1. 1. In response to the COVID-19 crisis, many tax administrations have taken on new roles to assist in the provision of wider government support. In many cases these have entailed responsibilities not normally provided by tax administrations, such as making support payments to citizens or providing new forms of analytical assistance to other parts of government. The speed with which such measures have to be implemented presents a number of challenges but also offers opportunities for learning lessons and for improving processes going forward, including as regards resilience and agility as well as closer working with other government agencies.

  2. 2. This document captures some of the new responsibilities taken on by tax administrations and suggests some considerations that administrations may wish to take into account. These new roles are described in the following categories:

    • Financial assistance, providing support to citizens and businesses, whether closely targeted or on a more blanket basis;

    • Providing services, using tax administration staff or services to support wider government COVID‑19 responses; and

    • Information assistance, supporting government by sharing information or using the administration’s data analytics capabilities.

  3. 3. Following the description of the challenges and potential mitigation strategies, the document also briefly describes the opportunities that may arise from taking on these new responsibilities including the use of swift development and implementation processes. Finally, an overview of some of the new responsibilities introduced by Forum on Tax member administrations is contained in Annex A. These examples are not intended to be comprehensive but rather to assist administrations in their domestic considerations, including where discussions with peers might be helpful.

  4. 4. In taking on these new roles, there are a number of common issues that tax administrations are likely to face, including the:

    • Rapid development of IT solutions. The need to provide large-scale support quickly in a time of crisis will often require an equally rapid development of new IT tools. Compared to previous IT development, this may also require more agile forms of decision-making in the development phase. Such agile methodologies are generally based on co-creation between business and IT departments with joint decision making, adaptation and testing to a tight timetable. The main downside is that the compressed timescales may limit consultation and evaluation prior to launch with potential implications for functionality. Compressed timetables may also reduce the time available for testing during the different phases of implementation, carrying risks for stability. It will be important to understand and document the risks involved and to maintain focus on the “must-haves”.

    • Fraud risks. It is likely that a trade-off will need to be made as regards the speed with which support is to be provided to large numbers of people and the risks of fraud. Outside of system vulnerabilities (e.g. to hacking or internal fraud), this essentially depends on two factors: what level of verification of entitlement is required prior to payment and what information is available to allow for cost-effective post-payment compliance checks. These issues need to be considered together in both the design and implementation of the policy.

      As regards verification, there are two ends of the spectrum. At one end is verification which can be done based on robust information already held by the tax administration (or other government agency) for processes which are already subject to high levels of verification, such as payments of certain benefits and refunds as well as regulatory processes. At the other end, is a process with a high degree of self-verification and limited ability for the administration to perform cross-checks prior to making payments. The more that self-verification is used, the more administrations may wish to focus on risk assessment prior to payment as well as the development of a post-payment compliance strategy. A post-payment compliance strategy might, for example, require the provision of qualifying evidence after the event, the provision of robust identity and contact details of the person or business, the use of electronic and traceable payments, etc. In any event, the risks of fraud and the acceptance of risk levels should be well documented and signed off at appropriate levels of seniority.

    • Data protection. Providing support at speed may require the use of data held by the administration, provided by other government departments or received from third parties, for reasons other than those for which the data was originally provided. This can create data and privacy protection risks and administrations would be well advised to carry out a data protection impact assessment and to consult with the relevant data protection authorities. In some cases, it may require some changes to the legal framework or the assumption of some degree of legal risk. In some circumstances, it may be possible to obtain advanced consent for the use of data from recipients of support. For example, there might be a requirement for consent by the applicant to use specified data for verification purposes as a condition of being able to receive the support.

    • Cooperation on policy design and implementation. Decisions by policymakers on some forms of fiscal support through the tax administration may also fall short of desired outcomes unless administrability issues, effective targeting and fraud risks are fully taken into account. It may, therefore, be sensible for tax administrations to be involved in the design of policy from as early a stage as possible, including advising on possible alternative approaches. Ideally policy design and implementation discussions should involve other agencies that have responsibility for making large scale payments to citizens, such as social security and pension benefits, since they will have extensive experience on application processes, evidence requirements and fraud risks. Co-design will also allow policy makers to be involved in decisions about the risks involved, including those related to the delivery of projects to time and to budget, as well as operational risks and fraud risks. Additionally, it will allow administrations and policy makers to agree on requirements for monitoring and evaluation purposes.

