On 3 April 2023 the OECD’s Forum on Tax Administration (FTA) published another report in its series on Supporting Small and Medium-sized Enterprises to Get Tax Right, this time looking at ways in which tax administrations can organise communication and engagement with small and medium enterprises (SMEs).
Many SMEs have only limited resources to manage their tax affairs and tax administrations therefore need to support them in their tax compliance and help to reduce the administrative burden resulting from tax obligations. The FTA report examines the appropriate actions that can be taken by tax administrations to engage with SMEs, with a focus on outbound communication and engagement.
The report outlines important considerations in developing a communication and engagement strategy. SMEs can face various friction points associated with annual tax compliance pressure points; when there are changes in responsibilities and obligations; or when certain important thresholds are crossed by the business during its lifecycle. These may include events such as becoming liable to register for VAT, hiring employees for the first time or starting to export goods overseas. If tax administrations draw up strategies based on these landmark events in the lifecycle of the taxpayer, the strategy can guide their choice of appropriate communication and engagement tools, to make their actions cost effective and to positively affect taxpayer behaviour.
Communications with SMEs can include notification of tax reporting deadlines, explanation of legal changes, or information about common misunderstandings or mistakes. This can be cost effective if done through the tax administration’s websites, although there also needs to be engagement with SMEs that do not use digital means of communication to any great extent.
In addition to the regular communications a tax administration can also launch educational initiatives for categories of taxpayer such as those just starting their business, or information aimed at specific industries to address particular issues. The tax administration may need to engage in consultation to clarify issues encountered in the implementation of systems and procedures or to identify the most effective ways of interacting.
The tax administration can also offer support to particular taxpayers, although this is more resource intensive. Some categories of taxpayer can benefit especially from additional help, such as those that are less engaged digitally or who have other special requirements. The report outlines how new technology can be used to reduce the costs of one-to-one engagement.
The report includes example case studies of engagement with SME taxpayers. One study looks at work carried out by the Swedish Tax Administration in implementing a whole of government approach to help manage the compliance burdens experienced by SMEs when they must deal with a number of different government agencies.
Another case study looks at the guidance model adopted by the Finnish Tax Administration to improve the service provided to new businesses. The approach is built on the advantages that can flow from supporting a new business with tax matters from the beginning, thereby reducing compliance risks and also reducing the costs.
