Functional Architecture of Tax Administration Information Systems

Taxpayers should have personal accounts with web and/or mobile access. The personal account records the status of the taxpayer’s settlements with the budget and manages two major indicators: tax accruals and tax payments.

Tax administrations accrue tax obligations either based on the data from the taxpayer’s tax return or on the other taxpayers’ data.

Payments are contributions made by the taxpayer to fulfill their tax obligations. The taxpayer must make the pay obligations within a set timeframe. A debt or overpayment is when there is a difference between these two items. The tax debt formed not at the time of the accrual, but only when the taxpayer misses the deadline for the voluntary payment.

Another type of accruals are penalties for not meeting tax payment deadlines. They have a strict period for payment and depend on the amount of the taxpayer’s debt. Often the tax code requires daily recalculation of penalties, which makes impossible the accurate calculation and payment of the taxpayer’s debt. A second penalty for the days while the previous payment was in transit levies on the taxpayer once the first payment has reached the Treasury’s account.

The personal accounts may differ by the categories of taxpayers, types of tax, and sometimes by territorial tax authorities.

This block includes the processes of the cameral (desk audit) control to verify the tax returns and the correctness of the calculation of tax liabilities by taxpayers.

The cameral control has its own procedures and a limited period. Tax administration can extend it only if the taxpayer submits revised information, after which the control process begins again.

The block of tax control also includes an on-site control or field tax audits. Tax administrations must plan, conduct, report, and formalize results of field audits as decisions to correct returns and may apply additional charges and penalties.

This block sends newsletters, claims, notifications on the opening of audits, if there were identified violations, audit results, and resolutions.

Often, tax administrations prefer to integrate this block into the core information system or embed it into the tax control block.

Communication with taxpayers involves not only the creation of a personal account with web or mobile access. It may also include other forms of interaction, like through the tax administration partners and e-Government portals.

It is important to implement the taxpayer’s obligation to use tax communication tools for receiving official tax notices and claims and responding to them.

The functions of this block may include:

• Management of taxpayers’ registration and accounting profiles.
• Taxpayer notification management, including sending tax claims and getting responses.
• Requesting and collecting documents for tax control.
• Payment of taxes.

We should remember that the ability to provide a scalable and inescapable tax control increases the level of tax collection and decreases the tax gap. It allows the tax administration to identify all discrepancies and correct them in a timely manner.

Another important task is the centralization of tax control and the exclusion of participation of employees of territorial tax departments in decision-making on the results of audits. This will significantly reduce the level of local corruption. Today, measures to implement tax control in most cases rely on the direct participation of a tax inspector, who independently and subjectively decides in each audit situation.

This creates a fertile ground for corruption, and this work is completely impossible to scale because of the shortage of employees. As a result, control focuses only on large taxpayers, and tax authorities simply do not have enough time and resources to control all individuals, small and medium-sized businesses.

This block supports the collection and storage of the following taxpayers’ data:

• Tax reports from taxpayers.
• Information created by tax authorities about taxpayers.
• Information about the taxpayer and its activities received from the third parties.
• B2B invoices.
• B2C invoices (fiscal cash receipts).
• Records with the settlement accounts and transactions data.

This block is especially important because it gives the tax authorities the opportunity to check the correctness of the calculation of tax returns or independently calculate the tax liabilities of taxpayers.

Tax authorities can exchange data with:

• Other state authorities (data from the state registers of real estate, land, transports, permits and licenses).
• Financial institutions (data from the payment terminals, opened settlement accounts and their transactions, deposits and loans).
• Other organizations (e-commerce data or information from digital service providers like cab aggregators).
• Foreign tax authorities on current accounts, taxable objects, and other assets of taxpayers—citizens of the country.

Since all tax payments go to the state budget, the tax administration must receive timely information about the fact of payment and receipt confirmation.

It is important to ensure that taxpayers can simply, conveniently, and quickly pay their taxes. Difficulties and problems with payment are one of the most common causes of tax debt.

Since all tax payments go to the state budget, the tax administration must receive timely information about the fact of payment and receipt confirmation.

It is important to ensure that taxpayers can simply, conveniently, and quickly pay their taxes. Difficulties and problems with payment are one of the most common causes of tax debt.

This block assures the administration of VAT for imports and verification of the zero VAT return on exports.

These processes handle significant amounts of taxes, so we highlight this functionality in a separate block.

Based on the data received from various sources, tax administration can calculate the taxpayer’s unconditional tax liability and pre-fill a tax return.

As additional features, this block calculates the amount of tax deductions, for example, for individuals, and for assorted expenditure items.

Analysis and comparison of taxpayer data with data from other taxpayers and about taxpayers. This block analyzes and processes data to identify discrepancies.

Such discrepancies make it possible to identify the facts of the understatement of the tax base by an individual or group of taxpayers and to prevent violations.

Modern tax administrations practice a risk-based approach. It is based on the analysis of data about the taxpayer, the creation of his profile, and the assessment of the level of risk. Based on the assessment, the tax authorities can make certain decisions about the taxpayer.

These decisions can be positive for the taxpayer, for example: the exclusion from the field tax audit, reducing the period for a desk tax audit. They also vice versa can be negative, such as selection for a field tax audit.

In most cases, the risk assessment system optimizes the tax administration and controls. It helps to reduce the number of objects requiring scrutiny by focusing on potentially riskiest segments.

The value of this approach is that creating a profile of a bona fide taxpayer and expanding the number of bonuses for him encourages the “laggards” to improve the quality of the tax reporting processes and move to a less risky category. That enables a gradual self-purification of the taxpayers’ environment.

The VAT administration block for B2B includes data and a set of processing tools, considering the peculiarities of this tax regarding transactions in the business to business (B2B) segment.

Management of the Online Electronic Cash Registers (OECRs) as a function supports the administration of VAT collection in retail (business to consumers, B2C) and includes:

• Analysis of the quality of fiscal data.
• Data aggregation.
• Revenue Calculation.
• Revenue visualization for taxpayers.
• Keeping consumer’s receipts.
• A system for fiscal receipt verification by consumers and forming complaints about retailers who are failing to issue fiscal receipts.
• A system to motivate customers to demand fiscal receipts from retailers.
• Tax administrations can implement these sub-blocks either simultaneously or separately.

Business process management and integration with partners.

If the tax administration works through or with the partners, it is necessary to build application programming interfaces (API) or a digital platform to organize interaction with partner applications and information systems.

Supports IT infrastructure split into several security zones and segments.

Performs management and control of data centers, computing and storage resources, the maintenance of network connectivity, backups, business continuity, and disaster recovery.