泛美开发银行（IADB）：税务机关预先进行增值税退税的成本收益分析法：应用于智利

ACost-BenefitAnalysisMethodology

forAdministrativePrefillingofValue-

AddedTaxReturns:AnApplicationforChile

InstitutionsforDevelopmentSector

FiscalManagementDivision

TECHNICALNOTENoIDB-TN-2765

GlennP.Jenkins

SiamandHesami

OsaidAlshamleh

AnastasiyaYarygina

CarolaPessino

August2023

ACost-BenefitAnalysisMethodologyforAdministrativePrefillingofValue-AddedTaxReturns:AnApplicationforChile

GlennP.Jenkins,CambridgeResourcesInternational(CRI)

SiamandHesami,CambridgeResourcesInternational(CRI)

OsaidAlshamleh,CambridgeResourcesInternational(CRI)

AnastasiyaYarygina,Inter-AmericanDevelopmentBank(IDB)

CarolaPessino,Inter-AmericanDevelopmentBank(IDB)

Inter-AmericanDevelopmentBank

InstitutionsforDevelopmentSector

August2023

Cataloging-in-Publicationdataprovidedbythe

Inter-AmericanDevelopmentBank

FelipeHerreraLibrary

Cost-benefitanalysismethodologyforadministrativeprefillingofvalue-addedtaxreturns:anapplicationfor

Chile/GlennP.Jenkins,SiamandHesami,OsaidAlshamleh,AnastasiyaYarygina,CarolaPessino.

p.cm.—(IDBTechnicalNote;2765)

Includesbibliographicalreferences.

Taxpayercompliance-Effectoftechnologicalinnovationson-Chile.2.Taxadministrationandprocedure-Effectoftechnologicalinnovationson-Chile.3.Internetinpublicadministration-Costeffectiveness-Chile.4.Information

technology-Costeffectiveness-Chile.I.Jenkins,GlenP.2.Hesami,Siamand.III.Alshamleh,Osaid.IV.Yarygina,Anastasiya.V.Pessino,Carola.VI.Inter-AmericanDevelopmentBank.FiscalManagementDivision.VII.Series

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Abstract

Taxadministrations(TAs)worldwidehaveincreasinglybeenmovingtowarddigitalizationtoincreaseprocessefficiencyandservicedelivery.Thistechnicalnotepresentsamethodology,anditsapplicationforthecaseofChile,forevaluatingthebenefitsandcostsofaparticularcomponentoftheTA’sdigitaltransformation:prefillingofvalue-addedtax(VAT)returns.Theanalysisidentifiesandallocatesthenetbenefitsfromboththefinancialandtheeconomicperspectivesconsideringtwomajorstakeholders:thegovernmentandtaxpayers.TheresultsshowthatprefilledVATreturnscouldbenefitTAsandtaxpayers,withareductionintaxpayers’compliancecostsbeingaprimarybenefit.TheapplicationofthemodeltotheChileancaseshowstheeconomicnetpresentvalueoftheprefillingofVATreturnsisUS$5.66billion,withanetbenefittotheprivatesectorofUS$1.729billionandapublicsectororbudgetaryimpactofUS$3.391billion.Sensitivityanalysesshowthattheresultsarerobusttochangesinassumptions,exceptfortheimpactongovernmentrevenuesfromthechangeintaxpayercompliance.Overall,theresultsshowthatprefillingtaxreturnsisaneffectivesolutiontohightaxpayercompliancecosts,theassociatedtaxgap,andtheriskofburdensomeinspections,audit,andtaxevasion.

JELCodes:D61,H21,H26,H83

Keywords:cost–benefitanalysis,taxcompliancecost,taxadministration,digitalization

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Introduction

Taxadministrations(TAs)inLatinAmericanandCaribbean(LAC)countrieshavehistoricallyfacedchallengesinfacilitatingcomplianceandperformingtheiractivitiesefficiently,particularlyregardingvalue-addedtax(VAT)refunds.Thesechallengescanbeattributedtoarangeoffactors,includingcomplextaxsystems,inadequatetechnologicalinfrastructure,andlimitedresourcesfortaxadministration.

