This chapter describes the components of a tax administration strategic plan, the process to develop a plan, determining timelines and identifying and engaging key stakeholders.
Components of a Strategic Plan
It is important to keep the strategic plan short and focused. A well-designed plan should include the following:
Strategic assessment
Foundation statements (vision, mission, core values)
Goals and objectives
Initiatives
Resourcing requirements
Performance measures
Strategic Assessment
Before developing a strategic plan, a strategic assessment should be undertaken. This assessment includes the following:
The expected operational environment over the next five to fifteen years
Current performance measures
The pressures that the organization will likely confront in the future, including government and community expectations
The assessment provides the baseline performance data for the organization and provides the basis for answering the following questions:
Where is the tax administration now?
Where does the tax administration want to b e?
How does the tax administration get there?
Two commonly used tools to assist with an environmental scan and an internal assessment of a tax administration are the political, economic, social, technological, legal, and environmental (PESTLE) analysis and the strengths, weaknesses, opportunities, and threats (SWOT) analysis.
PESTLE is a strategic management tool that helps senior management of a tax administration understand the external environment around their organization in a comprehensive and systematic way. Some issues are outside the mandate of the tax administration, but still important for leaders to understand how these issues could impact the organization. The PESTLE analysis also helps management make optimal operational and policy decisions.
PESTLE Analysis
The PESTLE analysis considers the following factors (Table 3.1).
Factors Considered in the PESTLE Analysis
Factors Considered in the PESTLE Analysis
| Possible change of government priorities, new policies impacting tax administration | |
| Performance of the economy; global economic trends; shift to greater global regulation; growth of the informal economy | |
| Shifts in trends and attitudes; reactions to global economic downturns; attitudes to tax compliance and government in general; aging population; aging workforce | |
| Increased speed and mobility of communication systems; increased demand for e-services; impact on the nature of jobs/work | |
| Pressure for greater exchange of information between tax administrations; stronger financial disclosure rules | |
| Impact of climate change; future of energy |
Factors Considered in the PESTLE Analysis
| Possible change of government priorities, new policies impacting tax administration | |
| Performance of the economy; global economic trends; shift to greater global regulation; growth of the informal economy | |
| Shifts in trends and attitudes; reactions to global economic downturns; attitudes to tax compliance and government in general; aging population; aging workforce | |
| Increased speed and mobility of communication systems; increased demand for e-services; impact on the nature of jobs/work | |
| Pressure for greater exchange of information between tax administrations; stronger financial disclosure rules | |
| Impact of climate change; future of energy |
Figure 3.1 provides an example of a completed PESTLE analysis.
SWOT Analysis
A SWOT analysis is a strategic management tool that helps a tax administration to
a. identify positive characteristics of the organization (strengths) that could help utilize opportunities in the external environment, and
b. recognize and address negative characteristics of the organization (weaknesses) that could expose the organization to external risks (threats).
Knowing the strengths and weaknesses of the tax administration ahead of establishing goals allows the tax administration to implement measures to improve weaknesses and capitalize on strengths. A review should be conducted through a range of lenses: HR, IT, business processes, governance framework, tax policy, and operational procedures. Figure 3.2 shows a tax administration’s typical internal strengths and weaknesses identified by a SWOT analysis.
Figure 3.3 shows examples of opportunities and threats identified during a SWOT analysis. The analysis shows opportunities and threats that exist in the external environment.
SWOT: Opportunities and Threats
Note: IOTA = Intra-European Organisation of Tax Administrations; WCO = World Customs Organization.SWOT: Opportunities and Threats
Note: IOTA = Intra-European Organisation of Tax Administrations; WCO = World Customs Organization.SWOT: Opportunities and Threats
Note: IOTA = Intra-European Organisation of Tax Administrations; WCO = World Customs Organization.The PESTLE analysis is externally focused, whereas a SWOT starts with the analysis of the internal environment. The SWOT will highlight the opportunities and threats in the external environment (including the political, economic, social, technological, legal, and environmental circumstances around the organization) as identified during the PESTLE analysis (see Figure 3.4).
It is also useful to understand how the country’s tax system is operating at a systemic level. Very few staff or external stakeholders are able to view the entire tax system in operation and are often unable to lift their focus above the functional or operational level. Administrations may choose to conduct a more systemic “top-down” review of key areas of interest as an input into the strategic assessment process.
Foundation Statements
Every tax administration should have a suite of foundation statements comprising a mission statement, the vision, and the core values that underpin the strategic plan.
