Front Matter

Front Matter

Richard Bird, and Milka Casanegra de Jantscher
Published Date:
September 1992
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Improving Tax Administration In Developing Countries

Edited by

Richard M. Bird and

Milka Casanegra de Jantscher

International Monetary Fund


© 1992 International Monetary Fund

Cover and interior design by IMF Graphics Section

Library of Congress Cataloging-in-Publication Data

Improving tax administration in developing countries / Richard M. Bird and Milka Casanegra de Jantscher, editors.

  • p. cm.

Book is based on a conference held in Segovia, Spain, June 6-7, 1991.

  • Includes bibliographical references.

  • ISBN 9781557753175

  • 1. Tax administration and procedure—Latin America—Case studies—Congresses. 2. Taxation—Latin America—Case studies—Congresses. I. Bird, Richard Miller, 1938—. II. Casanegra de Jantscher, Milka. III. International Monetary Fund.

  • HJ3374.5.I48 1992

  • 351.72’4’098—dc20



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It has always been a source of amazement for me to realize how many books and articles in professional journals deal with taxation. Most of these discuss various aspects of tax policy or tax law. Some of them are theoretical, others practical. For the most part they are concerned with the impact of changes in tax laws on the economy or on the income of taxpayers. Economists have developed theories that provide guidance for assessing just how good a tax system is. Somewhat surprising is how little of this writing deals specifically with ways in which taxes are administered. In fact, most public finance textbooks allocate practically no space to tax administration, assuming implicitly that the administration of tax systems is a trivial problem. Most journal articles on taxation also largely ignore issues of tax administration, and only infrequently does one find specialized writing focusing exclusively on administration problems. Yet, taxation is the art of the possible. A tax system that is not administrable is not worth much. The theoretically most perfect tax system in the world may become a bad system if the intention expressed in the law is distorted by the practice.

There may be various explanations for this lack of attention to tax administration, but probably it has much to do with the fact that an intimate knowledge of how an administration works is necessary to write about tax administration. This knowledge is only acquired by years of practical experience. Perhaps, because of training, or because of what they do, tax administrators are not inclined to generalizing from the problems they face.

In recent years organizations such as the Inter-American Center of Tax Administrators (CIAT) and the Centre de Rencontres et d’Études des Dirigeants des Administrations Fiscales (Credaf) have started changing the situation. CIAT conferences, for example, have been addressing general administrative problems. Still, the relative balance between writing on tax policy and writing on tax administration has not yet been corrected, so that when a new book, and especially an important new book, appears, which deals exclusively with administrative issues, it should be a cause for considerable satisfaction.

The Fiscal Affairs Department of the International Monetary Fund is one of the major centers in which tax policy and tax administration problems are discussed. The department assists many countries with advice on how to improve their administrations. Therefore, when Richard Bird and Milka Casanegra de Jantscher approached me about the project on which this book is based, I was particularly enthusiastic. I felt that a book of this kind would be extremely valuable for our work, as well as for the work of tax administrators around the world.

I am hopeful that the current book will succeed in raising the quality of the discussion on tax administration to a much higher level than in the past. The book shows that techniques that have been successful in one country can be successful in other countries provided that they take full account of the local environment. The use of new computer technology has created new possibilities for filing, for identifying, and for auditing taxpayers. These possibilities are not necessarily country-specific. But the mechanical transplanting of techniques from one country to another is unlikely to generate good results. I hope that the book will make a substantial contribution to the field of tax administration and that it will become an essential reference for tax experts everywhere.

Vito Tanzi


Fiscal Affairs Department


This book originated in a request from Miguel Angel Lasheras, Director of the Instituto de Estudios Fiscales of the Ministry of Finance of Spain, to Richard Bird to help put together a book on the subject of tax administration in the member countries of the Inter-American Center of Tax Administrators (CIAT), as part of the Institute’s contribution to the five hundreth anniversary of Columbus’s voyage to America. When Milka Casanegra de Jantscher, Assistant Director of the Fiscal Affairs Department of the International Monetary Fund, agreed to serve as co-editor, the project became feasible, and with the collaboration of the Fiscal Affairs Department and the unstinting support of the Instituto de Estudios Fiscales a conference on tax administration and tax policy in CIAT countries was held at Segovia, Spain, on June 6—7, 1991. The present book is based on the papers and discussion at this conference, as revised by the authors in light of the conference discussion and, to a limited extent, by the editors in order to produce a more integrated book than the usual conference proceedings.

The book has two principal parts, in addition to a brief introductory chapter intended to introduce the volume as a whole. In the first part, some of the more interesting recent country experiences with tax administration reform are summarized and evaluated. Different chapters deal with the major simplifications of tax structure and attendant administrative reforms in Bolivia and Uruguay, the important reform of income tax administration in Colombia, the development of a new system of information management in the Spanish tax administration, the introduction of a value-added tax in Trinidad and Tobago, and the on-going efforts to reform both tax structure and tax administration in Jamaica and Guatemala. Each of the chapters is written by people who were not only closely involved with what they discuss but who can also bring to bear a wider perspective on the reasons for the success (or failure) of the efforts they describe. In addition, in every case at least one comment on the chapter has been prepared by someone with substantial local knowledge—often an active participant in the experience discussed. Together, these five case studies provide an invaluable set of papers on specific country experiences with tax administration reform and its links to tax policy reform.