Oneofthemainissuesisthecomplexityofthetaxsystem,whichcanmakeitdifficultfortaxpayerstounderstandtheirobligationsandcomplywiththelaw.ThiscomplexitycanalsocreateadministrativeburdensforTAs.Furthermore,manyTAsintheregionlackthenecessarytechnologicalinfrastructuretoefficientlymanagetaxinformationandprocesses.Thiscanleadtoerrorsandinconsistencieswhichcanlimittheirabilitytoperformtheiractivitiesefficiently.Thisresultsinbacklogsofrefundrequestsandalackofcapacitytoprocesstaxinformationinatimelymanner.Thesechallengescanhavesignificantimpactsontaxpayers,includingbusinessesthatrelyontimelyVATrefundstomanagetheircashflowandinvestintheiroperations.

Overall,deficienciesinfacilitatingcomplianceandperformingtaxadministrationactivitiesefficientlycancreateachallengingenvironmentfortaxpayersandTAsalike.Digitalizationinitiatives,suchasVATprefilling,havethepotentialtoaddresssomeofthesechallengesandimprovetaxadministrationprocessesintheregion.ThedigitalrevolutionhasbroughtabouttremendouschangesinthewayTAsoperateacrosstheglobe.Inrecentyears,TAsinLACcountrieshavebeenparticularlyimpactedbydigitaltransformationprocesses,whichhavecreatedopportunitiesformoreefficientandeffectivetaxcollection.However,despitethepotentialbenefits,manyTAsintheregionstillfacesignificantchallengesinfacilitatingcomplianceandperformingtheiractivitiesefficiently.

Digitalizationhasemergedasapowerfultoolthatcanhelptoimprovetaxadministrationprocessesandservices.Inthiscontext,itisimportanttounderstandtheeffectivenessofthesedigitalinitiativesinimprovingtaxcomplianceandreducingadministrativecosts.Thispaperaimstocontributetoclosingthisknowledgegapbypresentingacost-benefitanalysis(CBA)ofVATprefillinginChile.Throughthisanalysis,wehopetoshedlightontheeffectivenessofdigitalsolutionsinimprovingtaxadministrationservicesandincreasingcompliance.

Findingacomprehensivestrategytoenableefficientandprompttaxsystemmodernization(TSM)isinthebestinterestoftaxpolicymakersandadministrators.Onesuchstrategymaybetodigitalizetaxadministration,whichwouldimprovetheinstitutionalcompetenceofTAsandencouragecognitiveandbehavioralimprovementsintaxpayers(Lee,2016).Withthehelpofpractical,transparent,andreliableservices,electronicadministrationwouldgiveTAsthetoolstheyneedtointegratetaxdataandcuttaxcompliancecosts.

DigitalizationistransformingTAs,helpingtoincreaseprocessefficiencyandservicedelivery(Guptaetal.,2017).TAshavebeenforcedtoadapttoseveralsignificantchangesduetoanincreaseinthegeneralpopulation,shiftsineconomicconditions,thenumberofsmallandmedium-sizedtaxpayers,andthecomplexityoftaxlaw(Bellonetal.,2022).Theimplementationofelectronicinvoicing(e-invoicing),whichallowsfortheautomatictransferofbillinginformationbetweenbusinessesandtheTA,isanexcellentexample.E-invoicinghasalreadybeendeployedinmorethan50countriesworldwide,including10LACcountries(Barreixetal.,2018).However,consideringthelargevolumeofdatacollectedbyTAsine-invoicing,particularemphasismustbeplacedonguaranteeingthesafeuseofcomplexdigitaltechnology(CampbellandHanschitz,2018).

ThistechnicalnotepresentsthemethodologyforevaluatingthepotentialbenefitsandcostsofaparticularcomponentoftheTA’sdigitaltransformation,thatis,theadministrativeprefillingofVATreturns.ThesystemofadministrativeprefilledVATtaxreturnsismadepossiblewhenacountrycanrequireallbusinesstransactionstoberecordedonstandardizedelectronicinvoices.AcopyofalltheseelectronicinvoicesisstoredinacentralinformationsystemaccessibletotheTA.Fromthisinformation,thetaxauthoritieshaveaccesstoalltheinformationrequiredtoprepareaproformaVATreturn.Theproformataxreturnisthenelectronicallysenttothetaxpayertocheckformistakes.Ifapproved,thetaxableentityisliableforthetaxowed.

TheprefillingofVATreturnsisadevelopmentintaxationinseveralrespects.Firstly,e-invoicingenablesTAstogatherthesalesinformationneededtoprefillrefunds.Anothercriticalfactoristherequirementtousegovernment-mandatedinvoicingsystemsfordatamatchingorverifyingpurchaseinvoices(Wolfers,2019).Finally,somecountriesareimplementingtherequirementforreal-timereportingoftransaction-leveldatasothatthegovernmentcanreceivedataonaregularorreal-

;

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timebasis.ArecentexampleisarequirementthataskstaxpayerstoprovidetransactionaldatainapredefinedauditableformattoTAsinsomeEuropeancountries,suchasPortugalandNorway.Prefillinghelpstoenforcepolicyadherenceandpreventassociatedfinesfornegligenceandfailuretocomplywithtaxresponsibilities(Symonsetal.,2010).