The mission statement defines the core purpose of the tax administration and highlights the contribution to the government’s economic and social objectives. The mission typically highlights the following:
Key tax administration functions
Responsibilities to key stakeholders in the tax system
Important principles that guide the work of the tax administration
While the socioeconomic status of the countries may differ, tax administration mission statements tend to reflect themes such as managing revenue collection effectively and assisting voluntary compliance.
The vision statement describes the desired future state of the tax administration and should be bold and challenging to inspire improvement and innovation. The vision statement is a response to the question, Where does the tax administration want to be over the next three to five years?
The vision statement identifies the areas where the tax administration seeks to excel, for example,
providing higher levels of service to taxpayers,
enhancing administrative efficiency by adopting modern technology and seeking to minimize compliance burden for taxpayers, and
becoming a trusted employer by investing in staff.
The vision statement describes what the administration wants to become in the future.
The core values represent the principles that the tax administration seeks to put into practice. The core values signal how tax officers are expected to perform in administering the tax system and how taxpayers can expect to be treated. Typical common core values include integrity, honesty, fairness, and respect.
Examples of tax administration mission, vision, and core values are provided in Appendix 1.
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The mission and vision statements together with the core values set the direction for a tax administration and ensure that the organization knows where it is going, why it is going there, and how it will get there. |
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The mission and vision statements together with the core values set the direction for a tax administration and ensure that the organization knows where it is going, why it is going there, and how it will get there. |
Defining the key aspects of the mission/vision/core values will require discussions among senior leaders to define the path forward for the administration. It is important to engage a broader group of midlevel managers early in the discussion process. These managers should also be engaged to provide input into the process and lay the groundwork for communicating the strategic plan to staff. This builds a sense of ownership of the mission/vision/core values statements as well as ensures that objectives are fully understood.
Goals and Objectives
As an outcome of the SWOT and PESTLE analyses, several observations will emerge, which can be separated into key themes.
Some typical strategic themes across tax administrations include the following:
Service improvement: making service contemporary and meeting community needs; typically covers online services, such as a secure web-based online account for each taxpayer, using individual data from previously reported tax returns to prefill forms, and delivery of correspondence electronically
Compliance challenges: responding to globalization of business and international tax challenges, utilizing data and automation to identify noncompliance, dealing with the challenges of the informal economy,3 and ensuring participation in the tax system through a strong registration program
Reducing red tape for small business: easing the reporting burden and compliance costs for small entities
Transforming the organization: improving agility and responsiveness of IT systems, IT systems integration, moving to contemporary IT system platforms that support digital service delivery, changing business processes and organizational culture
Reducing costs: in response to budget pressures of governments; reducing accommodation costs and increasing staff productivity
From these themes, or others that the administration has identified, decisions will need to be made about what the most important are and how they should be included in the administration’s goals and objectives.
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Goals and objectives are the outcomes the administration intends to achieve and are documented in the strategic plan. Goals are high-level outcomes that translate the general aims from the mission and vision statements into more concrete (and measurable) results. |
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Goals and objectives are the outcomes the administration intends to achieve and are documented in the strategic plan. Goals are high-level outcomes that translate the general aims from the mission and vision statements into more concrete (and measurable) results. |
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EXAMPLE: A strategic assessment has identified that “revenue collection has declined compared with previous years” and “on-time payment rates are low.” In response to this assessment, a strategic goal could be to “improve taxpayer on-time payment rates (improving the overall levels of voluntary compliance).” |
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EXAMPLE: A strategic assessment has identified that “revenue collection has declined compared with previous years” and “on-time payment rates are low.” In response to this assessment, a strategic goal could be to “improve taxpayer on-time payment rates (improving the overall levels of voluntary compliance).” |
In deciding the suite of strategic goals, it is good practice to establish no more than four to five goals, with each goal supported by one to four objectives. They should be challenging but achievable.
Initiatives
Once the goals and objectives have been established, well-defined and targeted initiatives need to be developed. These strategies and initiatives describe how the goals and objectives are to be achieved. Examples of tax administration initiatives include (1) implementing a large taxpayer office, (2) improving methods for detecting noncompliance, and (3) expanding the use of electronic fling by taxpayers.
Resourcing Requirements
Providing sufficient funding for the strategic management process and the ongoing reform effort is critical. Resourcing needs include HR (workforce), equipment, facilities, and other expenses such as communication costs. Typically, funding is required at two levels:
A dedicated project team is necessary to undertake the strategic assessment and development of the strategic and operational plans.
Funding is needed to support the implementation of the reform effort; however, some of the implementation work could be distributed across operational areas.
