Strategic management helps tax administrations build a strong foundation for their future by providing clear objectives and a road map to reach them. It is a cyclical, end-to-end process comprising three key components:

• Setting the administration’s objectives based on analysis of the environment and the internal organization

• Developing and implementing strategies to help the organization meet these objectives

• Implementing performance measures to:

  • Evaluate past results

  • Guide necessary adjustment of strategies to improve future results

Strategic management provides the framework to assist in answering key questions for tax administration leaders, including the following:

• What opportunities and threats could arise from technological developments?

• What is happening in the global economy that could impact management of the administration or how it protects its tax base?

• What are the current and future compliance risks, and how should they be managed?

• What is the right balance between service and enforcement?

• How can we track whether resources are allocated efficiently and are achieving the tax administration objectives?

• How much is spent on each tax administration activity, and what is the return on that investment for the administration and broader society?

• How can the administration continue to generate revenue results with an ever-decreasing budget?

The key benefits for tax administrations are that a strategic management approach achieves the following outcomes:

• Shifts thinking to beyond a short-term revenue focus

• Improves day-to-day operations

• Identifies future risks

• Prepares the administration for emerging developments that could negatively impact processes, procedures, and resources

• Assists in having a proactive approach to address risks and developments

• Facilitates increased efficiency

• Fosters innovation and reduces resistance to change

There should be strong linkages (line of sight) between the goals of the government, the Ministry of Finance, and the tax administration at the strategic, tactical, and operational levels (strategic alignment). The strategic plan of a tax administration should be aligned to the overall government strategy and typically includes (1) the strategic assessment; (2) foundation statements (mission, vision, core values); (3) themes, objectives, goals, and initiatives; (4) resourcing requirements; and (5) performance measures.

The critical elements needed to successfully implement a strategic plan in a tax administration are the following:

• Appropriate organizational support is essential, including a dedicated unit to manage the development and implementation of the strategy.

• A strong governance framework should be in place to determine how decisions are made in the development, approval, and implementation of the strategic plan.

• Active change management is required to ensure that the necessary processes are in place and that actions are taken to prepare staff, community, and stakeholders for the changes and reforms.

• Effective communication (internal and external) is essential to build consensus and allow staff and stakeholders to provide input to the strategic plan.