The OECD Forum on Tax Administration (FTA) has published a study entitled “Working Smarter in Tax Debt Management” to provide a picture of the most effective approaches to tax collection and recovery. The study appears at a time when tax debts are higher than before the financial crisis, amounting to two thirds of a trillion dollars at the end of 2013 in OECD member countries. The report looks in particular at ways to integrate payment of tax into the process of compliance. Attention is given to the important role of international cooperation in tax collection. The report outlines a number of ways in which countries have introduced modernization into tax debt collection and is a guide to more effective collection.
Advanced analytics have been used by many countries to target debtors with the correct level of intervention at the correct time. This enables categorization of taxpayer behavior, saving the expense of treating all debtors in the same way. Governments can for example avoid sending reminders to all debtors including those who regularly ignore them. The use of advanced analytical methods enables governments to experiment with new methods of collecting debts and to quickly assess their effectiveness. This helps revenue bodies to achieve effective results for low costs.
The study examines a range of interventions used by governments in collecting debts, including measures to prevent people falling into tax debt and stricter enforcement measures. Drawing on a range of collection and recovery methods in different countries the report puts together a suite of measures that could be used by governments to improve tax debt collection.
The use of call centers to chase up tax debtors is increasing as these can be used to efficiently follow up a large number of debts. The OECD report looks at the required technology and staffing of call centers and the management of the work flow. It also examines the question of how to measure the performance of the staff within the call center.
The study examines the organization of debt collection, for example the categorization of debtors into groups such as large business which may need particular types of treatment. For small and medium businesses the debt collection may be done more efficiently using analytics and call centers. The debt collection function can then be looked at in terms of the main disciplines required such as the face to face interventions, tax collection during liquidations or the use of call centers. There is also a growing trend towards the centralization of debt collection within government.
International cooperation becomes essential in situations where tax debtors have gone to live in another country, a situation which occurs with increasing frequency. The international agreements on tax collection either in double tax treaties, other bilateral agreements or multilateral agreements are therefore increasingly important.
The study urges revenue bodies to look at the types of intervention mentioned and to compare them with current tax debt collection strategies within the administration. This will give rise to ideas on how the existing practice can be improved. The debt collection strategy should then be regularly reviewed to ensure that the tax administration keeps in step with the changing habits of tax debtors.