While the dedicated project team may monitor the overall implementation progress, the operational areas will each play a role in implementing the initiatives that relate to their functional units. Staff within these functional units will be responsible for implementing the actions related to their workload. Based on the action plan and initiatives, estimates of the time needed and required number of staff should be made.
Performance Measures
After the foundation statements have been established and the strategic goals, objectives, and initiatives defined, performance indicators (or key performance indicators [KPIs]) should be developed to measure progress toward each strategic plan objective. KPIs assess progress toward the organization’s goals at the objective, initiative, and activity levels. Typically, the performance metrics start with evaluating progress of operational activities, enabling the administration to evaluate the initiative and, in turn, the objective.
Activity-level KPIs, often called operational KPIs, measure the degree of success in meeting operational workload expectations. A couple of examples of operational KPIs for service standards follow:
Responding to taxpayer calls through call center within two minutes
Achieving an on-time fling rate of 90 percent for VAT taxpayers within a specific timeframe
Targets and Thresholds
A KPI is only meaningful when it can be compared to something. This comparison could be a target based on previous performance (past period results) or a desired future performance or a benchmark when there is no basis to start from. Each measure should have the following characteristics:
Include characteristics of quantity, quality, and timeliness
Be measurable: a target that cannot be measured has no purpose and is likely to detract from the credibility of any performance measurement initiative
Be verifiable: the reported results for any performance measure must be open to scrutiny to ensure any misreporting of results can be detected and corrected
For a KPI to be useful, it needs to clearly state both an acceptable and unacceptable result. These are known as thresholds. KPI results can be presented in a diagrammatic format using “traffic light” colors, making it easier for the reader to interpret the outcomes using the following ratings:
Green indicates an acceptable result, indicating that the result is on target.
Yellow indicates that there may be a problem, which requires further assessment to determine whether additional action is required.
Red indicates an unacceptable result, indicating that there is a problem that needs prompt correction.
Figure 3.5 illustrates a common KPI on “Average time to respond to written taxpayer requests,” using the following threshold examples:
Green: requests responded to in 48 hours or less
Yellow: requests responded to between 48 and 96 hours
Red: requests responded to in 96 hours or more
KPI: Average Time to Respond to Written Taxpayer Requests
KPI: Average Time to Respond to Written Taxpayer Requests
KPI: Average Time to Respond to Written Taxpayer Requests
KPIs should be specific and timebound. They should be measured regularly, typically monthly, to help management identify issues quickly if the activities are not advancing as planned. It may also be appropriate to establish phased deadlines, particularly for activities that span a long period. An example of a typical KPI measure is given in Table 3.2.
Example of a KPI for the Establishment of a Large Taxpayer Office (LTO)
Example of a KPI for the Establishment of a Large Taxpayer Office (LTO)
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Example of a KPI for the Establishment of a Large Taxpayer Office (LTO)
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Engaging Stakeholders in the Strategic Planning Process
A strategic plan must articulate a vision that is based on stakeholder consultation and shared views. As part of the strategic planning process, it is necessary to identify the tax administration’s key stakeholders. Conceptually, a stakeholder is a person, group, or organization that has an interest in the value the tax administration creates, can influence it, or is affected by what the tax administration does. There are both internal and external stakeholders. They include employees of the tax administration, government ministries and agencies, taxpayers, private sector institutions, and nongovernmental agencies (Figure 3.6).
Internal stakeholders have an interest in the success of the tax administration and know how the administration functions. They are critical to the strategic planning process. They often understand the impediments to success and have firsthand institutional knowledge of the tax administration environment. Internal stakeholders include staff within the tax administration and government ministries, departments, and agencies (e.g., customs administration).
External stakeholder opinions are important in the early stages of planning to bring insight to understanding the operating environment. Examples of external stakeholders include the Chamber of Commerce, industry associations, accounting bodies, and banks.
Engaging stakeholders throughout the strategic planning process is considered one of the critical factors for effective strategic management. Engaging stakeholders provides a clear sign that the organization is interested in the effects that its actions might have on the community. This transparent, consultative process fosters closer relationships with these stakeholder organizations and individuals and provides valuable information for evaluating the tax administration (see Figure 3.7).
Stakeholder Engagement as Part of the Strategic Planning Process
Stakeholder Engagement as Part of the Strategic Planning Process
Stakeholder Engagement as Part of the Strategic Planning Process
When identifying stakeholders, consider the impact the strategy or initiative will have on them. Identify the individuals who best represent the identified stakeholder groups. Design a system to obtain their feedback and incorporate their feedback in the planning processes, specifically acknowledging the results of their participation in follow-up communication.
