FERDI Conference 2014 – What influences the use of performance measures in tax administrations in
Anglophone Africa
13 June 2014
Elizabeth Kariuki
Scope of paper
Background and contextAn overview of global performance measurement initiativesIn country performance measurement initiativesFactors that influence the adoption of performance measurementAreas for further study
Slide 2
Slide 3
Background and context
Slide 4
Background and context
ARAs in Anglophone Africa typically adopt a strategic orientation with respect to their management…
Identify goals
Measure performance
Use results
Report results
Perform
Perform
Slide 5
Background and context
There are numerous uses for performance information. Common purposes includeThe purpose The public manager’s question that the
performance measure can help to answerCharacteristics of performance measures
Evaluate How well is my public agency performing? Outcomes, combined with inputs and with the effects of exogenous factors
Control How can I ensure that my subordinates are doing the right thing?
Inputs that can be regulated
Budget On what programs, people or projects should my agency spend the public’s money?
Efficiency measures (specifically outcomes or outputs divided by inputs)
Motivate How can I motivate line staff, middle managers, non-profit and for-profit collaborators, stakeholders, and citizens to do the things necessary to improve performance?
Almost-real time outputs compared with product targets
Promote How can I convince political superiors, legislators, stakeholders, journalists, and citizens that my agency is doing a good job?
Easily understood aspects of performance about which citizens really care
Celebrate What accomplishments are worthy of the important organizational ritual of celebrating success?
Periodic and significant performance targets that, when achieved provide people with a real sense of personal and collective accomplishment
Learn Why is what working or not working? Disaggregated data that can reveal deviances from the expected
Improve What exactly should who do differently to improve performance?
Inside-the-black box relationships that connect changes in operations to changes in outputs and outcomes
Source: Behn, 2003
Slide 6
Background and context
In practice, corporate planning and regular monitoring of its implementation appears to be no more than a paper exercise
Mounting challenges
Information overload and/or gaming the numbers
Simplistic, incomplete or too much data
Limited or no analysable data collection
Sources: Kidd and Crandall, 2006; Franceschini et al. 2007
An overview of global performance measurement initiatives
Slide 8
An overview of global performance measurement initiatives
There are three prominent global initiatives to gauge performance of tax administrations
World Bank paying taxes ranking and associated
measures
USAID collecting taxes indicators
IMF’s TADT
In country and pan-African performance measurement initiatives
Slide 10
In country and pan-African performance measurement initiatives
The results of a survey of ARA executives and interviews with external stakeholders identifies a range of priority indicators, some of which are currently used
External stakeholders Internal stakeholders• Actual revenue compared to forecast revenue (7)• Expansion/contraction of the tax base - no of
registered taxpayers disaggregated by sector/industry and gender and compliance levels (6)
• Results of taxpayer surveys (2)• Tax gap/ growth projections (3)• Average processing turnaround time for tax returns
and refunds (during filing season) (3)• Equity indicators which show the extent to which the
tax system is progressive and pro-poor (5)• Cost of collection (1)• Percentage reduction in error rates (1)• Tax expenditure/ exemptions (2)• Governance/corruption indicators (3)• Measures which indicate the extent to which the ARA
has strengthened its capacity in terms of staffing and ICT (4)
• Statistics on the handling of service queries (1)
• Actual revenue compared to forecast revenue• Voluntary compliance rate • Percentage of taxpayers satisfied with
services/information and tools provided by the ARA
• Percentage uptake in electronic filing• Average processing turnaround time for tax
returns and refunds • Reduction in taxpayer/trader compliance burden• Amount spent for every dollar collected• Percentage increase in accuracy of processing• Time taken to prepare, file and pay various taxes• Global ease of paying taxes ranking• Percentage uptake in electronic filing• Number of cases successfully prosecuted
Source: Kariuki, 2012
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In country and pan-African performance measurement initiatives
The AfDB has also supported several domestic resource mobilisation studies focussing on performance. The studies are based on the following framework
(1) level of economic development and economic structure; (2) societal factors: culture, values, trust and ‘tax morale’; (3) war and taxes:
bureaucratic modernisation as a response to threat; (4) political institutions and tax systems; and (5) taxation and fiscal contract (Brautigam, 2008)
Reforms •Reform sequencing•Implementation
Performance Level
Efficiency
Effectiveness Equity