    • Capturing decisions and lessons learnt. Given the scale and scope of the support programmes, it will be important that there is an effective audit trail for decisions taken, risk identification, mitigation strategies and risk acceptance. In addition, it may be useful to begin capturing lessons learnt while everything remains relatively fresh and relevant personnel are still in place. This may be useful for the future resilience and agility of tax administrations both in general and for future crisis management (including the possibility of future waves of the virus). Administrations may wish to develop a common template looking at learnings in the policy design phase, the implementation phase, the launch and post-launch phase, possibly commissioning a small group of experts to undertake this work. This could cover descriptions of the process and an initial evaluation of the effectiveness of, among other things: different governance arrangements; the operation of project teams; systems resilience and adaptability issues; legal issues; budgets; testing; monitoring and evaluation; etc.

  1. 5. The COVID-19 pandemic poses an unprecedented challenge to the economy and the lives of many people around the globe, leading to increased unemployment, significant drops in income and heightened risks of business failures. Governments worldwide have swiftly taken multifaceted actions to support their citizens and businesses in this difficult period in order to mitigate the impact of these sudden and deep shocks on individual households, businesses and the wider economy.

  2. 6. Among these actions are direct government financial assistance programmes, usually targeted at those facing the most difficulties. These include:

    • Financial support for citizens, for example, providing new unemployment benefits, income support, one-off grants as well as other forms of financial support. Recipients might include: all households with income below certain thresholds; individuals who have lost their jobs; students and recent graduates unable to find work; and self-employed individuals who may have suffered significant reductions in income from containment measures or from significantly reduced demand.

    • Employer subsidies, where payments are paid to employers to encourage them to keep on staff (including through furlough schemes), to re-hire workers laid off as a result of COVID-19, or to help prevent further job losses; and

    • Company subsidies, for example, providing payments to companies which are facing demonstrable hardship in order to alleviate cash-flow concerns which may have impacts on their ability to retain staff, pay suppliers or meet loan payments and other costs.

  3. 7. Recognising the close connections that tax administrations have with citizens and businesses and their ability to operate at scale, many governments have asked their tax administrations to oversee the implementation and ongoing operation of some of these financial assistance programmes.

  4. 8. There appear to be a number of explicit or implicit objectives as to how these financial assistance programmes are delivered, namely

    • That the payments are made quickly given the urgent need for support;

    • That application processes are clear and relatively simple for applicants to complete;

    • That as many as possible of those who are entitled to the support actually receive it; and

    • That opportunities for fraud are minimised without damaging the achievement of the first three objectives.

  5. 9. In meeting these objectives, administrations have to overcome a number of challenges that arise, for example, from short implementation timelines, systems constraints, lack of full information and the additional burdens on an already stretched workforce. Some considerations that tax administrations may wish to take account of to help meet these objectives are:

    • Digital delivery at scale. Given the very large numbers of potential applicants and the need to make payments as quickly as possible, it will be important to develop online forms and digital services to expedite processing where it is not possible to use or repurpose existing solutions (for example, by using systems to report and pay wage taxes in “reverse gear” to process and pay-out a wage subsidy). This will often mean using an “agile methodology” to quickly build an IT solution, something that not all tax administrations will have experience of using. This will require rapid familiarisation with agile techniques, the risks involved, effective governance arrangements and sufficient budget.

      While digital may be the default application process, mandating the use of digital channels and instruments to apply for financial assistance can exclude significant numbers, particularly among the elderly population and those without sufficient resources. Administrations will want to consider how best to provide assistance in those cases, for example allowing applications by phone or mail, and appropriate communication channels to ensure that these populations are reached, including working with relevant stakeholders. In addition, in designing digital solutions administrations may wish to make provision for authorised persons to make applications on behalf of those unable to do so themselves. In this case, close attention will be needed to minimise opportunities for fraud (such as clear identification of the person, the nature of the authorisation and follow-up actions, such as letters of confirmation to the underlying applicant and risk based compliance activity).

