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    A Comparative Analysis of Tax Administration in Asia and the Pacific: 2020 Edition
    A Comparative Analysis of Tax Administration in Asia and the Pacific: 2020 Edition
    A Comparative Analysis of Tax Administration in Asia and the Pacific: 2020 Edition
    Ebook492 pages4 hours

    A Comparative Analysis of Tax Administration in Asia and the Pacific: 2020 Edition

    By Asian Development Bank

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    About this ebook

    Improved tax systems can help countries in Asia and the Pacific generate the resources needed to implement the Sustainable Development Goals. This report provides information on current tax administration practices in the region to help governments identify opportunities to strengthen their tax systems. It analyzes the administrative frameworks, practices, and performance of revenue bodies in 34 economies. The analysis was largely based on survey data gathered by the Asian Development Bank in collaboration with the Organisation for Economic Co-operation and Development and the International Monetary Fund.
    LanguageEnglish
    PublisherAsian Development Bank
    Release dateFeb 1, 2020
    ISBN9789292618650
    A Comparative Analysis of Tax Administration in Asia and the Pacific: 2020 Edition

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      Book preview

      A Comparative Analysis of Tax Administration in Asia and the Pacific - Asian Development Bank

      I. Introduction

      This report, the fourth edition of a comparative series on tax administration produced by the Asian Development Bank (ADB), analyzes the administrative frameworks, functions, and performance of revenue bodies in selected economies in Asia and the Pacific. The analysis and practical guidance provided here are based on surveys of revenue bodies done in 2017 and 2018, along with a detailed study of the revenue bodies’ corporate documents and guidance as well as diagnostic materials published by international organizations seeking to promote improvements in tax administration (e.g., the European Commission, the International Monetary Fund [IMF], and the Organisation for Economic Co-operation and Development [OECD]).

      National revenue bodies from 34 economies in Asia and the Pacific (see below) are included in the study. Not all were featured in prior editions.

      Afghanistan

      Armenia

      Australia

      Azerbaijan

      Bangladesh

      Bhutan

      Cambodia

      China, People’s Republic of

      Fiji

      Georgia

      Hong Kong, China

      India

      Indonesia

      Japan

      Kazakhstan

      Korea, Republic of

      Kyrgyz Republic

      Lao People’s Democratic Republic

      Malaysia

      Maldives

      Mongolia

      Myanmar

      New Zealand

      Papua New Guinea

      Philippines

      Samoa

      Singapore

      Solomon Islands

      Sri Lanka

      Taipei,China

      Tajikistan

      Thailand

      Uzbekistan

      Viet Nam

      The objective of the report is to help revenue bodies and governments identify opportunities to enhance the operation of their tax systems by sharing internationally comparable data on aspects of those systems and their administration. However, considerable care needs to be taken when making international comparisons of tax administration setups and performance-related data. The functioning of tax systems is influenced by many factors, including the size and composition of the tax base, tax reforms, the level of economic development, the structure and openness of economies, business cycle fluctuations, and the rate of political, economic, and social development. All of these factors and others are likely to be relevant to varying degrees to the observations and findings presented here, especially since this report covers a mix of advanced, emerging, and developing economies.

      An array of demographic, economic, and social indicators is provided to inform readers about the level of development of the economies included in this report (Appendix Tables A.2a and 2b). Among other things, these indicators reveal the enormously varied social, demographic, and economic circumstances of the economies. The following data demonstrate this great variety:

      •  Citizen populations (2017): from 0.2 million to over 1.39 billion.

      •  Adult literacy: from 31.7% to 100% (effectively).

      •  Citizens’ access to electricity: from just below 50% to 100%.

      •  Gross national income per capita (2017): from $570 to $54,530.

      •  Growth rates in real gross domestic product (2017): from – 0.4% to 7.5%.

      •  Communication access via mobile phones (2016): from below 50% to over 173%.

      •  Communication access via the internet (2016): from less than 10% to over 90%.