InundertakingaCBA,onemustidentifythepotentialbenefitsandcostsofimplementingsuchaTSM.Klun(2009)assertsthatprefilledreturnsinEurope,particularlySlovenia,decreasedcomplianceexpensesbystreamliningthecomplianceprocess.Similarly,prefilledreturnsguaranteethatadministrativeandcompliancecostsarekepttoaminimumforbusinessesoperatingwithintheEU.Asaresult,prefillingsystemsbasedoncomputersmustbewidelyused(Deloitte,2017;Dziemianowicz,2017;Harjuetal.,2019;Poniatowskietal.,2021).GaleandHoltzblatt(2003)covertheadministration,complexityoftaxreform,andimportanceofprefillinginreducingtaxevasionintheirworkontheUStaxsystem.Sincecompliancecostsareaburdenforaneconomy,taxsimplificationremainsafiscalpolicypriorityandakeybenefitoftheprefilledVATreturns.

PrefillingVATreturnscanbringsignificantbenefitstobothtaxauthoritiesandtaxpayers.Thesebenefitsincludeincreasedtaxcompliance,reducedadministrativeburden,costsavings,improvedtaxtransparency,andenhancedtaxpayerexperience.Fortaxpayers,prefillingVATreturnscanreducethecomplianceburdenbyeliminatingtheneedformanualdataentryandrecord-keeping,thussavingtimeandmoney.Itcanalsoreducethecostoftaxcompliancebyautomatingthetaxreturnprocess,thusreducingtheneedfortaxprofessionalsandsoftware.Itcanimprovetaxtransparencybyprovidingaclearandaccurateoverviewoftaxobligationsandincreasingtrustinthetaxsystem.Moreover,prefillingVATreturnscanenhancethetaxpayer’sexperiencebysimplifyingthetaxreturnprocessandimprovingrelationshipswithtaxauthorities.

Fortaxauthorities,prefilledVATreturnsincreasetaxcompliancebymakingiteasierfortaxpayerstofiletheirtaxesaccuratelyandontime,reducingtheriskoferrorsandomissions.Thiscanleadtoincreasedrevenuecollectionforthetaxauthority.Secondly,prefilledVATreturnscanleadtocostsavingsforthetaxauthorityintermsoftaxadministrationandenforcement.Finally,prefilledVATreturnscanimprovetaxtransparencybyprovidingthetaxauthoritywithaclearandaccurateoverviewof

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taxpayers’taxobligations,makingiteasiertodetectfraudulentactivityandincreasingtheefficiencyofthetaxadministrationprocess.

Inadditiontotheabove,therearetwootherbenefitsthatshouldbementioned.Firstly,prefillingVATreturnscanreducethetimetaxpayersneedtowaittoobtainrefundsforVATcreditsgeneratedininputpurchases,whichisparticularlyimportantforfirmsengagedinexporting.Secondly,prefillingVATreturnscanhelpenhanceorpreservepublicsectorrevenues,whichisakeyconcernforbothtaxauthoritiesandfinanceministries.

WhileimplementingaprefilledVATreturnsystemmayincurupfrontcostsforcomputerservices,licensing,andpersonneltrainingforbothtaxauthoritiesandtaxpayers,thebenefitsofprefillingVATreturnsareexpectedtooutweighthecosts.Furthermore,taxauthoritiesshouldinvestineducationandsoftwarelicensingforseveralyearsafterimplementingthesystemtoensureitseffectiveness.

Thisstudyusesanintegratedinvestmentappraisal(IIA)approachinconductingtheCBAofprefillingVATreturns.Theapproachintegratesinvestmentprojects’financial(budgetary),economic,stakeholder,andriskanalysesinoneanalyticalmodel.Theanalysisidentifiesandallocatesthenetimpacts(benefitsorcosts)thataccruetoeachstakeholderduetoprefilledVATreturnsversustraditionalpractices.