    • Avoiding excessive burdens. Since the objective is to make payments as quickly and simply as possible while minimising fraud, administrations may wish to document their risk appetite as to the extent of pre-validation required of claims. This will depend heavily on the design of the policy and the difficulties that applicants might face. In this regard, early engagement with policy makers will be important to explore design options and residual risks.

      Depending on the design of the policy, it may be possible to undertake validation without seeking additional information from the claimant. This may be the case where some of the information is already held within the tax administration, such as contact details or information on previous income. In some cases, there may already be payments being made to some applicants by another government body, for example those that provide child benefits, healthcare benefits, income subsidies, etc.

      Administrations may also wish to explore whether there are additional data-based validation options, such as through exchange of appropriate information or through direct confirmation of eligibility (for example, from universities or student loan bodies as regards payments to students). In summary, it could be very helpful to identify all of the available data sources relating to the population covered by the financial assistance, some of which may require new legislation to access.

      Where it is not possible, cost-effective or sufficiently timely to automate validation checks based on information accessible to the tax administration, then consideration needs to be given as to what is reasonable, in the circumstances, to ask of applicants by way of supporting information. Where evidence requirements may cause difficulties for large numbers of applicants, then decisions may need to be taken on what degree of self-attestation is sufficient, possibly with supporting evidence sought at a later date (agreement to which could also be a condition for payment). In this case, having highly robust identity information from applicants will be critical and enhanced identity checks, using for example anti-money laundering evidence requirements, may be appropriate.

    • Compliance strategy. There will always be those who seek to defraud such financial assistance programmes, and this may be compounded by the significant amounts being paid out quickly. Tax administrations will wish to consider the balance between pre-payment and post-payment compliance measures. In both cases, compliance activities will be driven by risk assessment given the large populations involved. Risk factors can be established around the degree of confidence that the information provided by applicants is correct, with different confidence levels triggering additional pre-payment checks and post-payment compliance activity. Risk factors might include:

      • Previous tax non-compliance by the applicant;

      • Lack of previous contact with the tax administration or other government agency;

      • Recent establishment of a business;

      • Significant increase in the number of previously reported employees;

      • Recent change of details (such as address or bank account);

      • Old identification documents;

      • The use of the same IP or physical address for multiple applications.

      Consultation with other agencies making significant amounts of payments, such as social security agencies, could be of high value in this respect given their long experience in risk identification and prevention. In developing post-payment compliance strategies administrations will wish to take account of the further information that may become available over time, for example in future tax returns or third party data. In addition, administrations may wish to supplement their information sources through the promotion and efficient follow-up of whistle-blowing mechanisms.

    • Communication. Ensuring that as many as possible of those who are entitled to payments know how and when to apply for financial assistance requires a multifaceted communication strategy, with particular consideration given as to how to reach those who may be more digitally challenged, such as the elderly. Consultation with other agencies responsible for making payments to citizens could be highly valuable both for general communication purposes and for possible inclusion in their own targeted communications. Additional multipliers might be government agencies who have interactions with small businesses, such as local authorities, and trade associations. Tax administrations may also wish to consider setting up dedicated help lines for different taxpayer segments and the development of guidance for commonly occurring issues. This could be supported by redeploying staff, such as those currently not engaged in their regular pre-crisis work, with appropriate training and support.

      In addition to communication strategies to support applications, administrations may wish to make clear both the penalties for supplying false information as well as more general messaging around the harm that fraud causes to wider society at a time of crisis. There may be useful lessons here from other government agencies which make payments to citizens.

  1. 10. Tax administrations are large organisations that employ skilled and specialised staff that interact with citizens on a daily basis. Taking account of that, a number of governments have asked their tax administration to assist other agencies or the government in general in manoeuvring through the crisis by providing emergency hotline services or by redeploying staff to provide other forms of assistance (either from within the tax administration or through temporary transfers).

  1. 11. Tax administrations are used to dealing with large contact volumes. In 2017, for example, Forum on Tax Administration members received more than 300 million incoming telephone contacts, and many have put in place service or call centres to deal with the requests generated by taxpayers and other stakeholders (OECD, 2019[1]). Understanding that these processes and related infrastructure have been used successfully over many years, some governments have asked their tax administrations to assist them in providing emergency hotline services to citizens to answer questions related to the COVID-19 crisis.

