The success of any initiative of the tax administration depends on the backing of the political system, prevalent governance system, culture of a society, available resources, and digital maturity of the tax system of that country. Tax authorities, government officials, taxpayers, intermediaries, research bodies and private sector were identified as important stakeholders for taxation.
A simplification exercise should bear in mind all possible intended outcomes and unintended consequences. This cannot be done without comprehensive stakeholder consultation covering as many actors as possible.
The presence of a large number of stakeholders, each with a diverse set of priorities and needs may pose challenges. For example, policymakers could change rapidly, hence they may have a short-term outlook and only support initiatives that are quick wins rather than those initiatives which may yield better results over the long-term.
Governments have on many occasions used the tax policy and infrastructure to further other policy agendas or socio-economic priorities. Mauritius shared an example where in 2006 they had reduced deductions to have one single deduction for all. However, based on the policy change on pets and tourism being a key sector, the next government brought back some of the deductions, by allowing deductions for pets under the new government policy on pet protection and promotion of tourism.
Tax systems must actively manage expectation across stakeholders. For example, the understanding that consulting taxpayers could be done selectively and not always, as this may build resistance and cause delays in implementation.
Recommendations: Stakeholder collaboration & expectation management
Engage with stakeholders through targeted consultations, use evidence-based policymaking to garner political will; share experiences with peers on several aspects of design and systems used, encourage/ incentivise further collaboration between tax practitioners with researchers.