remarks

1. Introduction
3
Agenda
In this world nothing is certain but
death and taxes Benjamin Franklin
(1706-1790) Scientist, Inventor, Politician
(among others)
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Introduction

• The efficiency and justice in collecting fiscal
  revenues are government priorities for any
  administration.
• However, the current situation of the Portuguese
  economy
• adds further meaning to this statement!
• In order to achieve this goal

The commitment with EU to reduce the fiscal
deficit from 6,0 of GDP in 2005 to below 3 of
GDP without one-off measures by 2008
The Portuguese government has elected
expenditure-based fiscal adjustments as the most
durable and effective economic policy
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Introduction

• Despite the government focus on the debt side,
  there were important policies also to be
  developed in the revenue side.
• Considering that the lion share of revenues of
  a country is generated by taxes, the electronic
  taxation (e-taxation) was one of the action
  lines presented last year by the Portuguese
  Ministry of Finance and Public Administration.
• Moreover, it is understood by the fiscal
  authorities that
• Therefore, several emblematic initiatives were
  developed by the Fiscal Administration as a way
  to achieve the above enumerated goals

E-taxation services in Portugal could act as
critical driver on changing the installed
impunity/resignation culture that subsists in the
society
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Introduction - Tax Administration Main Actors

• Ministry of Finance and Public Administration
  (MFPA)
• MFPA is the government department in charge of
  the definition and orientation of the state
  financial policy, namely in the budget and fiscal
  domains, through the coordination of the
  financial policies of the several sub-sectors of
  the Administrative Public Sector.
• Secretary of State for Fiscal Affairs
• It is the arm of the Ministry of Finance and
  Public Administration in charge of all the Fiscal
  and Taxing affairs. The two main actors of the
  e-taxation reform are DGCI and DGITA.
• Directorate General for Taxation (DGCI)
• DGCI has as its main object the implementation
  of the Portuguese Government tax policy.
• DGCI encompasses Central Services, Regional
  Services and Local Services.
• Directorate General of Informatics and Support of
  Tributaries and Customs Services (DGITA)
• DGITA is a department of Ministry of Finance
  that has the mission to help DGCI, through the
  development of technological infrastructures and
  by offering high quality services that are
  required for those departments achieve their
  established goals.

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Introduction - Context
DGCI - Levels of Activity
C O L L E C T over 25 Billion Euros OE 2006
Personal Income Tax (IRS)
4.300.000 submissions
Source Up Front Collection
500.000 Paying Entities
75.000 Monthly System
VAT
650.000 Trimonthy System
Corporate Income Tax (IRC)
350.000 submissions
Executive Debt
3.000.000 processes
Adapted from Paulo Macedo, November 2006
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Agenda

• 1. Introduction
• 3. E-Taxation Practice Evaluation
• 4. Perspectives and Final Remarks

2. Methodology
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Methodology

• We have selected the most important projects that
  have been continued or initiated in the last two
  years and that had a significant impact on the
  overall results of the e-taxation practice in
  Portugal.
• The criteria used for this selection corresponds
  to all (five) of the Fiscal Administration
  initiatives that applied and were recognized by
  its merits on the 3rd and 4th Edition of Best
  Practices in the Public Sector Award, organized
  by Deloitte, Diário Económico and National
  Institute of Public Administration (INA), in
  2005 and 2006, respectively.
• All of these projects have been developed by the
  DGCI/DGITA partnership and have been awarded with
  an excellence special prize for their
  contribution to the Reform of the Tax System,
  namely in the Electronic Services category.

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Methodology

• The list of projects stands as follows
• Electronic Submissions - 3rd Edition, 2005
• Accounting Technicians Management via Internet
  4th Edition, 2006
• Buy your Home without directing to the Finance
  Services 4th Edition, 2006
• Electronic Collection Process 4th Edition, 2006
• Electronic Tributary Justice 4th Edition, 2006
• In addition to this evaluation, we will refer to
  the Web Based Survey on Electronic Public
  Services - Report of the 6th Measurement,
  performed by Cap Gemini in April, 2006, used to
  assess the level of online availability and
  sophistication of public services from each of
  the 25 European Union members (plus 3 outside
  states).

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Proposed Set of Criteria

• Benefits to the Citizens (Taxpayers)
• This dimension refers to the quality and
  quantity of the services provided by the project
  and therefore to the resulting benefits to the
  taxpayers. For instance the reduction of the
  time spent by the average taxpayer when filling
  the tax submission or the possibility of
  correcting wrong data submissions.
• 2. Efficiency and Effectiveness
• Here, we will assess the extent to which actual
  improvements in efficiency and effectiveness are
  realized, e.g. Does the Fiscal Administration
  optimize the use of its resources to achieve
  better results (e.g. increase of the Total
  Fiscal Revenue or in Total Number of electronic
  submissions).