In contrast, the second part of the book stands back from specific country experiences and considers instead a number of important issues and aspects of tax administration reform more generally. One chapter, for example, focuses on the effects of inflation on tax administration. Three chapters discuss three of the basic elements of tax administration: improving the organization and performance of the administration itself, improving the services and assistance provided to taxpayers, and improving taxpayer compliance. Finally, the last chapter of the book considers the extent to which tax administration can be “privatized” by turning over to the private sector some functions traditionally carried out by public employees. Both the authors of these papers and the commentators have had wide experience in the areas they discuss. Indeed, although the focus of this book is on the Latin American and Caribbean region, since many of the authors and discussants have worked on similar problems in other parts of the world, many of the lessons they draw are obviously of wider relevance.

The task of turning a set of papers and discussions originally delivered in two languages—Spanish and English—in a relatively short time into a book that reads well in both languages was by no means easy. The editors are most grateful to both the Instituto de Estudios Fiscales and the International Monetary Fund for their indispensable assistance in making this feasible. In particular, we are most indebted to Carlos Silvani of the Fiscal Affairs Department for editorial and other assistance well beyond the call of duty, in addition to his own impressive contributions to this volume. Isabel Menendez Ros and her colleagues at the Instituto de Estudios Fiscales were also of invaluable assistance both in organizing the complex logistics of a conference involving participants from 16 countries and in helping to bring the finished product to the publication stage. Vito Tanzi, Director of the Fiscal Affairs Department, was most gracious both in permitting his hard-pressed staff to make such a substantial contribution to this volume and in supporting the publication of the book. Similarly, Miguel Angel Lasheras, Director of the Instituto de Estudios Fiscales, whose idea this book originally was, provided unwavering support throughout the long process of its gestation. Esha Ray of the Fund’s External Relations Department deserves special mention for editing the English version of the book for publication.

In the end, however, our main debt is of course to the contributors to this volume. We were exceptionally fortunate in being able to attract such a distinguished and expert group to the conference in the first place, and we were doubly lucky in the extent to which their papers complemented and reinforced each other. The contributors come not only from a variety of countries but also a variety of backgrounds, including administration, economics, and law. This diverse mix both produced some lively discussion at the original conference, as evidenced in this book, and gave rise to some of the more valuable insights that emerged from this discussion.

How to improve tax administration is one of the most important, and least studied, aspects of fiscal reform in developing countries. The present volume constitutes a major contribution to the relatively undeveloped literature in this field. It should be of interest to all those concerned with the important question of mobilizing resources for development. In particular, we hope that it will prove to be of use to those to whom we dedicate it: the many tax officials throughout the world who try, often under very adverse circumstances, to carry out the difficult but essential task of gathering the taxes that, in the words of U.S. Supreme Court Justice Oliver Wendell Holmes, are necessary to pay for civilization.

Richard M. Bird

Milka Casanegra de Jantscher



María Corina Arocha, Ministry of Finance, Venezuela

Roy Bahl, Georgia State University

Richard M. Bird, University of Toronto

Renato Botaro, Deputy Director of Taxes, Brazil

Ramiro Cabezas M., Consultant, Bolivia

Milka Casanegra de Jantscher, International Monetary Fund

Michal Y. Christian, VAT Office, Trinidad and Tobago

Isaias Coelho, International Monetary Fund

John F. Due, University of Illinois

Javier Etcheberry, Director of Taxes, Chile

Arturo Fernandez, Instituto Tecnológico de Mexico

Richard Gordon, International Tax Program, Harvard University

Francis P. Greaney, KPMG Peat Marwick

Edgar GutiÉrrez, Consultant, Costa Rica

Malcolm G. Lane, KPMG Peat Marwick

Robert A. LeBaube, Consultant, Washington, D.C.

Jorge Martinez-Vazquez, Georgia State University

Charles E. Mclure, Jr., Hoover Institution

Rafael Moya, Ministry of Finance, Spain

Oliver Oldman, Harvard Law School

Santiago Pardo M., Consultant, Colombia

Jaime F. Pineda S., Ministry of Finance, Guatemala

Alberto H.J. Radano, Consultant, Argentina

Luis Fernando Ramírez Acuña, Embassy of Colombia, Washington, D.C.

José-Damián Santiago, Ministry of Finance, Spain

Aldo Schlemenson, Consultant, Argentina

Carlos A. Silvani International Monetary Fund

Edwin Tulloch-reid, Board of Revenue, Jamaica

Jaime Vázquez-Caro. World Bank

Charles L. Vehorn, International Monetary Fund

Affiliations listed are those at the time of the conference.


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