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The Netherlands Tax and Customs Administration reported that it is required to reduce budget by EUR 400 million by the end of 2015, equivalent to around 12% of its 2010 budget. Savings will be achieved through efficiency gains (EUR 240 million) and changes in legislation that lead to simplification of tax administration proceses and tasks (EUR 160 million). In addition, a reinvestment programme has been approved by parliament: EUR 157 million will be invested in hiring and educating staff for targeted compliance activities.

The United Kingdom’s HMRC reported that it is required to reduce staffing levels by the equivalent of 10 000 FTEs over a 4 year period to end March 2015. Over the four years, covered by the review, HMRC will also reduce its overall spending by 25%, with the administration budget reduced by 33%. However, Government Ministers have agreed to “reinvest” £900 million of these gross savings over the four years to transform HMRC’s work against avoidance, evasion and criminal attack. In return, HMRC has a target to raise an extra £7 billion a year in revenue by 2014/2015.

Overall tax administration expenditure

This part focuses on the aggregate level of expenditure of revenue bodies (all categories of expenditure) to carry out their tax and other mandated responsibilities. For comparison purposes, efforts have been made to separately identify the resources used (and costs of) tax and non-tax related functions. A number of ratios are used to make relative comparisons across surveyed bodies countries – where relevant, any known abnormal factors influencing the ratios for individual countries are also identified. Separate expenditure information is also provided in respect of information technology operations and human resource management (covering both tax and non-tax responsibilities. For these areas of revenue bodies’ operations, the survey sought data concerning:

Information technology operations: Actual or estimated costs of providing all information technology support for administrative operations (incl. non-tax roles).

Human resource management functions: Actual or estimated costs of providing all human resource management support functions (e.g. personnel, payroll, recruitment, learning and development) for administrative operations (incl. non-tax roles).

Aggregate Tables A.4 to A.6 located in the Annex A of this series set out for a seven year period (2005 to 2011) categories of aggregate expenditure data reported by revenue bodies for this and prior series. Table 5.1 sets out relative aggregate salary expenditure data for all years to display trends, while Table 5.2 similarly displays relative total expenditure attributable to the use of information technology (IT) (2007 to 2011), and HRM expenditure (2010 and 2011). The key observations are as follows:

Aggregate salary expenditure

Aggregate salary costs vary widely within a band of 60-90% of aggregate administrative costs for the vast majority of revenue bodies;

Viewed over the seven year period (2005-11), aggregate salary costs as a share of total administrative costs for OECD countries averaged around 72% from 2005 to 2009 but declined sharply by 6% (absolute) in each of 2010 and 2011, most likely reflecting the impacts of Government-mandated reductions in staffing and/or efficiency gains from automation and internal re-organisations initiatives, etc.;

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Table 5.1. Salary expenditure/total expenditure-tax administration