The next step is to define when stakeholders need to be engaged. Internal stakeholders should be engaged early and throughout the process. External stakeholders who play a key role in the tax system or are closely linked may be engaged once the strategic objectives are designed, and again at the final stage of the plan. For each instance where communication with a stakeholder is required, document what information will be shared during the engagement and the expected outcomes.
Workshops, formal meetings, surveys, and emails are all examples of ways that a tax administration can engage with its stakeholders. A key element to effective engagement is to know your audience and ensure that what you communicate is relevant to them. This will result in better feedback.
The Road Map to Create and Cascade the Strategic Plan
The next phase requires the tax administration to create a strategic plan and cascade the objectives through to the lower-level organizational plans. This can be achieved by undertaking the following tasks:
a. Assessment
Gather information (e.g., conduct interviews with senior leaders and other internal and external stakeholders).
Revisit existing strategic plans, studies, and reports.
Analyze results.
Conduct SWOT and PESTLE analyses.
Create/review mission, vision, and values.
b. Design
Conduct a technical workshop with senior leaders and business unit managers.
Execute scenario planning.
Develop a business model.
Determine strategic themes and expected results.
Identify key areas that create value for the administration and help in achieving the strategic objectives.
c. Creation of strategic themes, goals, objectives, initiatives, and projects
Brainstorm, design, describe, and prioritize strategic goals and objectives, and determine initiatives and projects.
Define the strategic project portfolio.
Assign owners/managers to projects.
Roll out project management methodology.
d. Establishment of indicators and targets
Establish KPIs.
Complete KPI identification and monitoring tables.
Describe thresholds and targets.
Assign KPI owners.
Develop spreadsheets for data collection.
Establish a reporting calendar and procedures with deadlines and standard reporting templates. This should be done in consultation with KPI owners.
e. Development of ancillary multiyear focused plans
Draft multiyear plans if required.
f. Preparation of annual and local tactical and operational plans
Conduct individual technical workshops with all business units and the project team.
Generate the tactical and operational plans. Design performance indicators.
Assign, whenever applicable, team and individual tasks and targets.
An example of how a goal in a government’s national plan cascades through the hierarchy of plans to an action at a tax administration’s regional operations level (including a measure of success indicator [KPI]) can be found in Figure 2.4.
Planning Calendar
The strategic management cycle has a calendar of planned events. While the programs for the current fiscal year are being executed, the strategic assessment and priority setting are taking place for the upcoming three-to-five-year period. A typical quarterly scheduling of planning activities is presented in Figure 3.8. In this example, the activities in relation to the previous year’s performance, the current year’s program, and preparation for the next year are separately highlighted.
Risks to the Strategic Plan
Placing the administration on a reform pathway will inherently involve taking risks. But to not evolve with the changing environment or plan for the future is a much larger risk. A comprehensive strategic plan incorporates an assessment of various risks and sets out mitigation strategies to help manage those risks.
Common reasons for a strategic plan not achieving its objectives include the following:
Unrealistic goals: If the objectives are impractical considering the environment in which the administration is operating, the plan may fail due to lack of staff support and inability to progress at the pace outlined in the strategy. Change management takes time, and improvements are incremental.
Overly complex plans: If the administration is developing its first strategic plan, it is advisable to keep the number of objectives manageable. Start small and build on your success. For any administration, the more complex the objectives are, the greater the risk that the deliverables will not be understood by those expected to implement them or that insufficient resources are assigned to the activity, making achievement more difficult.
Plans based on insufficient data: A data-driven approach is critical to making good decisions. However, the best objectives may not be determined if a tax administration has insufficient or weak data to identify their current levels of efficiency, strengths, and weaknesses.
Undefined team roles and responsibilities: Clear expectations and accountability for timebound actions are necessary ingredients for success. Without them, results will suffer.
Insufficient resources: This risk can be mitigated by estimating the resources needed and regularly checking in on staff workload demands and success in meeting established deadlines. Adjustments to the resource allocation based on these check-ins will ensure that the reform effort has the support needed to succeed.
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Ideally, the strategic plan should have no more than four or five strategic goals and three or four strategic objectives for each goal. |
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Ideally, the strategic plan should have no more than four or five strategic goals and three or four strategic objectives for each goal. |
Administrations should plan for unexpected events and consider, in advance, what actions they might take if the unexpected occurs. Remaining flexible and open to adjusting the plan will also mitigate risk. Leaders should remain open to feedback from staff as the strategic plan is being implemented. They should also leverage their knowledge to find creative, efficient, and innovative ways to implement the initiatives to achieve better results within the administration.