In2003,ChilebecamethefirstLACcountrytointroducee-invoicing(Koch,2019).By2019thegovernmentrequiredthatallinvoicesbemadethroughe-invoicingwithacopyroutedtothetaxauthorities(IDB,2021).Withcomprehensivetransactioninformationaccessibletothetaxauthorities,itbecomespossiblefortheTAtoprepareprefilledVATreturnsforthetaxpayer’sreviewandpayment.

Pomeranz’s(2015)studyinvestigatestheimpactofthird-partyinformationonVATenforcementinChileandtheroleoftheVATpapertrailintaxcompliance.Thestudysuggeststhattheuseoftechnologyandthird-partyreportingcanimprovetaxcollectionandreducetaxevasion.Specifically,thestudyfoundthate-invoicingsignificantlyincreasestaxcomplianceandrevenue.Thepapertrailcreatedbyonlinebillingsystemsorelectronicreceiptsactsasacomplementtoauditprobabilityandhasastrongdeterrenteffectontaxevasion.Thestudyalsoshowsthatfirmssubjecttoe-invoicinghadhigherVATcomplianceratesthanthoseofcontrolgroups,andtheeffectwasevengreaterforfirmsthatalsoreceivedthird-partyinformation.Therefore,

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theuseoftechnologyandthird-partyreportingcanyieldsignificantbenefitsfortaxcollectionandreducetaxevasion.

Pomeranz(2015)arguesthattaxsystemssuchasVAT,whichgeneratemoreinformationforthetaxauthoritybyleavingastrongerpapertrail,offeranadvantageintaxcollectionoverothertaxformssuchasretailsalestax.Inaddition,othermechanismsthatfurnishinformationtothegovernment,suchasonlinebillingsystemsandelectronicreceipts,mayyieldsignificantbenefits.However,moreresearchisnecessarytoexploretheeffectivenessofthesemechanismsandtheextenttowhichthesefindingscanbegeneralized.

BecauseChileisalreadywelladvancedintheimplementationofasystemofadministrativeprefillingofVATreturns,itwasselectedastheexampletoillustratehowaCBAcouldbeundertakentoevaluatetheimplementationofthisinterventioninaspecificcountry.Theapplicationofthemethodologyinthisexampleshowsthattheeconomicnetpresentvalue(ENPV)oftheprefillingofVATreturnsisUS$5.66billion,withanetbenefittotheprivatesectorofUS$1.729billionandapublicsectororbudgetaryimpactofUS$3.931billion.Basedonthegivenfigures,theprefillingofVATreturnsprojectinChileisexpectedtohaveasignificantimpactonboththeprivateandthepublicsectors.TheENPVoftheprojectisestimatedtobe8.76percentofChile’staxrevenue.Theprivatesector’sshareoftheseeconomicgainsthroughhighernetprofitsisapproximately2.58percentofChile’staxrevenue(US$64.602billionin2021),whilethepublicsector’ssharethroughthepositivenetrevenueimpactisaround6.08percentoftotalrevenue.ThesenumbersshowhowtheprefillingofVATreturnsprojectpotentiallycontributessignificantlytotheoveralleconomyofChile.TheresultsoftheCBAfortheadministrativeprefillingofVATreturnsindicatesthatthistaxadministrativeinterventionhasgreatpotentialtogeneratenetbenefitstoallthepartiesinvolved,thevariousgroupsoftaxpayers,andthegovernmentTreasury.ByreducingthecompliancecostsofthetaxpayersandtheadministrativecostsoftheTA,theeconomywillalsobetterutilizeitsscarceresources.

Areviewofthecurrentliteraturedemonstratesthattherearestillnumerousareasthatrequireattentioniftechnologyistobewellincorporated.Theadoptionofprefilledreturnsstillfacesdiversechallengesthatnecessitatefurtherresearch.Nostudieshavelookedatthemagnitudeoftheeconomicbenefits,norattheimpactsondifferentstakeholders,includingtaxgroupsbytype(TAandtaxpayers).Thisiscritical

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forsecuringbuy-infromboththeadministrationandtheprivatesectorforthismajoradministrativereform.Thesechallengesofferhugeopportunitiesforresearcherstoparticipatebycontributingtoandexploringpotentialstudiesintheseareas(Forasummaryoftheliteraturereview,pleaserefertoAnnexA.).

Thistechnicalnotehasfivesections,includingthisintroduction.Section2presentsthemethodology.Section3presentstheapplicationofthemethodologyforChile,whileSection4presentsthesensitivityanalysis.Finally,Section5concludesanddiscussesthemainfindings.

