This chapter focuses on the plans a government and tax administration should develop for their strategic, tactical, and operational purposes. It explains the concept of strategic alignment, highlighting the links between the ways in which the plans break down large-scale, organization-wide strategic objectives into small, actionable goals for a tax administration’s operational units.
Strategic Alignment
The process of creating linkages between the goals of the government, the Ministry of Finance,1 and the tax administration at the strategic, tactical, and operational levels is called strategic alignment.
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Strategic alignment enables the breakdown of high-level goals into more specific objectives and strategic initiatives, and their assignment to leaders and teams at the next level. Leaders and teams then break down these objectives and initiatives into plans and tactics, and into concrete activities. This way, high-level goals and objectives permeate across the entire administration and direct all its activities. |
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Strategic alignment enables the breakdown of high-level goals into more specific objectives and strategic initiatives, and their assignment to leaders and teams at the next level. Leaders and teams then break down these objectives and initiatives into plans and tactics, and into concrete activities. This way, high-level goals and objectives permeate across the entire administration and direct all its activities. |
Hierarchy of Plans
Each tier of the hierarchy of plans in Figure 1.2 is explained in more detail in the following sections.
Government Plan
Strategic alignment begins with the government’s overarching plan that sets out their social and economic goals. To generate tax revenue to fund the delivery of those goals, tax revenue strategies must be developed and implemented. An internationally emerging practice is the development of a country-owned medium-term revenue strategy (MTRS),2 which takes an all-encompassing approach to reforming a country’s tax system. It is a high-level road map of a tax system reform that covers revenue policy settings, the tax legal framework, and the tax and customs administrations.
This MTRS process has been designed to achieve tax system reform, typically over a four-to-six-year period, within a comprehensive framework of the following four interdependent components (see Figure 2.1):
1. Revenue and other goals: building broad-based consensus in the country for medium-term revenue goals to finance needed public expenditures
2. Comprehensive tax system reform: designing a comprehensive tax system reform covering policy, administration, and the tax legal framework to achieve these goals
3. Sustained political commitment: sustained medium-term government commitment to reform— from a whole-of-government perspective that goes beyond the tax administration and the Ministry of Finance
4. Coordinated capacity development support: securing adequate resourcing—domestically and from capacity development partners and donors—to support implementation of the MTRS
The Core Elements of a Medium-Term Revenue Strategy
The Core Elements of a Medium-Term Revenue Strategy
The Core Elements of a Medium-Term Revenue Strategy
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The MTRS approach frames the tax system reform through a multiyear commitment, which includes a mandate and monitoring mechanism. This ensures effective implementation at the highest levels of government and increases the likelihood of achieving and sustaining effective reform governance. |
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The MTRS approach frames the tax system reform through a multiyear commitment, which includes a mandate and monitoring mechanism. This ensures effective implementation at the highest levels of government and increases the likelihood of achieving and sustaining effective reform governance. |
Ministry of Finance’s Strategic Plan
The Ministry of Finance’s strategic plan sets out its goals to the tax administration and the actions needed to achieve those goals. The goals and objectives include the coordination and implementation of the government’s economic and fiscal policies and programs. It should include the allocation of financial resources to provide appropriate public services and contribute to the overall development of the country. In most countries, the tax administration falls under the Ministry of Finance portfolio. Where this is the case, the tax administration’s strategic plan must align with the Ministry’s strategic plan.
Tax Administration’s Strategic Plan
The tax administration’s strategic plan outlines the desired future state of the organization and translates this vision into broadly defined goals or objectives and the sequence of steps to achieve them. The strategic plan covers all aspects of a tax administration’s activities and must be revisited regularly, as the operating environment is always evolving. As projects and plans progress, the tax administration needs to measure progress and achievements against the objectives in the plan. An example of a tax administration’s strategic goals and objectives is shown in Figure 2.2.