Tax system LawPolicyAdministration
Political economy
Slide 12
In country and pan-African performance measurement initiatives
The AfDB’s 2011 flagship report applies some of the KPIs identified by internal and external stakeholders
Level of revenues• Focus on
taxes, measured primarily by the tax ratio (e.g. tax to GDP)
Efficiency• Cost of
collection• USAID and
Paying taxes indicators
• Tax expenditures
Equity• Distribution of
the tax burden • Dimensions of
progressivity
Effectiveness• Measures of
taxpayer satisfaction
• Tax gap• Tax effort
Source: AfDB, 2011
Slide 13
In country and pan-African performance measurement initiatives
Source: Kariuki, 2013
The AfDB led initiative has motivated an ATAF proposal to benchmark country tax systems in 37 ARAs
Policy result area Specific criteria A, P and L
A. Creating an enabling political environment
A fiscal contract forged PTax morale engendered P & ARA accorded political and institutional autonomy PRAs held to performance targets A
B. Development policy objectives and tax policy regime nexus
Tax exemptions and incentives rationalised P & LEffective fiscal decentralisation and tax revenue generation policies P
C. Robust tax policy and legislative frameworkLegislative provisions up-to-date and fully implemented P, L & A
Tax policies comprehensive and harmonised P
Effective tax policies and legislative provisions P & L
D. Ensuring efficiency, effectiveness and accountability of ARA
RA accorded managerial autonomy P & LOrganisational culture transformed AStrong organisational capacity AICT effectively applied ACompliance management AEnforcement A
Operation research capacity enhanced and more efficient A
E. Developing a national information sharing infrastructure to widen the tax base
National ID system in place AAn effective TIN system AA large banked population PThird party information fully exploited A
Policy (P) or Legislation (L) or Administration (A)
Factors that influence the adoption of performance measurement
Slide 15
Factors that influence the adoption of performance measurement
The use priority KPIs varies across ARAs. Research in Kenya, South Africa and Tanzania identified eight factors influencing adoption
A= Pragmatism is a dominant political economy driver in setting performance
measures
C=Target setting is a chief feature of performance measurement
B= Good practices influence the choice of outcome KPIs
D= Policy and legislative requirements make a significant difference to the performance
measurement regime
E= The structure of the revenue base influences the choice of KPIs
F= A performance culture has a bearing on the selection of KPIs
G=Priority information demanded by external stakeholders impacts the choice of
performance measures
H= Data collection cost and quality are taken into account in selecting KPIs
Source: Kariuki, 2012
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Factors that influence the adoption of performance measurement
Three of these factors are more dominant in ARA with a well developed performance measurement regime
E= The structure of the revenue base influences the choice of KPIs
F= A performance culture has a bearing on the selection of KPIs
H= Data collection cost and quality are taken into account in selecting
KPIs
Source: Kariuki, 2012
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Factors that influence the adoption of performance measurement
In addition, a 2014 study confirms the view that some performance measures can not be gauged in isolation of the tax system
Source: Kariuki et al., 2014
Level of horizontal equity
Level of vertical equity
Number (%) of administrative general rulings conceived collectively with civil society>
Tax expenditure/ exemptions
Tax system – policy, law and administration
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Factors that influence the adoption of performance measurement
ARAs in Anglophone Africa can also draw on recent relevant research on this subject from the global scene…
Kroll, 2014The use of performance measures and information is influenced by ownership of the
data, “a preference for a creative cognitive learning style, and a distinct” public service motivation
Hammerschmid et al., 2013
“Implementation of performance management instruments, such as strategic planning, management by objectives, performance contracts and performance
related pay, are major influencing factors on the use of performance information”
Angiola and Bianchi., 2013
Underscore the need for : competencies in effective information use; learning forums to promote widespread reviews performance data; benchmarking to
encourage the adaptation of best practices; and demands for accountability by external stakeholders
Nõmm and Randma-Liiv , 2012
(1) Use of the same measures over time; (2) strong analytical skills; (3) strong management capacity and political oversight; and (4) adopt practices from foreign
countries with caution
Areas for further study
Slide 20
Areas for further study
There is benefit in extending the research on the factors that influence the adoption of performance measures in ARAs in Anglophone Africa to cover more cases and factors
1. At least 15 ARAs
2. Incentives as a
motivating factor
3. Degree of autonomy