Tax Administration:

Preliminary Information on Selected Foreign Practices That May Provide Useful Insights

GAO-11-540T: Published: Apr 12, 2011. Publicly Released: Apr 12, 2011.

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The Internal Revenue Service (IRS) and foreign tax administrators face similar issues regardless of the particular provisions of their laws. These issues include, for example, helping taxpayers prepare and file returns, and assuring tax compliance. GAO was asked to describe (1) how foreign tax administrators have approached issues that are similar to those in the U.S. tax system and (2) whether and how the IRS identifies and adopts tax administration practices used elsewhere. To do this, GAO reviewed documents and interviewed six foreign tax administrators as well as tax experts, tax practitioners, taxpayers, and trade group representatives. GAO also examined documents and met with IRS officials. This preliminary information is based on GAO's ongoing work for the Committee to be completed at a later date.

Foreign and U.S. tax administrators use many of the same practices such as information reporting, tax withholding, providing web-based services, and finding new approaches for tax compliance. These practices, although common to each system, have important differences. Although differences in laws, culture, or other factors likely would affect the transferability of foreign tax practices to the U.S., these practices may provide useful insights for policymakers and the IRS. For example, New Zealand integrates evaluations of its tax and discretionary spending programs. The evaluation of its Working For Families tax benefits and discretionary spending, which together financially assist low- and middle-income families to promote employment, found that its programs aided the transition to employment but that it still had an underserved population; these findings likely would not have emerged from separate evaluations. GAO previously has reported that the U.S. lacks clarity on evaluating tax expenditures and related discretionary spending programs and does not generally undertake integrated evaluations. In Finland, electronic tax administration is part of a government policy to use electronic services to lower the cost of government and encourage private-sector growth. Overall, according to Finnish officials, electronic services have helped to reduce Tax Administration staff by over 11 percent from 2003 to 2009 while improving taxpayer service. IRS officials learn about these practices based on interactions with other tax administrators and participation in international organizations, such as the Organisation for Economic Co-operation and Development. In turn, IRS may adopt new practices based on the needs of the U.S. tax system. For example, in 2009, IRS formed the Global High Wealth Industry program. IRS consulted with Australia about its approach and operational practices.

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