		Salary expenditure/total expenditure for all tax administration and support functions (%)
Country	2005	2006	2007	2008	2009	2010	2011
OECD countries
Australia	69.5	70.6	71.3	59.6	62.3	62.1	63.1
Austria	80.3	80.2	82.2	63.2	67.5	80.0	80.3
Belgium	79.4	82.5	81.7	81.9	81.7	82.9	81.4
Canada	76.6	79.7	77.0	77.2	78.9	76.7	77.8
Chile	80.8	80.4	78.1	78.4	80.3	81.8	83.3
Czech Rep.	76.4	75.6	78.7	60.3	59.8	81.7	72.1
Denmark	67.2	67.2	68.5	n.a.	n.a.	78 2	77 6
Estonia	70.7	72.3	75.9	76.5	77.3	78.4	76.5
Finland	68.5	66.7	65.2	64.9	64.4	65.6	64.5
France	78.6	79.3	79.1	81.3	81.1	81.5	80.8
Germany	84.3	84.3	83.3	83.7	82.3	81.3	81.6
Greece	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
Hungary	80.8	83.3	80.0	61.6	71.4	48.5/1	51.7/2
Iceland	n.a.	n.a.	n.a.	53.6	52.7	65.6	69.4
Ireland	73.3	70.9	71.5	68.5	71.7	72.6	74.9
Israel	n.a.	n.a.	n.a.	87.5	87.9	68.2	68.3
Italy/1	66.2	68.8	69.5	56.5	56.4	44.8	46.0
Japan	80.2	80.5	81.1	80.7	80.8	80.5	80.7
Korea	68.0	67.5	66.5	64.0	63.6	61.9	64.4
Luxembourg	84.0	84.7	81.5	80.0	81.3	83.6	82.9
Mexico	84.0	84.2	82.5	82.4	83.1	88 9	85 2
Netherlands	59.9	61.2	64.0	65.5	67.1	70.6	72.0
New Zealand	61.9	62.2	63.0	62.5	64.3	59.9	59.2
Norway	59.9	60.3	63.1	64.0	65.2	66.4	68.5
Poland	73.6	74.5	71.8	71.7	72.8	80.4	81.7
Portugal	80.6	80.9	79.4	79.0	81.0	81.9	80.3
Slovak Rep.	43.5	47.4	49.6	n.a.	n.a.	50.9	44.8
Slovenia	67.4	59.8	68.5	68.4	68.3	65.7	66.3
Spain/1	66.6	67.0	67.1	68.5	73.1	71.7	72.2
Sweden/1	70.5	71.9	69.6	65.3	69.0	69.5	68.4
Switzerland	90.2	89.7	90.6	90.6	89.4	94.0	92.6
Turkey	64.9	65.9	68.4	67.6	66.1	71.2	71.7
United Kingdom	63.0	60.1	61.2	58.8	55.2	54.4	57.1
United States	71.5	71.3	71.5	70.4	71.5	71.6	72.9
OECD ave. (unw.)	72.3	72.6	72.9	70.8	71.9	66.9	66.9
Non-OECD countries
Argentina	90.7	90.1	94.2	94.7	95.3	95.8	96.9
Brazil	n.a.	n.a.	n.a.	n.a.	n.a.	60.1	59.8
Bulgaria	59.2	68.5	76.0	76.6	85.1	81.7	80.6
China	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
Colombia	n.a.	n.a.	n.a.	n.a.	n.a.	76.4	75.8
Cyprus	n.a.	n.a.	n.a.	71.0	78.1	81.4	81.8
Hong Kong, China	n.a.	n.a.	n.a.	n.a.	n.a.	86.6	88.9
India	n.a.	n.a.	n.a.	57.5	65.5	66.0	61.3
Indonesia	n.a.	n.a.	n.a.	31.7	37.3	65.0	50.5
Latvia	66.7	61.0	61.5	72.4	68.9	58.6	65.6
Lithuania	65.5	71.2	68.6	73.1	77.8	79.6	78.9
Malaysia	66.4	63.1	67.3	51.2	39.2	79.2	82.4
Malta	62.2	63.0	66.7	66.7	60.0	68.0	73.9
Romania	72.7	75.0	76.5	85.9	97.1	n.a.	n.a.
Russia	n.a.	n.a.	n.a.	66.5	68.2	74.4	71.8
Saudi Arabia	81.4	79.4	82.8	80.9	79.2	n.a.	n.a.
Singapore	59.6	55.4	58.2	58.9	55.0	52.8	55.3
South Africa	58.1	57.2	60.9	56.6	53.1	n.a.	n.a.

For notes indicated by “/ (number)”, see Notes to Tables section at the end of the chapter, p. 191. Source: CIS survey responses.

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Table 5.2. IT and human resource management expenditure (% of all expenditure)

