	Examples of Selected Tax Administration Practices to Address Known Tax Administration Issues

The following examples illustrate how New Zealand, Finland, EU, UK,  Australia, and Hong Kong have addressed well known tax administration  issues. New Zealand Does Joint Evaluations of Tax Expenditures and Discretionary Spending Programs to Analyze Their Effects and Improve Program Delivery

New Zealand, like the U.S., addresses various national objectives through  a combination of tax expenditures and discretionary spending programs. The research found that the WFF  program aided the transition from relying on government benefits to  employment, as intended. In 2005, we reported that the U.S. had substantial tax expenditures but  lacked clarity on the roles of the Office of Management and Budget  (OMB), Department of the Treasury, IRS, and federal agencies with  discretionary spending programs responsibilities to evaluate the tax  expenditures. Electronic tax administration is part of a government-wide policy to use  electronic services to lower the cost of government and encourage growth  in the private sector. Overall, the growth  of electronic services, according to Finnish officials, has helped to reduce  Tax Administration staff by over 11 percent from 2003 to 2009 while  improving taxpayer service. In contrast to Finland’s self-described “simple and stable” system, the U.S.  tax system is complex and constantly changing. Taxpayers are to accurately prepare and file an income tax  return by its due date. This agreement addresses common  issues with the accuracy and usefulness of information exchanged among  nations that have differing technical, language, and formatting approaches  for recording and transmitting such information. The UK and U.S. both have individual income tax returns and use  information reporting and tax withholding to help ensure the correct tax is  reported and paid. As announced by the  Commissioner of Internal Revenue in 2009, the IRS formed the Global  High Wealth (GHW) industry to take a holistic approach to high-wealth  individuals. The IRS consulted with the ATO as GHW got up and running  to discuss the ATO’s approach to the high wealth population, as well as its  operational best practices. This cultural attitude  helps promote compliance. IRS Considers Foreign Tax Practices That Might Merit Adoption

IRS officials learn about foreign tax practices by participating in  international organizations of tax administrators. As the  IRS learns of these practices, it may adopt the practice based on the needs  of the U.S. tax system. Second, the IRS participates with the  Organisation for Economic Co-operation and Development (OECD)  Forum on Tax Administration (FTA), which is chaired by the IRS  Commissioner during 2011. IRS and OECD officials exchange tax administration knowledge.
Why GAO Did This Study

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.

What GAO Found

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.