  2. 12. In responding to such requests, the key challenge for tax administrations lies in preparing and providing training for officials tasked with carrying out new responsibilities, while at the same time managing the increase in the number of normal day-to-day incoming calls due to the reduction of in-person interactions and questions about COVID-19 related tax measures. Considerations that tax administrations might wish to take account of include:

    • Co-operating with other government agencies to prepare virtual training modules;

    • Leveraging the service and call centre employees of other government agencies to manage the volume of calls at peak times;

    • Employing additional temporary or agency staff to provide more basic information to free up more experienced staff; and

    • Where no additional resources are provided to the tax administration, redeploying officials from areas that have seen reduced activity (e.g. debt collection or audit / verification) to assist in answering incoming calls related to the administration’s regular functions.

  1. 13. Understanding that tax administrations employ staff that includes not only tax specialists but also staff with a variety of other skills (such as data scientists and analysts, communication experts and behavioural scientists), several governments have asked their tax administration to support other parts of government by redeploying staff to, for example, health authorities, emergency services and other government departments.

  2. 14. This could include, for example, staff being reassigned to support contact tracing, data analysis, call centre support, reviewing support claims, research, etc. Some administrations also reported redeployment of staff that have relevant health care experience to assist health authorities.

  3. 15. Redeploying staff to other parts of government is not a simple task and comes with some significant challenges. First, there are some logistical challenges in setting up appropriate physical accommodations (such as office space), communication technologies, budgetary changes, insurance coverage etc. Second, to function properly, redeployed staff need access to the other agencies’ IT systems and staff may need to receive special training and preparation for carrying out the new responsibilities. Third, the tax administration may have to handle the loss of skilled experts at a time where staff numbers may already be reduced due to COVID-19 related impacts.

  4. 16. Considerations that tax administrations might wish to take account of include:

    • Co-operating with the IT-department of the other agency to see whether the tax administration’s IT equipment can be quickly repurposed for the new use, for example, so that redeployed staff can access the IT systems of the other agency or that other agency staff can use the tax administration’s IT infrastructure (e.g. for analytical purposes);

    • Co-operating with the other agency to provide necessary training (and other preparations) for redeployed staff;

    • Analysing the impact on the tax administration’s resources so that remaining staff can cover the functions of those that have been redeployed or priorities can be revaluated;

    • Developing arrangements, where appropriate, to allow staff from one agency to be reassigned formally to another agency such that they have access to the same systems, internal services, terms and conditions etc.; and

    • Where necessary, allocating suitable tax administration premises or facilities for use by other agencies.

  1. 17. Access to data and information is extremely important for governments to understand the COVID-19 crisis and address it effectively and efficiently. Analysing and monitoring data is critical, for example, when trying to understand which parts of the economy are affected the most, which support measures might be most effective in supporting citizens and businesses, and to forecast how the virus may impact the economy going forward. Tax administrations can play a key role in this as they are data rich organisations that have significant analytical resources and extensive experience in both handling and sharing data sets.

  1. 18. Tax administrations hold information on large parts of the population and economy. This includes taxpayers’ personal information, such as address and bank information, and revenue and income information sourced from tax returns or third-party information reporting obligations.

  2. 19. In times of a crisis, this information can be extremely useful. Income and revenue information can be used to determine eligibility of COVID-19-related benefit or support, and taxpayers’ address and account information can be used to contact citizens and businesses or to make direct benefit or support payments.

  3. 20. Where other government agencies are in charge of implementing the COVID-19 related support measures, the tax administration might be asked to share the information it holds. Providing the information demanded by other government agencies in a timely manner while maintaining confidentiality and data protection is one of the key challenges that tax administrations will face. The speed with which new procedures for exchanging this information need to be created require specific attention to potential privacy, disclosure and fraud risks. This is compounded by the fact that the human and IT resources needed to support these new procedures will often be operating in a remote working environment. Considerations that administrations might wish to take account of include:

    • Reallocating human and IT resources to support the information sharing;

    • Developing protocols for the interchange of information, and automation;

    • Using secure channels (or developing those where they do not exist);

    • Logging of all information exchanges; and

    • Where necessary for legal reasons, providing only the information required in a general way, i.e. building a two-way exchange system where the administration would only confirm certain thresholds (for example, income or turn-over) without revealing specific figures.