We propose to perform a subjective evaluation of
the selected set of Portuguese projects by
considering and adapting the following five
dimensions of the BEGIX approach
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Proposed Set of Criteria

• 3. Participation
• This domain is concerned to evaluate whether the
  services are designed so as to promote political
  communication and enable a higher degree of
  citizen participation, e.g., direct user access
  to relevant contact persons via e-mail or the web
  or consideration of user wishes.
• 4. Transparency
• This facet focuses in whether e-government
  contributes to the realization of the transparent
  state. For instance, the amount of information on
  executive and legislative processes provided in
  the e-taxation services is one of the indicators
  that contribute to assess the transparency level.
• 5. Change Management
• At last, this dimension evaluates the course of
  the planning and implementation process in the
  e-government program, e.g., inclusion and
  motivation of the employees, and monitoring and
  controlling.
• Considering this, we will analyze and evaluate
  the pre-selected set of projects, emphasizing in
  each project what were the main privileged
  dimensions.

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Agenda

• 1. Introduction
• 2. Methodology and Criteria
• 4. Perspectives and Final Remarks

3. E-Taxation Practice Evaluation
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E-Taxation Practice Evaluation
PROJECT A

• A) Electronic Submissions (Declarações
  Electrónicas)
• Description Allows taxpayers to fulfill their
  fiscal obligations 100 online. All of the
  subsequent e-taxation projects have been
  developed to create and integrate new e-services
  within this portal.
• Key Benefits and/or Results It has about 5
  million registered users and over 9 million tax
  submissions were received in 2006. The
  implemented process optimization reduced the
  process of collecting and validating submissions
  from 40 to 4 days, rationalizing the labor cost
  associated to the digitalization of data,
  document management and the collection process
  itself.
• Main benefits for the taxpayers
• Services available online 365/7/24
• No need to acquires paper forms
• Priority payment of the reimbursement

• Main benefits to the Fiscal Administration
• Reduction of the resources assigned to the
  front-office
• and collection
• Reduction in the collection errors and therefore
  in the
• resulting costs associated
• Decrease in the exploration cost of other
  systems
• Decrease in the volume of the physical archive

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E-Taxation Practice Evaluation
PROJECT A

• A) Electronic Submissions (Declarações
  Electrónicas)
• Critical Success Factors
• Availability of services totally automated and
  integrated with the back-office
• Availability (from start) of the following
  options deliver, correct and consult
• Availability of confirmation documents (PDF
  files) of the transactions made, when applied
• Concern on the design and easy-of-use of the
  interface
• Giving incentives (like priority reimbursements
  to online submissions)
• This project covers all of the five BEGIX domains.

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E-Taxation Practice Evaluation
PROJECT B

• B) Accounting Technicians Management via Internet
• Description Creation of a new electronic
  service, integrated in the Electronic Submissions
  Portal, that enable the Taxpayers and theirs
  Accounting Technicians (TOCs) to interact with
  the Fiscal Administration for managing and
  updating the information to themselves, in a fast
  and effective way.
• Key Benefits and/or Results
• The Fiscal Administration is greatly fostered by
  optimizing its human resources at a national
  level, by enabling that the modifications in TOCs
  will be made online. In the other hand, and as a
  result of the simplification measures, it
  promotes the fulfillment of the fiscal
  obligations.
• For the Clients, (taxpayers and TOCs) this
  process enables great reductions in all the costs
  (like time and forms acquisition) incurred when
  fulfilling their fiscal obligations. The
  relationship with the Fiscal Administration
  becomes more transparent, due to the option of
  tracing their processes online.

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E-Taxation Practice Evaluation
PROJECT B

• B) Accounting Technicians Management via Internet
• Critical Success Factors
• The fact that the services created,
  simultaneously increase a significant value to
  the clients (taxpayers and TOCs) and the Fiscal
  Administration. By automating and putting online
  a set of services that used to consume a great
  amount of resources of the Fiscal Administration
  (especially due to the errors that resulted from
  outdated data or information), it assures a
  win-win situation to all of the parties involved.
• Benefits to the Taxpayer, Efficiency and
  Effectiveness and Transparency are the three main
  BEGIX domains covered by this particular project.

