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Digital Transformation of Tax Agencies

Episode 2 Tax Revenue Management

Microsoft solutions for Tax Revenue Management are designed to improve the Tax Agencies operational
efficiency as well as to enable ease of paying taxes and improve citizens ability to comply. This typically
results in improved tax revenue, more satisfied tax payers, reduced processing times or costs as well as
potentially improved transparency.

Tax Revenue Management refers to all the core services, applications, processes that Tax Agencies use to
collect, view, modify, model and securely access the data, at the same time we need to also consider
modernization services required to improve the efficiency, productivity, transparency, reliability of the current
services used by stakeholders (citizens, businesses, tax agencies or tax consultants), enabling for example, self-
service, intelligent reporting (report builders, dashboards, e citizen information), powerful search engines, easy
connection, improved analysis ability, etc.

Our overall portfolio of solutions for Tax Revenue Management also englobe some of our partners solutions,
which enable us to provide our clients with a comprehensive set of solutions which range from e services such as
e-invoices, e-filling, e-forms, e-payment, to smart portals, mobile tax apps, Taxpayer e-Identity solutions, etc.

Products and services


Before deep-diving on our solutions for Tax Revenue Management, lets take you through how your countrys
Tax is likely to be organized. Firstly, the country decides on a set of taxes such as:
- VAT
- Income Tax
- Property Tax
- Environment Tax
- Roads Tax
- Profit (business) Tax
- Utilities tax etc.

Each Tax then has its own requirements, which might also differ by country, in terms of:
- Registration requirements
- Tax returns
- Payment application rules
- Penalty and interest rules
- Notices, letters
- Billing stages
- Collections procedures
- Refund rules
- Audits
- Reports, etc
Thus, implementations will differ from country to country but 1) our solutions will be highly configurable to
the customer needs (also supported by global to local Partners solutions) and 2) we will strive to implement
evolution on the basis of our guiding principles which we high-lighted in the introduction, 3) our solutions -
wherever relevant- will adapt to central, state & local needs, facilitated by our cloud and API logic, despite
differences that are summarized below:

DIFFERENCES at IT level DIFFERENCES at BUSINESS level


- Scalability of the - Sources of revenue: which tax goes to local budget, which tax
solution: from 000s goes to central budget; what is the autonomy on changing taxe
to M of taxpayers rates or install a new tax
- Integration with - VAT tends to be Central Tax while Property tax tends to be local
Central Gov system tax
and City accounting - Utilities fall usually under local administration as they should
systems service it
- Data sources and - Who does collection and how: local administration collects
data format at majority of taxes at the same time central government is looking
- collection point for at the source withholding of some taxes (income, VAT) that will
- Capacity to handle go directly to state budget
exceptions refunds, - Some countries (France for 2018) are building 360 view of
tax exempts, taxpayer revenue and allocate % for taxation, that employers will
deductions or grants use in their submission automation of processes and big data
- Specific calculations potential
for each individual tax - There are Revenue transfers & revenue sharing between Central
(tax base, tax % etc.) & Local and local among each other (annual budget allocation):
Different % per local administration based on criteria such as
Demography, Revenue contribution in the past etc.
- There is also support from Central to Local as Grants for specific
social topics
- Increased Tax Competition between Cities and regions in their
effort to attract more taxpayers and investors
- Socio-economic inequalities between cities and regions impact
revenue potential of these regions and might require for the poor
areas central government intervention
- Devolution transformation of the tax system that empowers
more and more Cities & Regions to have autonomy when it comes
to establishing taxes, collecting them and managing their
revenues and spending.

Despite these differences, a Tax Revenue Management solution will have similar Core Processes and Support
Functions, as illustrated by one of our partners Fast Enterprises:
Microsoft reference architecture detailed below is guided by our Vision:

The following architecture is our way to bridge the typical client processes into the system components
workloads and products. Microsoft architecture considers the fact that customers have already existing
systems in place as well as heterogenous environments into which we need to integrate. This can easily be
done via an API approach and Cloud services enhance Microsoft interoperability, connection and
consumption of data from diverse sources and in diverse formats.
This architecture should be helpful to your MCS or STU counterparts to pitch our overall vision on Tax &
revenue management.

It highlights:
- Inputs & Outputs
- Core processes and Supporting Functions
- Channels of communication internally and externally
- Data connections

Tax Revenue
Management Product
portfolio & mapping

From a product
standpoint, the table
below illustrates a
mapping of the various
solutions for Tax
Revenue Management to
our products. The hero
products on this solution
category are Dynamics
365 (to enable the 360o
taxpayer view, the
modernization in the case
management, the
accounting) as well as Azure/ Data platform (to enable e-commerce services, reporting, access security, EMS,
OMS, etc).
As mentioned in the introduction, countries have different maturity levels, which translate into different
priorities or IT focus and forces each of us to understand our exact client position/maturity to best pitch the
solution scenarios. These are a few examples:
- US: the IRS offers best practices when it comes to Audit management and Risk assessment; tax
inspectors are a great population to address initially as they are still heavy paper reliant, so
modernization services should be relevant. Also tax consultants are important players in the value
chain and our ability to leverage API in the cloud can be a great facilitator.
- Germany: as a wealthy country, taxpayer satisfaction and transparency are more important objectives
to go after than trying to improve the efficiency in tax collection, which is already high.
- LATAM, CEE and MEA: have many emerging countries where moving from paper to digital as well
as building a centralized/connected infrastructure such as National taxpayer registry, to taxpayer
identity, tax data exchange, building tax workforce capacity are areas to address. Professional training
initiatives such as Tax Academy driven by the Greek Ministry of Finance or Tax app Dev Hub driven by
the Australian Tax Organisation are good practices to refer to. The same topics will be relevant for
India and some of the APAC countries.
- WE, UK, France, Canada, China and mature APAC countries tend to focus on personalized taxpayer
services, self-compliance taxation via automated processes, integration of tax system with banking
system, fraud and error detection and tax evasion in cross border initiatives. Another focus is the
environment tax which aims at reducing carbon emissions generated by taxpayers individuals (cars) or
companies (factories e.g.).

Key roles to target on the Central and Regional levels are illustrated by the functional org chart.

In Central Governments, targeted Customers are Tax & Public Finances, Revenue Authorities subordinated in
most cases to Ministry of Finance.

The target customer roles are the


following line of business (LOB) titles,
and the CTO or IT director who provides
the infrastructure to support the Tax
Compliance, Errors prevention and Fraud
detection function.

Recently we see more and more new


functions dedicated to Data, Research,
Analysis and Statistics, Taxpayer
Advocate Service, and Tax Professional
Responsibility.

Digital transformation in Tax Agencies


will impact a number of other
stakeholders as illustrated in the table.

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