  1. 21. Tax administrations receive vast amounts of data on a regular basis either through direct taxpayer reporting (for example, e-invoicing information and the filing of tax returns) or through third-party reporting for example, information from financial institutions or employers. As a result, many tax administrations have built significant capability and expertise in collecting, modelling and analysing statistical data.

  2. 22. Many governments have recognised this expertise in processing and using data and have asked tax administrations to support health authorities and other government bodies to make informed decisions. This can be done by:

    • Analysing existing data sources, such as e-invoicing information, pay-as-you-earn and VAT returns, to produce statistical data on the COVID-19 impact on the economy and to identify areas where additional support might be required or where the recovery has started and support measures might be reduced. This might also assist the government with monitoring and preventing price-gouging.

    • Collecting and analysing new data sources (for example, via web scraping) to support health authorities with predicting the further course of the crisis or to inform wider government policies.

  3. 23. In times of tight resources where tax administrations have to focus their resources on supporting taxpayers through the crisis while bringing in much needed government revenue, a key challenge will be to manage the increased frequency and format of data collection, processing and analysis, as well as any related technical difficulties. Also, office closures and remote working may make it difficult for the administration’s data scientists to fully access the required IT equipment and programmes. Considerations that administrations might wish to take account of include:

    • Employing new methods and tools to amalgamate data for statistical purposes regarding the economic impacts of the COVID-19 crisis;

    • Collaborating with data scientists from other government agencies or academia to process and analyse data; and

    • On an exceptional basis and under strict health and safety restrictions, providing data scientists with access to offices where necessary to use on-site IT equipment and tools which are not available in the remote working environment.

  1. 24. The challenges faced by tax administrations during the COVID-19 crisis and their responses offer opportunities for reconsideration of both operational resilience for possible future crises (including possible further waves of COVID-19) and for more efficient day-to-day operation of the tax administration, including reduction of administrative burdens. The experience with providing assistance to, or on behalf of the wider government may provide opportunities in a number of areas, including:

    • Digitalisation. In implementing the various new responsibilities, some tax administrations have undertaken rapid development of new digital services and tools. This provides an opportunity for administrations to review how they approach digital development in general and whether different and more agile methods could be applied more widely than may have previously been the case. In addition, it would be sensible to reflect the lessons of the crisis in future development of e-administration systems, in particular whether they are sufficiently robust to support both business operations and swift changes in government policy, including provision of financial and other support. A core consideration here is the resilience of the e-administration systems themselves to cyber-security attacks and system failures.

    • The legislative framework in a crisis. In order to make changes at speed, it may sometimes be the case that legislative changes are needed (and some options may not be pursued as a result given timing considerations). The tax administration may wish to reflect on where legislative issues led to less good outcomes during the crisis or the assumption of a high degree of legal risk, and what additional flexibilities might have been helpful in the crisis. This could feed into wider consideration of how the balance between proper Parliamentary scrutiny and oversight can be maintained while allowing for more rapid temporary legal changes to be made, including, for example, delegation of some policy decision-making to tax administrations which currently appears to vary significantly between jurisdictions.

    • Co-ordination and co-operation across government. Taking on new functions very rapidly is a very different environment from implementing tax policy changes in the ordinary course of events. In the latter case, there is often considerable consultation with stakeholders on significant changes to tax law requirements which have major impacts on how tax is administered (as opposed to changes in rates). This is not possible in a crisis and administrations may, therefore, wish to consider how such consultation can be conducted in a compressed timescale to surface issues of administrability at speed and to allow consideration of possible alternative implementation options. In addition, tax administrations may wish to review their existing processes for engagement with other government agencies and how they can best work together to improve services for citizens as well as to improve resilience and agility.

This annex provides an overview of the new responsibilities that tax administrations have undertaken to assist in the provision of wider government support during the COVID-19 pandemic. The examples below, which are not intended to be comprehensive, are aimed at providing food-for-thought for administrations’ domestic considerations, including helping to identify where discussions with peers could be useful.

References

[1] OECD (2019), Tax Administration 2019: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://dx.doi.org/10.1787/74d162b6-en.

Contact

OECD Forum on Tax Administration Secretariat (✉ FTA@oecd.org)

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