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E-Taxation Practice Evaluation - Project C
PROJECT C

• C) Buy your Home without directing to the Finance
  Services
• Description In the scope of the Municipality
  Taxes, the Fiscal Administration developed and
  implemented a set of applications and services
  that allow the taxpayer to fulfill every action
  needed to the acquisition of a home, without
  having to directing in person to the Finance
  Services.
• Key Benefits and/or Results
• The fulfillment of the fiscal obligations is
  simplified and much more easy to perform
• Fulfillment cost are greatly decreased
• 100 full service is in the different real state
  business operations
• The efficiency is huge. After filling the data,
  the system automatically runs the process
• The quality of the service is only conditioned
  by the quality of the data introduced by the
  client
• It allows business companies specialized in this
  area to provide a broad service to their clients
• Process management, the taxes payment and
  collection is more fast with obvious benefits to
  the State financial activity
• This system manages the 20 million buildings that
  exists in Portugal and is used by over 8.000
  users daily.

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E-Taxation Practice Evaluation
PROJECT C

• C) Buy your Home without directing to the Finance
  Services
• Critical Success Factors
• The Fiscal Administration here makes a clear
  bet on life cycle events as a way of reward
  the citizen with services not only related with
  taxes. Although, there are some obvious gains
  that result from municipal taxes declaration (IMT
  and IMI) this set of services were designed in
  such a way that provide value-added information
  to all of the potential real state buyers and
  sellers.
• Benefits (to the Taxpayer) and Transparency are
  the main BEGIX domains covered here.

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E-Taxation Practice Evaluation
PROJECT D

• D) Electronic Collection Process
• Description The main goal was to uniform the
  collecting procedures in order to fully take
  advantage of the benefits provided by the ICT,
  namely in the Information domain.
• Key Benefits and/or Results
• Reduction of costs both to the Fiscal
  Administration as to the taxpayer.
• Optimize resources, free human resources (that
  were strictly assigned to the collection and
• processing of the submissions) and redirect
  them to other critical areas like the fraud
  prevention
• and tackling tax evasion
• Major qualitative and quantitative increase in
  the processing cycles
• The relationship between the Fiscal
  Administration and its employees also become more
  
• transparent and safe, resulting in a fast,
  safe and convenient service for the taxpayers.
• Today, it is already possible that a taxpayer
  submit its declarations, correct them, perform
  payments, and also consult his/her tributary
  situation, through the permanent online service.

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E-Taxation Practice Evaluation
PROJECT D

• D) Electronic Collection Process
• Critical Success Factors
• By creating a unique submission option for the
  payment of the several taxes, the entire
  collecting network has been developed and new
  payment methods have been introduced.
• A horizontal view of the several processes of
  payment allowed the Fiscal Administration to
  implement a more logic, simple and effective
  service that fulfils both its needs and the needs
  of the taxpayers.
• Efficiency and Effectiveness, Transparency and
  Change Management are the more relevant BEGIX
  domains directly impacted by this project.

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E-Taxation Practice Evaluation
PROJECT E

• E) Electronic Tributary Justice
• Description Simplify the fulfillment of the
  fiscal obligations of the taxpayers, increase the
  Fiscal Administration effectiveness in collecting
  fiscal debts and in sanctioning illicit actions,
  provide taxpayers with a quick acknowledgement of
  their right in litigation situations, reducing
  the context costs overtaken by business and
  citizens through the use of ICT.
• The main processes targeted in this project were
  coercive collection processes, gracious
  reclamations, criminal surveys and judicial
  impugnation in the administrative phase, and to
  provide in the Internet the services options
  available on the physical fiscal services.
• Key Benefits and/or Results
• Elimination of waiting times and queues for the
  taxpayers
• Huge increase in the production, the collection
  and in the extinction of processes
• Significant increase of the interaction between
  the Fiscal Administration and the taxpayers
• Consolidation of an external image of
  effectiveness by the Fiscal Administration
• Moralization of the fulfilment of the fiscal
  obligations
• Increase on the motivation of the Fiscal
  Administration employees.

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E-Taxation Practice Evaluation
PROJECT E

• E) Electronic Tributary Justice
• Critical Success Factors
• The change of the administrative and process
  management paradigm
• The replacement of the long, erratic and
  expansive manual processes with electronic
  solutions
• that automate the procedures resulted in a
  new level of effectiveness and quality
• The change of the relationship paradigm to the
  taxpayers, by replacing a litigious, slow and
• expansive front-office with a friendly,
  helpful and simple service using the Internet has
  its favored
• channel also resulted in new quality standards
• The clear bet on the massive databases crossing
  to obtain the production outputs and the
• automated execution of the processes as the
  share of data, information and systems with other
  
• public entities
• The three main BEGIX domains of this project are
  Efficiency and Effectiveness, Transparency and
  Change Management.

