At the meeting of the OECD’s Forum on Tax Administration (FTA) on 9 to 11 May 2016 a publication entitled “Tax Administrations and Capacity Building: A Collective Challenge” was issued.
Domestic resource mobilization requires an effective tax system administered by an efficient tax authority. Resources can then be mobilized for sustainable development, good governance, growth and stability. The implementation of the initiatives in relation to base erosion and profit shifting (BEPS) and to the automatic exchange of tax information is leading to greater inclusion of developing countries in the process as global changes are required to deal with the challenges to the international tax system.
The need for tax cooperation is therefore greater than at any previous time. Effective cooperation depends on building and maintaining relationships between tax authorities. The report looks at ways in which the FTA and its member countries can organize themselves to coordinate support for tax administration capacity building.
The study suggests that in an integrated international tax system it is necessary to engage tax administrations of countries outside the FTA. This ensures global effectiveness and is essential for implementation of BEPS recommendations and exchange of tax information. The FTA member countries are in a key position for supporting the capacity building by participating in international and regional tax organizations and by providing bilateral support to developing country tax administrations. By giving thought to how they organize capacity building strategies the donor tax administrations may achieve better outcomes.
As the demand for capacity building is increasing and the required knowledge and skills are scarce there is a need for more efficient organization by tax administrations in delivering capacity building assistance. The various stakeholders must work together to avoid duplication and identify best practice. Use of the prototype online Knowledge Sharing Platform can facilitate broad sharing of knowledge, expertise and innovative practices. Donor tax administrations should further explore the value of a common approach.
Recommendations
The key recommendations of the study are as follows:
- Adoption of a common Tax Administration Capacity Building Framework.
- Application of a whole-of-government approach to capacity building in each jurisdiction, integrating tax administration activities into wider development.
- Development of a Knowledge Sharing Platform to cooperate and create efficiencies in sharing expertise to support capacity development.
- Establishment of a capacity building network by the FTA that will connect to the work of other international and regional organizations.
These recommendations will allow the tax administrations to meet the demand for capacity building. They will also help to position FTA member countries to support the implementation of BEPS and the automatic exchange of information. The FTA intends to focus its efforts on engaging with member countries to advance the recommendations.