		Total IT expenditure/total revenue body expenditure %				Total HRM costs/total expenditure %
Countries	2007	2008	2009	2010	2011	2010	2011
OECD countries
Australia	19.5	21.7	22.9	21.7	21.5	5.3	6.0
Austria	6.9	12.1	10.4	13.5	15.4	5.0	5.0
Belgium	7.7	8.4	7.8	6.4	6.1	n.a.	n.a.
Canada	8.4	11.4	12.6	11.3	10.5	1.9	1.9
Chile	5.1	5.5	5.2	5.6	5.7	3.2	3.4
Czech Rep.	13.4	13.8	13.7	3.4	20.4	0.5	0.5
Denmark	15.1	14.5	16.2	14.5	14.8	2.1	1.9
Estonia	n.a.	13.8	11.5	11.5	15.8	1.5	2.6
Finland	21.4	18.3	20.0	n.a.	27.5	n.a.	n.a.
France	5.3	4.1	4.2	3.6	3.6	n.a.	n.a.
Germany	5.3	5.7	6.4	6.5	6.5	1.3	1.3
Greece	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
Hungary	11.7	13.3	12.0	4.8	5.2	1.6	2.9
Iceland	n.a.	29.8	30.4	16.4	16.8	n.a.	n.a.
Ireland/1	11.8	n.a.	n.a.	13.6	10.2	1.3	1.4
Israel	n.a.	8.4	8.8	5.0	5.2	1.3	1.2
Italy	3.9	5.0	4.9	4.6	5.2	3.8	3.9
Japan	8.5	8.1	8.3	8.5	8.6	0.04	0.05
Korea/1	6.4	8.0	6.3	8.8	7.1	0.7	0.7
Luxembourg	n.a.	4.9	5.5	2.1	3.6	0.02/1	0.02/1
Mexico	4.5	4.5	3.9	4.1	4.1	1.2	1.0
Netherlands	24.7	19.1	18.1	16.2	14.2	2.5	1.9
New Zealand	20.0	21.4	19.2	24.5	22.5	1.5	1.6
Norway	19.9	22.4	21.0	21.9	20.8	2.2	2.3
Poland	n.a.	5.1	2.8	1.4	1.6	0.1	0.4
Portugal	1.7	2.5	2.4	1.4	1.2	n.a.	n.a.
Slovak Rep.	13.6	n.a.	n.a.	8.6	15.5	0.9	0.8
Slovenia	7.4	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
Spain/1	n.a.	5.3	4.6	5.7	5.6	n.a.	n.a.
Sweden	17.0	17.0	19.5	16.8	17.7	n.a.	n.a.
Switzerland	9.4	8.2	8.9	2.0	2.6	0.7	0.7
Turkey	3.8	6.2	3.6	0.8	2.2	n.a.	n.a.
United Kingdom	n.a.	23.3	21.2	20.3	22.8	1.7	1.6
United States	15.1	15.8	14.9	15.4	15.0	2.0	1.8
OECD ave. (unw.)	11.1	11.9	11.6	9.5	11.0	2.0	2.1
Non-OECD countries
Argentina/1	1.5	1.1	0.7	0.6	0.8	0.04.	0.1.
Brazil	n.a.	n.a.	n.a.	16.2	15.5	n.a.	n.a.
Bulgaria	n.a.	1.9	n.a.	0.6	2.4	1.2	1.2
China	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
Colombia	n.a.	n.a.	n.a.	3.4	3.5	1.1	1.3
Cyprus	n.a.	n.a.	n.a.	2.3	3.0	0.7	1.1
Hong Kong, China	n.a.	n.a.	n.a.	9.1	9.6	1.2	1.3
India	n.a.	n.a.	n.a.	7.0	7.1	0.1	0.3
Indonesia	n.a.	n.a.	n.a.	4.2	1.5	n.a.	n.a.
Latvia	n.a.	9.5	14.8	13.3	9.8	5.0	4.9
Lithuania	11.9	10.6	6.7	7.3	7.8	1.1	0.9
Malaysia	4.0	12.0	27.5	5.9	2.4	2.7	3.0
Malta	n.a.	8.3	7.9	0.2	0.2	0.6	0.6
Romania	n.a.	n.a.	n.a.	n.a.	2.7	n.a.	n.a.
Russia	n.a.	6.7	5.7	5.9	6.9	1.8	1.8
Saudi Arabia	3.4	1.2	6.7	n.a.	n.a.	n.a.	n.a.
Singapore	32.3	31.3	33.8	40.4	39.4	1.5	1.7
South Africa	n.a.	4.7	4.5	n.a.	n.a.	n.a.	n.a.

For notes indicated by “/ (number)”, see Notes to Tables section at the end of the chapter, p. 191. Source: CIS survey responses.

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A number of revenue bodies reporting relatively high salary costs also report relatively low amounts of expenditure on IT and/or relatively large local office networks, low e-filing usage, use of manual payment methods for taxpayers and/or limited use of data processing centres/call centres, e.g.