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E-Taxation Practice Evaluation EU Survey

• CapGemini/EU Web Based Survey on Electronic
  Public Services
• This study is based on a pre-defined list of 20
  basic public services, adopted by the Council of
  the EU in March 2001, that are classified by
  their stage of online availability and
  sophistication.
• From this list of 20 basic public services, 4 are
  directly related to the e-taxation practice.
  Next, we will identify each of these electronic
  services and then describe and present the
  performance achieved by Portugal
• 1. Income taxes declaration, notification of
  assessment
• Responsibility Central Government, Ministry of
  Finance and Public Administration, DGCI
• Website Online Tax Declarations
• Description Fully transactional online
  submission and assessment system. Users can also
  consult their tax files, statistics and conduct
  simulations.

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E-Taxation Practice Evaluation EU Survey

• 2. Corporation tax declaration, notification
• Responsibility Central Government, Ministry of
  Finance and Public Administration, DGCI
• Website Online Tax Declarations
• Description Allows registered businesses to file
  their taxes online. They can also consult their
  online files, statistics and conduct simulations.
• 3. VAT declaration, notification
• Responsibility Central Government, Ministry of
  Finance and Public Administration, DGCI
• Website Online Tax Declarations
• Description Allows registered businesses to file
  their VAT returns online.
• 4. Customs declarations
• Responsibility Central Government, Ministry of
  Finance and Public Administration, DGITA
• Website Online Customs Declarations
• Description Online declaration for customs
  operations.
• In all of these services, Portugal achieved the
  highest score in the Sophistication stage 4/4

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Agenda

• 1. Introduction
• 2. Methodology
• 3. E-Taxation Practice Evaluation

4. Perspectives and Final Remarks
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Perspectives and Final Remarks Some Data
Figure 1 Registered Users per Year (in Thousands)

• Figure 2 Submitted Tax Declarations by Nature

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Perspectives and Final Remarks Some Data
Compared to the 5th measurement, Portugal
has done an overtaking manoeuvre. This puts
both indicators just above EU(18)
Cap Gemini/EU Web Survey 6th Measurement
Portugal Country File
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Perspectives and Final Remarks Some Data
Impact of Fiscal Efficiency on Fiscal Deficit in
2006 Evolution of Fiscal Deficit ( of
GDP) 6.0 in 2005 2,2 billion Euros
Increase in Revenues 3.9 in 2006
Increase of GDP growth (1,3 billion )
(4.6 in 2006 State Budget) Rise of
several taxes (about 600 million ) Increased
Fiscal Efficiency (about 300 million
) () 3.3 in 2007 ? 2007 State
Budget lt 3.0 in 2008 ? UE Compromise
Portuguese GDP in 2006 155 Billion Euros
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Perspectives and Final Remarks

• The projects presented in this paper have all
  contributed to this success, and although the
  analysis and evaluation performed referred to the
  most recent years (2004 to 2006), we should not
  forget that ..
• As we have seen in the critical success factor
  analysis

The actual e-taxation system did not establish
itself overnight and many of the results we see
today are an image of the hard work and planning
that have been made at least in the last 10 years

• A great deal of the success of the system must be
  attributed to the strategic system analysis and
  planning and the system integration resulting
  from that

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Perspectives and Final Considerations

• The recent governments have made a good choice
  when favoured the investment on e-taxations
  projects. Not only the results are here to prove
  that the bet was safe in terms of effectiveness
  of the Tax but it also has helped to the
  simplification and moralization of the system
  itself
• The benefits and transparency offered by the
  actual e-taxation services is significant and
  have been increasing in a sustained way

Tax employees are now more motivated to perform
their jobs with the great support of the new ICT
tools and the improve of the external image of
the Tax Administration also results in a
confidence environment by the majority of the
citizens.
Many of the already offered e-services are
becoming only available online (e.g.,VAT for
businesses) and with the already (and expected)
penetration of the personal taxation services it
should not take long for some of these services
follow the same way,
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Perspectives and Final Remarks - Recommendation

• Another very important lesson from the
  Portuguese case is that
• like
• Investment in highly trained personnel
  (inspectors, programmers, mathematicians, etc.)
• Massive increase of audit and inspection actions
• Promoting Fiscal Fulfilment and Fraud and Tax
  Evasion Reproof (in Media)
• Publishing online the top list of individual and
  collective debtors as a inhibition measure
• among others
• As a final recommendation, one of the areas
  (BEGIX dimensions) that we think that should be
  fostered in the near future is Participation.
• Although, some efforts have already been made in
  this area, a lot more must be done in order to
  give taxpayers the opportunity to actively
  participate with the Tax Administration. This
  could be achieved by providing the proper tools
  for debating public topics (chat rooms, forums)
  and by making sure that strong content is offered
  to lead the discussions and administrate the
  lists/forums constantly.

In order to achieve these results, the e-taxation
services and projects developed have been
complemented by a set of non-ICT initiatives and
policies
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• Thank You!
• paulo.silva_at_ina.pt