Increase in inspection and collection activities by the tax and customs administration
Example of a business case in central government
Since 2013, the Tax and Customs Administration has been allocated an additional budget of €150 million per annum to carry out more checks of tax returns and collect more tax.. The Court of Audit has investigated whether the Administration’s business case to increase the total tax revenue it collects has been successful.
Conclusions
Return on investments in the Administration uncertain
For various reasons, the Tax and Customs Administration cannot demonstrate a direct link between the investments it has made using the additional budget and the increase in tax revenue. Firstly, the Administration recruited additional new staff in 2013 and 2014 to step up its inspection and collection activities but its personnel system was unable to record them separately. No link can therefore be made in hindsight between the cost of recruiting and training new staff and their added value. Secondly, in a number of cases money intended for the business case was spent on other activities. Some measures in the business case, moreover, were not carried out as originally planned, if at all. This makes it even more difficult to establish a clear link between the investments and the return on them. On the whole, the benefits of the extra money put into the Tax and Customs Administration in 2013 and 2014 are uncertain. The House of Representatives therefore does not known whether the extra money budgeted for the Administration was spent effectively and efficiently.
Staff and ICT support requirements underestimated
Organisationally, too, things went wrong during the implementation of the business case. When drawing up the plans, the Administration underestimated how much time it would need to recruit, select and train additional staff. In practice, it needed far more than anticipated.
House of Representatives only informed of main points
From the outset, the House of Representatives was informed of only the main points of the increase in inspection and collection activities. The information was enough to establish whether additional tax revenue had been collected as promised, but it did not disclose whether it was due to the additional budget allocation. The House therefore cannot establish whether the Administration has achieved the goals it set itself in the business case.
Recommendations
To the Minister of Finance
We recommend that the Minister of Finance improve the organisation of monitoring for future business cases. It must be possible to account transparently for the relationship between investments and returns. This recommendation is particularly relevant to the monitoring of the Investment Agenda plans for the future of the Tax and Customs Administration.
We also recommend that the Minister of Finance continue to improve the effectiveness of tax collection. The minister needs to increase the insight available into the amount of uncollected tax revenue, the tax gap. Information on which groups of taxpayers pay too little tax, deliberately or otherwise, would enable the Administration to target its capacity more effectively, i.e. at the biggest tax gaps. In our opinion, a targeted analysis of the tax gap would be appropriate in the Investment Agenda. The intelligent use of data to improve inspection activities is one of the Investment Agenda’s main themes.
To the House of Representatives
We recommend that, when debating future investment plans, the House of Representatives ask ministers to pay specific attention to transparency and accountability and to ensure that the relationship between investments and returns can be established and audited.
To the minister and the House together
We recommend that both the Minister of Finance and the House of Representatives be aware in future that an executive agency such as the Tax and Customs Administration functions more efficiently if an initial investment is made in, for example, its ICT functionalities.
Reponse of the Minister of Finance
The Minister of Finance agreed with our conclusions. He acknowledged that the precise return on the investments in the Administration was uncertain but he thought the additional tax revenues were probably due to the additional investments. The minister also noted that his ministry’s half-yearly and annual reports consistently informed the House of the achievement of the business case’s main objective of increasing the inspection and collection activities in order to generate additional tax revenues. He further noted that he would apply the lessons learned from the business case in order to monitor the implementation of the Investment Agenda.
We will follow how the minister applies the planning, monitoring and reporting lessons he learned from the business case in the Investment Agenda.