	% of total costs in 2011					Manual payment	Data processing
				Size of local	Electronic filing	methods (i.e. mailed	centres (DPC)/call
Country	Salary	IT		office network	take-up (overall) *	cheques) are used	centres (CC) are used
Argentina	96.9	0.8		n.a.	99	n.a	Very limited
Belgium	81.4	6.1	1 182		9	99	Minor usage
Bulgaria	80.6	2.4	23		9	n.a.	One small CC
Cyprus	81.8	3.0	15		xx	99	Very minor
France	80.8	3.6	1 500		x	99	Extensive (both)
Germany	81.6	6.5	551		xx	9	Extensive DPC
Japan	80.7	8.6	524		x	9	None reported
Luxembourg	82.9	3.6	83		xx	99	DPC only
Malaysia	82.4	2.4	67		9	99	2 DPC and 2 CC
Poland	81.7	1.6	400		xx	99	Limited
Switzerland	92.6	2.6	-		xx	xx	Nil
* 99 above average 9 average			x below average xx well below average.

This observation, along with a number of computed ratios that are described later in this chapter, point to potential for increased utilisation of technology and/or new ways of organising the processing of large work volumes.

A factor explaining the relatively low salary costs in some revenue bodies appears to be the significant use of outsourcing for the provision of IT and other services, as seen in Australia, Denmark, Finland, Italy, New Zealand the United Kingdom; Australia also reported that its ratio was also impacted by significant additional capital funding in recent years for its Change Programme.

Information technology (IT) expenditure

Reported IT-related costs also vary widely in their relative magnitude which may result from a variety of factors (e.g. low real investment in IT, errors and inconsistency across revenue bodies in properly classifying IT-related expenditure for this survey, sharing of IT costs with other parts of MOF;

Notwithstanding the wide variation, IT-related costs (i.e. salary and other administrative costs) 1 are a significant component of the overall expenditure budget of many revenue bodies; across all revenue bodies, total IT-related costs were reported by 18 revenue bodies as exceeding 10% of total expenditure in 2011 (with 14 reporting amounts in excess of 15%);

Viewed over the five year period (2007-12), average IT costs for all OECD revenue bodies countries are reported fairly consistently at around 12% of total revenue body expenditure; for non-OECD countries the average investment in IT was much lower at the commencement of this period but there are some notable exceptions to this pattern (e.g. Brazil, Latvia, and Singapore);

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Of the 10 revenue bodies reporting IT expenditure consistently in excess of 15% of total expenditure over the five year period, just about all perform favourably across a series of performance-related measures calculated and reported in other parts of this series (i.e. e-filing (Tables 7.1 to 7.3), e-payment (Table 7.4), average staffing (Table 5.5), total administrative costs/GDP (Table 5.4), total costs/net revenue (Table 5.3), and average debt levels (Table 6.16). In the case of the Netherlands and United Kingdom, cost reduction initiatives described earlier in this chapter can be expected to lead to further improvements in a number of the ratios indicated.

				Service/efficiency/performance indicators
	Overall		Electronic		Average	Total costs/	Costs/	Debt levels/
Country	e-filing rates *		payment rates *		staffing ratio *	GDP **	net revenue **	net revenue **
Australia	99		9		99	9	9	99
Finland	9		n.a		99	9	9	99
Iceland	99		n.a		99	99	99	x
Netherlands	99		99		x	x	9	99
New Zealand	99		99		99	9	9	99
Norway	99		n.a		x	99	99	99
Sweden	9		99		99	99	99	99
Singapore	99		99		99	99	9	99
United Kingdom	9		99		9	9	9	99
United States	9		9		99	99	99	99
* 99 above average		9 average		x below average		xx well below average
** 99 very favourable		9 favourable		x unfavourable		xx very unfavourable

Human resource management expenditure

As relatively large employers, revenue bodies must invest fair amounts in their HRM support functions. Accordingly, for CIS 2012 it was decided to ascertain information concerning the level of resources devoted in 2010 and 2011 to a range of HRM functions.2 Table 5.2 sets out the level of expenditure for HRM functions as a proportion of all revenue body expenditure – the data should be interpreted with care owing to the possibility of misinterpretation/inconsistencies in its compilation. The key observations are:

Data reported by 36 (of 52 surveyed) revenue bodies revealed an average expenditure of around 2% on HRM functions, but there were a number of countries reporting substantially higher amounts-Australia (5-6%), Austria (5%), Chile (8.6%), and Latvia (around 5%).

Revenue bodies reporting a relatively high amount of HRM expenditure all reported major changes underway or planned concerning a mix of recruitment, training, performance management and/or rewards related changes (see Table 4.1 of Chapter 4).

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