Example of Strategic Goals and Objectives of a Tax Administration
Note: VAT = value-added tax.Example of Strategic Goals and Objectives of a Tax Administration
Note: VAT = value-added tax.Example of Strategic Goals and Objectives of a Tax Administration
Note: VAT = value-added tax.In this example, the tax administration’s objective of strengthening compliance (Objective 2.1) is aligned with, and contributes to, the government’s goal of maximizing revenue collection in an effective way.
For each objective, specific initiatives will be developed to support the achievement of the objective. For example, in the case of Objective 2.1 in Figure 2.2, the initiatives are numbered 2.1.1, 2.1.2, and so on. Figure 2.3 includes the time period during which the activities would be undertaken.
Example of Initiatives to Meet Objective 2.1: Strengthen Compliance
Example of Initiatives to Meet Objective 2.1: Strengthen Compliance
Example of Initiatives to Meet Objective 2.1: Strengthen Compliance
Tax Administration’s Multiyear Focused Plans
Based on their medium-term strategic plan, many tax administrations formulate and design multiyear plans for specific areas, which require longer than a yearly planning and implementation cycle. Common multiyear focused plans typically include the reform program or plan, as well as plans for support areas such as information technology (IT), human resources (HR; workforce allocations and capability), and compliance risk management and communication.
It should be emphasized that there is no one-size-fits-all approach to this model. Developing multiyear focused plans is country specific and should reflect the tax administration’s size, institutional arrangements, governance model, and corporate dynamics. In some situations, multiyear focused plans are not used.
Tax Administration’s Annual Plans
A tax administration’s annual plan—with goals, indicators, and targets—is developed by functional units (departments/divisions/units) for their respective area of competence, along with a budget and detailed work plans to meet the objectives of the strategic plan (and the multiyear focused plan if one has been developed).
Annual plans specify productivity, service levels and enforcement initiatives, staffing levels, and expenditure/budget requirements. They also include quantity, quality, and timeliness productivity performance indicators. Table 2.1 shows an example of a component of an annual operational plan with performance metrics for three typical tax administration functions.
A Subset of a Tax Administration’s Annual Plan: Performance Metrics
A Subset of a Tax Administration’s Annual Plan: Performance Metrics
| Number of nonregistrants identified and registered | 1,000 | 2,000 | 2,500 | 1,200 |
| Number of late-fled returns obtained | 750 | 1,000 | 1,300 | 500 |
| Number of comprehensive audits completed | 1,000 | 1,500 | 2,000 | 750 |
| Amount of additional tax assessed (local currency) | 10,000 | 17,000 | 23,000 | 7,000 |
A Subset of a Tax Administration’s Annual Plan: Performance Metrics
| Number of nonregistrants identified and registered | 1,000 | 2,000 | 2,500 | 1,200 |
| Number of late-fled returns obtained | 750 | 1,000 | 1,300 | 500 |
| Number of comprehensive audits completed | 1,000 | 1,500 | 2,000 | 750 |
| Amount of additional tax assessed (local currency) | 10,000 | 17,000 | 23,000 | 7,000 |
Local Operational Plans
Local operational plans are developed by an administration’s operational regional or field office. They outline what activities the organizational unit (such as a team) will focus on, on a monthly, weekly, or even daily basis. These plans include specific procedures and tasks that occur at the operational levels of the tax administration. Field office managers/supervisors must plan the routine actions of the department using specific detail that sets out expected outcomes at the individual level.
Figure 2.4 highlights the cascading nature of strategic planning. The plans are aligned from the highest level of government through to operational plans of the tax administration. This line of sight (the
Alignment of Plans
Note: Highest-level strategic focus to tactical/operational team plans. The green arrow illustrates the staff line of sight on how individual performance contributes to the achievement of government plans. KPI = key performance indicator.Alignment of Plans
Note: Highest-level strategic focus to tactical/operational team plans. The green arrow illustrates the staff line of sight on how individual performance contributes to the achievement of government plans. KPI = key performance indicator.Alignment of Plans
Note: Highest-level strategic focus to tactical/operational team plans. The green arrow illustrates the staff line of sight on how individual performance contributes to the achievement of government plans. KPI = key performance indicator.