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1.Methodology

ThisanalysisbeginswithasetofassumptionsaboutthesituationwithoutprefilledVATreturns.TheeconomicopportunitiescreatedbytheadvancementoftechnologytoreduceoperatingcostshaveledbusinessesandTAsworldwidetoimplemente-invoicingsystems.In2003,ChilebecamethefirstLACcountrytograntlegalvaliditytoane-invoice(Koch,2019).Hence,thisanalysisassumesthatsuchasystemisalreadyinplaceandispartofthewithout-projectsituation.ThismethodologyisdesignedtoevaluatethebenefitsandcostsofasystemofadministrativelyprefillingtheVATtaxreturninasystemwheree-invoicingiswidespread.

1.1.Approach

Theanalysisisconductedfor10yearsusingaCBAframeworkthatiscarriedoutfrombothafinancialandaneconomicperspective.Theseperspectivesdifferintheirfocusandthefactorsthattheyconsider.

ThefinancialperspectiveofCBAisconcernedwiththedirectfinancialcostsandbenefitsofaprojectorpolicydecision.Itevaluateswhetheraprojectwillgenerateanetfinancialgainorlossfortheorganization.Itconsidersfactorssuchasinvestmentcosts,operatingcosts,andrevenues.Thefinancialperspectivefocusesmainlyontheimpactofinterventionsonanorganization’snetcashflow.

TheeconomicperspectiveofCBAtakesabroaderviewandconsiderstheimpactoftheinterventionontheresourcesavingandresourcecostsincurredbecauseoftheintervention.Itevaluatestheeconomicefficiencyofaprojectorpolicydecisionbymeasuringtheoverallimpactontheuseofresourcesandthevalueoftheoutputsoftheinterventiononsociety.Forexample,increasesinpersonnelandcomputercostsfortheTAareeconomiccosts,whileareductioninthesecostsisaneconomicbenefit.Itistheseeconomicresourcecostsandbenefitsthatdeterminewhethertheeconomicwelfareofsocietyisimprovedordamagedbyanintervention.Atthesametime,theincreasedrevenueobtainedbythegovernmentfromthisinterventionisafinancialbenefittothegovernmentandafinancialcosttothetaxpayers.Thesefinancialflowsareneithereconomicbenefitsnoreconomiccosts.Therefore,aneconomicappraisalisnecessarytoensurethatpolicydecisionsconsidertheoverallwelfareofsocietyandnotjustthefinancialbenefitstoanyoneormoreorganizations.

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Fromthisanalysis,theimpactonthestakeholdersintheeconomycanbelargelyquantified.Themajorstakeholdersarethegovernmentandthetaxpayers.Fromthegovernmentperspective,thereistheTAconcernedwithitscostsandtheNationalTreasury,whoseprimaryfocusisontheimpactofsuchaninnovationonthebudget.TheNationalTreasury’sperspectiveincludesboththeadministrativecostsofimplementingthissystemchangeandthechangeintaxrevenuesthatitwillfollow.Themaincoststhatataxauthoritymayincurareasfollows:

.Technologycosts:Taxauthoritiesrequirearangeoftechnologicaltoolstomanageandprocesstaxreturns,conductaudits,andtracktaxcompliance.Thesemayincludecomputersystems,software,anddatabases.

.Infrastructurecosts:Taxauthoritiesrequirephysicalinfrastructuresuchasofficebuildings,storagefacilities,andcommunicationnetworkstosupporttheiroperations.

.Legalcosts:Taxauthoritiesmayincurlegalcostsassociatedwithenforcingtaxlawsanddefendingagainstlegalchallengestotheirdecisions.

.Outreachandeducationcosts:Taxauthoritiesmayincurcostsassociatedwitheducatingtaxpayersabouttheirtaxobligations,helpingwithtaxfilings,andconductingoutreachprogramstoencouragevoluntarycompliance.

.Operatingcosts:Taxauthoritiesmayincurcoststoenforcetaxlawsandcombattaxevasion.

.Personnelcosts:Thisincludesthesalariesandbenefitsoftheemployeesofthetaxauthority,suchastaxauditors,accountants,lawyers,andsupportstaffaspartofthelegal,outreachandeducation,andoperationalfunctionsoftheTA.Taxpayerscanbebrokendownintolargetaxpayers,medium-sizedtaxpayers,

smalltaxpayers,andmicrotaxpayers.CBAisoftenimplementedinanaggregatemannerbecauseitprovidesawaytoassesstheoverallimpactofaprojectorpolicydecision.Byaggregatingthecostsandbenefitsacrossallstakeholders,decisionmakerscandeterminewhetheraprojectorpolicydecisionwillhaveapositiveornegativeneteconomicimpactonsociety.Suchananalysisallowsdecisionmakerstocomparedifferentprojectsorpolicyoptionsonacommonscale.Thiscanhelptoprioritizeprojectsandpoliciesthathavethegreatestnetbenefitsforsociety.