      Data Quality

      The vast majority of data tabulated in this report came from the 2018 International Survey on Revenue Administration (ISORA) for fiscal years 2016 and 2017. While all of the ISORA-sourced data were reviewed by consultants engaged by ADB for the project and by officials of revenue bodies from the various economies, the data were not formally validated by ADB. The data should therefore be regarded as largely self-reported by revenue body officials in the economies concerned.

      II. Tax Revenues and Tax Structures

      An important consideration in understanding the administrative frameworks, functions, and performance of national revenue bodies is the size and mix of the taxes they are required to administer. This chapter provides an overview of internationally comparable data and analyses of the aggregate tax collection of economies included in the report for all levels of government and shows how their respective tax systems are structured. Readers seeking a detailed discussion on tax ratios and tax structures are directed to the OECD publications Revenue Statistics in Asian and Pacific Economies (2018) and Revenue Statistics 2018.

      Separate data on the tax revenues collected by national revenue bodies are set out in Appendix Tables 3a and 3b and are used in various chapters of the report to contrast the performance of national revenue bodies.

      A. Tax Revenue Collection

      1. Tax Ratios

      Information about aggregate net tax revenue collection, often expressed in terms of an economy’s tax ratio or tax burden, is typically presented for cross-economy comparison as a percentage share of gross domestic product (GDP). In practice, most tax revenue is collected by the national revenue body, although the relative proportion of tax collected by national and subnational tax bodies can vary significantly between economies because of a variety of factors. The aggregate tax revenue data shown in this report are for all levels of government unless otherwise indicated.

      For the purpose of presenting internationally comparable data on tax revenues for all levels of government, this report generally follows the OECD definition of taxes:

      In this publication, the term taxes is confined to compulsory, unrequited payments to general government. As outlined in the Interpretative Guide to the Revenue Statistics, taxes are unrequited in the sense that benefits provided by government to taxpayers are not normally in proportion to their payments.¹

      Under this definition, social security contribution (SSC) systems established by governments in many developed economies, including a number covered in this report, are generally regarded as tax regimes forming part of an economy’s computed tax ratio or tax burden.

      It is also important to recognize that the tax ratios computed for each economy rely as much on the denominator (GDP) as the numerator (net revenue collected), and that the denominator is subject to periodic revision by the relevant statistical body to take into account updated data or new methodologies introduced to improve the accuracy and thoroughness of national accounts aggregates, including steps taken to account more fully for the hidden economic activities that constitute part of the so-called black, hidden, shadow, or underground economies. It should be noted that for some economies, including a number covered in this report, governments have access to significant nontax revenues (e.g., sales of oil, minerals, and real property, and investment income) that lessen the need to rely on tax revenues to fund government programs and services. Economies in this category include the Lao People’s Democratic Republic (Lao PDR), Kazakhstan, Mongolia, Papua New Guinea, and Singapore.

      Key Observations and Findings

      Data collected on tax ratios for economies included in the report are set out in Tables 2.1 and 2.2 and in Figures 2.1 and 2.2. Key observations are as follows:

      Tax Ratios in 2016

      •  The 2016 tax ratios of economies in the report varied enormously, ranging from 7.5% in Myanmar to 31.6% in New Zealand. This wide range of tax ratios was a result of the mix of economies included: a few high-income or OECD economies, large and rapidly growing developing economies (such as India, the People’s Republic of China [PRC], and Viet Nam), and a number of newly emerging economies, as well as the access of governments in a few economies to significant streams of nontax revenue that reduced their dependency on taxation and that are not reflected in Table 2.1.

      •  For fiscal year 2016, the tax ratio exceeded 30% in two economies (Japan and New Zealand) but was below 15%—widely considered by international bodies to be the minimum level required for sustainable development—in 13 of the 34 economies in the report (Table 2.1 and Figure 2.1).

      •  Overall, the unweighted measure of the ratio of average tax to GDP for fiscal year 2016 was 18.5%, significantly below the OECD average tax burden of 34.0%.

