Modernizing Chile's Internal Tax Service 1990 – 2001 Public FTAA.ecom/inf/146 June 5, 2002 Original: Spanish Translation: FTAA Secretariat

e-Government l Presidential Directive (11 May 2001) Scope of Development of e-Government Taxpayer Services Good Governance Consolidation of Democracy

Guiding Principles e-Government Projects Should: A.Transform relationship with taxpayers B.Be accessible to all C.Be user-friendly D.Offer more advantages E.Ensure security and privacy and keep a log of visits F.Strengthen the private sector’s role G.Encourage decentralization H.Promote e-competition

Four Phases in the Evolution of e- Government l Presence: Provide citizens with information on the Internal Tax Service (SII) l Interaction: Communication between the SII and the public l Transactions: Introduction of e-relations l Transformation: Provision of online services

Case Study: Chile's Internal Tax Service w Emphasis on knowledge and experience over management w Excessive hierarchization w Need for procedures manuals w Failure to question procedures w Growing backlog Diagnosis: Problems in Work Methods

Mission Statement: u The Internal Tax Service is responsible for implementing and managing the internal tax system, for reviewing taxpayers compliance with tax rules, and for making it easier for them to comply with these rules. Modernization Strategies

l To reduce tax evasion. l To encourage taxpayers to opt for the Internet when dealing with the Internal Tax Service l To improve human resource management l To develop and strengthen capacity for innovation Strategic Objectives for :

Main processes w Taxpayers' completion of initial registration steps ("life cycle") w Tax courts w Income and VAT operations w Simplified penalty plan, etc. Restructuring Criteria w Simplification w Service-oriented approach toward taxpayers w Making the best possible use of the allocated resources rather than requesting budget increases w Online processes Process Reengineering

l Processing large numbers of taxpayers l Direct relationship, without intermediaries l Less time devoted to each taxpayer l Free services and software on the website l General information, regulations, taxpayer standing, news Internet: A Strategic Option of the SII

Innovations Being Developed l Requirement that taxpayers complete initial registration steps ("life cycle") on the Internet site, except for initial notification of employment and application for RUT ("taxpayer unique number") l Implementation of electronic invoicing l Changing property information over the Internet l Consultations on diverse property issues (assessments, appraisals, etc.) and modification of records over the Internet

Advantages of the Internet for the SII  Savings in: Physical infrastructure Distribution of forms Reception of forms Data entry  Better use of human resources - auditors  Consistent information across databases  Assurance of accuracy of information  Timeliness of information  Transparency of the system

 SII proposes a sample tax return  Payment of taxes online  Longer deadlines for taxpayers who file their returns over the Internet  Expedited tax refunds  Online filing of tax returns  Online consultation of grounds for challenging SII decisions  Online correction of returns (saves time)  Retrieval of property valuation certificates  Retrieval of duplicate copies of real-estate-tax payment bulletin  Consultation of real-estate background records Benefits for Taxpayers

l 1993: Adoption of open technology (Unix, TCP/IP) and relational databases l 1995: Adoption of the Internet as a strategic technological platform for internal communications and communications with taxpayers l Oct. 1995: Website inauguration l May 1997: First transactions (consultations on proceeds and income) l March 1998: Receipt of sworn statements l April 1999: Receipt of income tax returns l May 1999: Receipt of VAT statements l April 2000: Ability to receive large numbers of income and VAT statements l April 2001: Development of already-completed income statements Timeline of Implementation of New ITs at the SII

Total Time:25 days INCOME STATEMENT: Paper-Based Process 4.- Turn in to bank 1.- Design and print forms 2.- Distribute forms 10.- Entry into SII Database 5.- Sorted in clearinghouse 3.- Complete form 7.- Data entry 9.- Correction of errors 8.- Verify data entered 6.- File with SII

l Authenticate identity at with password or digital certificate l File tax return or payment order l Select type of payment l Specify bank or credit card l Authenticate identity with electronic banking code or information from card l Confirm online transaction l Obtain bank certificate l Obtain SII certificate Online Electronic Payment Process

Statement Debit Order Statement Debit Order Bank Executes Debit Order Statement Information SII Treasury Deposit Report Deposits Taxpayers Debit Order Unique Tax Account Debit Notification Income statement: Process Via the Internet (Simplified) Total time < 12 hours

Users with Passwords to Enter

Monthly Visits to

INCOME STATEMENT: Results and Evolution

INTERNET: Some Figures for

Internet: Additional Considerations l Greater transparency (clear instructions, uniform rules, structured procedures, tracking) l The Internet improves on paper-based procedures l The Internet transforms and revolutionizes the relationship between taxpayers and the tax administration

Issues Still Unresolved w Coordination of strategies for, and the pace of, modernizing state institutions involved w Capacity to secure resource commitments for medium-term plans

Key factors in the modernization process Final Comments  Clear and effective leadership.  Formulating a strategic plan, and following through on it, have been essential to the success registered so far in modernizing the institution.  The organization is familiar with and shares the strategic objectives identified, as well as the strategies and policies that have been formulated.