Business School

TAX, GOVERNANCE AND ADMINISTRATION:CHALLENGES AND OPPORTUNITIES IN CHINA,

INDONESIA AND THAILAND*

Prof Dr Chris EvansUNSW Australia

* International Conference on Public Management,Bali 19-20 August 2014

TAX, GOVERNANCE AND ADMINISTRATION:CHALLENGES AND OPPORTUNITIES IN CHINA,

INDONESIA AND THAILAND*

Prof Dr Chris EvansUNSW Australia

* International Conference on Public Management,Bali 19-20 August 2014

Overview

1. Introduction

2. Tax revenue and tax effort

3. Governance

4. Tax administration

5. Summary and conclusions

Overview

1. Introduction

2. Tax revenue and tax effort

3. Governance

4. Tax administration

5. Summary and conclusions

1. Introduction

Purpose of paper• to consider aspects of the complex interrelationships oftax, governance and administration• to evaluate China, Indonesia and Thailand performance• to identify key challenges and opportunities

Objectives of the tax system• to raise revenue (building capacity)• to tackle inequality, foster economic growth andwellbeing (building legitimacy and consent)

2. Tax revenue and tax effort

Tax revenue as per cent of GDP, 2011

31,7

25,6

19,1 18,916,3 15,3

20

25

30

35

16,3 15,3 14,1 13,8 13,5 12,310,9 10,4

0

5

10

15

2. Tax revenue and tax effortClassification of selected countries based on tax effort and taxcollection, 1994-2009

Classified1994-2009

Tax Effort

Low High

Low

12 countries including Cote'd'Ivoire, Ghana, Kenya,

Mali, Pakistan, Sri Lanka,Togo and Zambia

37 countries includingChina, Ethiopia, India,

Indonesia, Japan,Mexico, Thailand and

the United States

Tax

Col

lect

ion Lo

wH

igh

34 countries includingAustralia, Botswana, Brazil, France, Netherlands, New Zealand, South Africaand the United Kingdom

20 countries includingBulgaria, Estonia,Germany, Latvia,Russia, Spain,

Switzerland, and Turkey

12 countries including Cote'd'Ivoire, Ghana, Kenya,

Mali, Pakistan, Sri Lanka,Togo and Zambia

37 countries includingChina, Ethiopia, India,

Indonesia, Japan,Mexico, Thailand and

the United States

3. Governance

Government effectiveness, 2002-2012

3. Governance

6

8

10

Corruption perceptions

0

2

4

NewZealand

Singapore Australia Hong Kong Japan Malaysia China Thailand Indonesia Philippines

2011 2001

3. Governance

Key challenges and opportunities

(1) To build state capacity and legitimacy for self-sufficientsources of revenue

(2) To implement policies that aim to increase economicperformance and reduce income inequality

(2) To implement policies that aim to increase economicperformance and reduce income inequality

(3) To continue institutional reform, strengthening integrity andreducing corruption

(4) To increase transparency and accountability in taxadministration

4. Tax administrationMajor trends in tax administration(1) Modernisation and professionalism of tax administrations –

staffing flexibility, merit based performance targets(2) Autonomous and semiautonomous structures –

independence of operation from political sphere(3) Internal organisation of revenue authorities – market

segment versus type of tax, function of officer(3) Internal organisation of revenue authorities – market

segment versus type of tax, function of officer

(4) Increased reliance on self-assessment versus officialassessment

(5) Increased use of technology in all aspects of revenueadministration

(6) Shift away from command and control to risk managementapproach designed to foster voluntary compliance

4. Tax administration

Models of internal organisational design

4. Tax administration

The shadow economy for selected Asiancountries as a percentage of GDP, 2007

4. Tax administration

Operating costs as per cent of net revenuecollected for selected countries

1,5

2

0

0,5

1

Japan Malaysia Australia Singapore Hong Kong Thailand NewZealand

Philippines Indonesia

2011 2010

4. Tax administration

Ease of paying taxes ranking of selectedcountries, 2012

5. Summary and conclusions

(1) Tax, governance and administration areclosely linked and do matter(2) Capacity and legitimacy adversely affectedwhen governance is poor(3) All three countries suffer low tax revenue, lowtax effort(4) No one-size-fits-all solution

• China – quality of institutions• Indonesia – corruption• Thailand – shadow economy

(3) All three countries suffer low tax revenue, lowtax effort

TERIMA KASIH

Any comments or questions?

TERIMA KASIH

Any comments or questions?