      Changes in Tax Ratios over Time

      •  Over the 5-year period 2012–2016, the average tax ratio remained relatively constant, at around 18.6%–18.8%, although a number of economies experienced significant fluctuations in their tax-raising performance during this period (e.g., Kazakhstan, Mongolia, and Papua New Guinea).

      •  Over the 5-year period 2012–2016, only four economies (Cambodia, Japan, the PRC, and the Philippines) experienced consistent year-on-year growth in their tax ratios.

      •  Compared with 2015, the tax ratio in 2016 rose in 12 of the 34 economies, was constant in 4 economies, and declined in 18 others. Of particular concern is the lack of growth in a number of heavily populated economies with very low tax ratios (e.g., Bangladesh and Indonesia).

      •  Several economies experienced a significant decline in their overall tax ratio in 2012–2016 owing to a substantial drop in the prices of commodities. These include Kazakhstan, Mongolia, and Papua New Guinea, whose tax ratios were reduced by over 5%.

      •  Viewed over the 4-year period 2013–2016 for which comprehensive tax ratio data are available (Table 2.2), the average tax ratio declined by about 1 percentage point for taxes on income and profits, but remained largely constant for taxes on consumption.

      •  The tax ratio data displayed for 2017 are incomplete although, where available, they suggest that the majority of economies displayed achieved higher tax ratios in 2017, compared with 2016.

      International and Regional Comparisons

      •  Figure 2.2 compares average tax ratios for the surveyed economies in Asia and the Pacific with those in the regional and international series of reports prepared by the OECD and published in its various Revenue Statistics publications—one for 21 economies in Africa, another for 25 economies in Latin America and the Caribbean, and a third publication covering all 36 OECD member economies. As will be evident, the performance of tax ratios for economies in Asia and the Pacific aligns closely with the performance of tax ratios for the African economies, but it is considerably below that for the Latin America and Caribbean region, by around 5 percentage points, on average, for each fiscal year shown.

      Figure 2.1: Tax–GDP Ratios for All Levels of Government, 2016 (%)

      GDP = gross domestic product, Lao PDR = Lao People’s Democratic Republic, OECD = Organisation for Economic Co-operation and Development, PNG = Papua New Guinea, PRC = People’s Republic of China.

      Note: Final data for Azerbaijan not available at cutoff date.

      Sources: OECD Global Revenue Statistics Database (http://www.oecd.org/tax/tax-policy/global-revenue-statistics-database.htm, accessed 3 May 2019); International Monetary Fund Article IV Reports for 2018 and 2019.

      Washington, DC; Ministry of Finance, Taipei,China. 2018. Yearbook of Financial Statistics 2017.

      Figure 2.2: Tax Ratios across Regions, 2012–2016 (%)

      GDP = gross domestic product, OECD = Organisation for Economic Co- operation and Development.

      Sources: OECD. 2018. Revenue Statistics 2018. Paris: OECD Publishing; OECD. 2018. Revenue Statistics in Asian and Pacific Countries: OECD Publishing; OECD. 2018. Revenue Statistics in Africa 2018. Paris: OECD Publishing; OECD. 2018. Revenue Statistics in Latin America and the Caribbean 2018. Paris: OECD Publishing; International Monetary Fund Article IV Reports; Ministry of Finance, Taipei,China. 2018. Yearbook of Financial Statistics 2017.

      Table 2.1: Total Tax Revenue as a Percentage of GDP, 2012–2017

      … = data not available at cutoff date, GDP = gross domestic product, Lao PDR = Lao People’s Democratic Republic.

      Sources: OECD Global Revenue Statistics Database (http://www.oecd.org/tax/tax-policy/global-revenue-statistics-database.htm); International Monetary Fund Article IV Reports for 2018 and 2019. Washington DC; Ministry of Finance, Taipei,China. 2018. Yearbook of Financial Statistics

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