Single window revenue and tax systems
It is vital for policy makers in a country to evaluate and compare best economic solutions in the world so that those models can be implemented with a view to improving their own economy. As a practice, the annual DBI (Doing Business Index) Reports discussing many exceptional or rather best cases in the world, so that those systems can be studied and adopted by other upcoming economies.
The “Doing Business Index” (DBI) published annually by the World Bank evaluates 189 economies in the world as of now. The index pays attention to the following 10 criteria: Starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
In addition to the above, the index further considers the distance to frontiers as well where the index captures the gap between an economy’s performance and measure the distance to best a performing economy in each of the above mentioned aspects. Further, it is noteworthy that the aspects such as security, the prevalence of bribery and corruption, market size, macro-economic stability and level of training and skills of the labor force are not deeply taken into consideration.
Tax Management System in Malaysia
As evaluated in DBI reports, taxation is very important for balanced economic development and tax management is a significant function of a booming state. On the other hand taxation also helps make a Government accountable to the public. When Governments are spending taxpayers’ money, they are more accountable to make budget decisions transparent to the maximum level.
In 2004, the Inland Revenue Board (IRB) of Malaysia took an initiative to implement a system for filing and paying taxes that would promote electronic, paperless transactions. IRB’s objective was to become a leader in tax administration and be an example to the world. Tax systems in economies face new challenges and new possibilities as a result of technological changes taking place in the world. Malaysia is providing a very good example to the world of its electronic tax filing and payment system showing where and what conditions of technology can bring the advantages to both tax authorities and taxpayers.
Creating public awareness
The IRB faced many issues during the development of the system particularly lack of public readiness to use it. As a result taxpayers using the e-filing system remained far below expectations. Uncertainty of security and privacy of information transmitted online was one of the key reasons for low usage of e-filing. So IRB began promoting it among public with the slogan “As Easy as 1, 2, 3” and incentivized taxpayers heavily in using the system. The authorities recognized the importance of the involvement of the private sector and requested tax preparers and accountants to share ideas on how to enhance the online system.
System with more accuracy
As discussed in DBI 2014 report, E-filing systems increase the quality and quantity of transactions, faster and more accurately and has much lower error rates compared with paper based manual system. With this system, the need to impose penalties also has gone down to a considerable level. The tax officers were also finding it easier to issue assessments and refunds much faster. Further, E-filing and e-payment allow better management of risks and audits. It is noteworthy mentioning that the said system has the capability of reducing corruption to a greater extent where the system is avoiding face to face interactions between tax payers and tax officers.
Other countries with better tax administration systems
Singapore is also known as a country which adopted an integrated, computerized tax administration system for their Inland Revenue Authority. They moved from paper based hard copy system to paperless imaging system as the first step in 1992. Chile also has an online tax collection system and to date reached nearly 100 per cent usage. Just like in other countries, Chile has faced many obstacles such as, the system not being user friendly at the beginning and IT infrastructure issues, i.e bandwidth and connectivity. Over the period, Chile has overcome practical problems faced by them and reached a well implemented and managed tax administration system.
It is quite challenging for a country to implement, electronic based tax filing and paying system and convinced most of the taxpayers to use the same effectively. Malaysia is showing the rest of the world how the technology works and how the sheer commitent of the implementers can bring in the real benefits to the country on this aspect.
Single window systems
The competitiveness of an economy is measured on many factors including having speedy, dependable and cost effective ways and means for trading goods. But in many economies in the world, international traders have to spend considerably longer time in submitting information for authorities such as Customs and Ports. As per World Bank DBI reports, 73 economies are having single window systems with different complexities, but very few are extending the expected benefits to the traders at large.
DBI 2014 report talks much about a single window system that can improve information flows by sharing needed information with all parties involved in trade such as private participants i.e. banks, insurance companies and public agencies like customs, immigration and vehicle registration authorities and agri authorities, etc.
Singapore’s Single Window System
This is named “Tradnet’ and started operations in 1989 as an Electronic Data Interchange (EDI) system. The Singapore Government extensively backed this concept by appointing a Steering Committee and three sub-committees focusing proper control on Sea Shipping, Air Freight and Government agencies with the view of improving process of imports and exports in the country.
The concept of a single window system in Singapore evolves through enabling traders to submit standardized information and documents through a single gateway, and eliminate redundant processes by traders and Government agencies and improve co-ordination and co-operation between authorities. Reducing manifold data submissions to different agencies in the country helps minimize data entry errors as well. Singapore’s Single Window System is more than 20 years old by now and still in the process of improving. As per the DBI reports there are many non-performing single windows around the world.
It is important to note that government authorities such as customs and port related services, health department, agriculture authorities, tax authorities and banks, etc are connected, sharing information on a single network enabling traders to be connected through one single gateway. This efficient information flow and the simplified procedures can significantly increase the speed of clearance and release, reduce costs, improve business efficiency and enhance overall economic performance of the country. As indicated in DBI reports, the input and the involvement of the private sector business community is extremely important in implementing a single window system and they must be involved from the design stage itself and an opportunity to provide feedback is also vital. The dangerous situation of the single window system is that, failure of one point may wreck the entire system.
Experience of Colombia
Colombia is also considered to be having a proven single window system which is evolving since 2006 onwards. Its single window is connecting 21 Government authorities involved in foreign trade, mostly ministries and health and safety intuitions and three private companies that provide e security information on registered traders. As per the DBI 2014 report, the Colombian single window links these public agencies with importers, exporters, customs agents and brokers through an online platform that provides users to collect procedures, approvals, authorizations and other certifications needed to import and export of goods. Further tax identification and business registration records are also available to the agencies connected to the system.
Just like in Singapore, the single window system in Colombia implemented the system through different stages, in 2006 initiating it with import module, taking care of import registration requests and import licenses for certain products. Subsequently in the same year the Government commenced the export module which took care of export authorizations. Just like in other places the existing laws and regulations were amended to create the legal basis for using electronic signatures and payments. The system has provided benefits to entities engaged in trade, increasing efficiency and cutting times and costs and reduced 135 procedures and 35 forms on importing into one step for trading organizations.
DBI 2014 discusses the single window system implemented by Azerbaijan as well, but different from systems implemented in Singapore and Colombia which shows the fact that an economy could have a system of their own, which suits the practical situation of that economy. (Direct Reference: Doing Business Index 2015 and 2014)
(The writer is the Secretary General / CEO of the National Chamber of Commerce of Sri Lanka)