However,itisimportanttonotethataggregatingcostsandbenefitsdoesnotmeanthatdecisionmakersshouldignorethedifferentiatedeffectsbygroup.Instead,

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theyshoulduseadistributionalorstakeholderanalysistoidentifygroupsthatmaybedisproportionatelyaffectedbyaprojectorpolicydecisionanddevelopmeasurestoaddresstheirconcerns.Thisensuresthattheanalysisisfairandequitable,andthatthedecisionreflectsthediversepreferencesandneedsofsociety.

Ifallstakeholdersasagrouparebetteroff,thenitmustbethecasethattheeconomicimpactofthisinterventionisapositivevalue.Thenetimpacts(benefitsorcosts)accruingtoeachstakeholderduetoprefilledreturnsversustraditionalpracticesarequantified.

Theintegratedcost-benefitanalysis(ICBA)approachisasingle-modelmethodusedtoassessthefullrangeofimpactsofaprojectorpolicydecision.Itintegratesfinancial,economic,stakeholder,andriskanalysesintoonefinancialmodel,makingiteasiertocomparetheimpactsofdifferentinterventionorpolicyoptions.Thisapproachprovidesaconsistentandtransparentmethodologyforassessingtheimpactsofaprojectorpolicydecisionacrossdifferentsectorsandstakeholders.ICBAcanhelptoensurethattheanalysisiscredible,andthatdecisionmakersidentifythemostefficientandeffectiveoptions.

TheintegratednatureoftheICBAapproachisparticularlyimportantforassessingthesustainabilityandeconomicviabilityoftaxingsystemsandstakeholders.Thisisbecausemanyactorshavedifferentinterestsandvaryinglevelsofinfluence.TheICBAapproachenablesdecisionmakerstounderstandthefullrangeofimpactsofaprojectorpolicydecisionandidentifythemostefficientandeffectiveoptions.ThevaluesintheICBAmodelareexpressedin2022U.S.dollarsbutcanbeeasilyconvertedtoanycurrency.ThisflexibilitymakesICBAavaluabletoolfordecisionmakersacrosstheglobe.TheCBAisconductedonanincrementalbasis,whereinthebudgetaryandeconomicoutcomesofthebefore-TSMtaxationpractices(referredtoasthe“without”scenario)arecomparedwiththeoutcomesfromtheafter-TSMpractices(referredtoasthe“with”scenario).Thedifferencebetweenthe“without”and“with”scenariosisusedtoevaluatetheincrementalimpactofprefilledVATreturnsinadministrativeandcompliancecostsonalltherelevantactorsandstakeholders.

1.1.1.EconomicAppraisal

CBAisamethodforevaluatingtheeffectivenessofinvestmentsintermsoftheirneteconomicbenefitbycomparingthediscountedNPVsofbenefitsandcosts.The

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Taxpayers

Benefits:

Reduc'onincompliancecosts

Costs:

CAPEX:Computersystemchangesandeduca'oncosts

NetCashFlowBeforeTax-Taxpayers

Benefits:

Reduc'onin'mecosts

NetCashFlowBeforeTax-TA

discountingprocessiscrucialfortaxadministrationchangesthatmayneedyearsofplanningandimplementationbecauseitaccountsforthefactthatexpensesoftenriseearlyonbeforeaprojectisfinished,butbenefitstypicallyshowuplater,longaftertheprojecthasbeenimplemented.

TheconventionalmeasurementofbenefitsinCBAhasfocusedontheeconomicvalueoftaxpayers’benefitsintermsofthereductionincompliancecostsandthebenefitstoTAsintheformoftimesavedbyimplementingprefilledreturns.Ontheotherhand,themaincostsofimplementingaprefilledVATreturnsystemaretheupfrontcostsofcomputerservices,licensing,andpersonneltrainingfortaxpayersandtheTA.ThetaxauthorityshouldalsoinvestineducationandsoftwarelicensingonacontinuingbasisafterimplementingtheTSM.UsingthetwosetsofparametervaluesfortheestimationoftheTSM,theENPVisestimatedassummarizedinFigure1.

Figure1.TotalEconomicPerspective

TaxAdministra-on

Costs:

CAP