Tax Inspectors Without Borders (SDG 16 and SDG 17)

#SDGAction42941

Description

Intro

Tax Inspectors Without Borders (TIWB) was launched as a joint UNDP-OECD initiative in July 2015, at UN’s Third Financing for Development conference in Addis Ababa, to support countries in building their tax audit capacity. The aim of TIWB is to transfer tax audit knowledge and skills to tax administrations in developing countries through technical assistance, with special focus on South-South Cooperation. TIWB’s role is also to increase developing countries’ domestic revenues, to enable them to finance the Sustainable Development Goals (SDGs). The initial project period is from 2016-2020.

Objective of the practice

This project was originally piloted by the OECD in 2013 and 2014 in an 18-month programme, given that widespread tax avoidance and evasion were a major challenge for developing countries. A key finding of the pilot was that practical, learning-by-doing assistance on real audit cases was an unmet area of tax-focused technical assistance. However, without a country level presence, the OECD found it challenging to understand demand and expand the initiative. Hence the partnership with UNDP took shape in 2015. 
 
TIWB has been identified as one of the tools to support developing countries in implementing Base Erosion and Profit Shifting actions to improve their ability to effectively tax multinational enterprises. An increase in domestic revenues through taxation, enables developing countries to finance the SDGs. TIWB support is being provided in a diverse variety of sectors and technical areas including mining, tourism, financial, maritime, manufacturing, sales and distribution, and telecommunications. Some of the audit focus areas include transfer pricing, asset valuations, service verification and costing, profit allocations between the subsidiaries and their parent companies, and risk assessment. 
 
The steady rise in demand for TIWB has been matched by a corresponding rise in collaboration by ‘partner’ administrations. These are tax administrations that provide in-kind support to TIWB by sending their own experts to assist developing countries. Furthermore, Regional Tax Organisations (RTOs) such as the African Tax Administration Forum (ATAF) and The Inter-American Centre of Tax Administrations (CIAT) partner with TIWB and other assistance providers in programme delivery. TIWB also forges partnerships with donors and organizations that are keen to support its programmes such as the World Bank Group, European Union, US-Office of Technical Assistance (OTA), USAID, CREDAF, Asian Development Bank, amongst others. In addition to the partner administrations, UNDP HQ has resources to fund TIWB programmes with UNDP managed roster of 52 qualified tax audit experts, including many experts from the South, available for deployments to strengthen the capacities of tax administrations. Hence, the programme is almost always free for the countries receiving assistance. Thus, the Initiative not only enhances international support for implementing effective and targeted capacity building, but also enhances global and multi-stakeholder partnerships for sustainable development. In addition, TIWB has a mentoring approach to solving domestic resource mobilization challenge, so that developing countries become experts themselves in the long-run. 
 
Few risks included possibility of low demand from countries, inability to source relevant experts, amongst others. However, the initiative managed to counter these by engaging with a variety of partners, including UNDP country offices which build demand. The technical assistance is also carried out through a UNDP managed roster of highly trained independent tax audit experts. Experts are deployed to carry out tax audit work by working directly with local tax officials to build local skills and capacities. Another challenge was around impact measurement, which is being dealt with now, with systematic assessments at the end of every programme.

Partners

Key stakeholders are five-fold:

- Host Administrations (developing countries receiving assistance)
- Partner Administrations (countries providing assistance in kind to developing countries, by sending their serving tax officials/experts)
- Donors (OECD-TIWB funded by many donors and UNDP-TIWB funded by Finland)
- Experts (tax audit experts who travel to developing countries to provide assistance)
- Regional/International Organizations (organizations assisting in-kind by providing their experts/expertise)

Rarely does aniInitiative engage such multitude of stakeholders in such an innovative manner

Implementation of the Project/Activity

The Host Administration uses the TIWB Assistance Request Form to notify of its request. The Form is meant to communicate key information about the scope of the TIWB Programme and the areas of focus for which assistance is required. The Host Administration ensures that the TIWB Assistance Request fits within the Host Administration's broader objectives and is adapted to its current capacities. The request is then circulated to international points of contact within potential Partner Administrations to check if any of them could second a tax audit official with expertise in a particular area. A Partner Administration can then propose a currently serving tax official from within its administration for the TIWB Programme who will become a seconded TIWB Expert. In case the request is not taken up by Partner Administrations, UNDP through its TIWB project resources and UNDP managed roster of experts selects and deploys experts to countries requiring assistance. Alternatively, the request is circulated to Donors who may wish to fund specific programmes.

There is a monitoring process in place for TIWB programmes. Initially a workplan is developed for every programme, including agreement between all stakeholders on the key set of indicators on which progress is to be monitored. Then the progress is monitored through methodical and periodic reporting, such as through mission reports, progress reviews and final evaluation.

Results/Outputs/Impacts

TIWB assistance programmes have resulted in an additional USD 445 million in tax revenues being mobilized. It is estimated that every dollar that is invested in TIWB programmes results in over USD 100 of increased domestic revenues for countries receiving assistance. In addition, over the long-run, the Initiative results in skill transfer to developing countries, improves confidence of developing country personnels in conducting future audits independently and builds their organizational capacity. Examples are – Nigeria and Kenya previously received TIWB assistance and have now become partner administrations under the TIWB programme providing assistance to other countries in the south. which shows transfer of skills and sustainability of the initiative. In addition, TIWB enables change in taxpayer compliance behavior in countries receiving assistance, and positively impacts the overall investment climate in the country.

Enabling factors and constraints

Capacities in the developing works in the niche area of transfer pricing are low. The Initiative compliments the wider theoretical capacity building assistance by providing a much demanded, “learning by doing” approach which is unique, converting theory into actual practice. The framework of the TIWB initiative helps overcome the constraint of being able to work with real data. The TIWB experts work as insiders by signing a confidentiality and no conflict of interest documents which gives them access to real data. This is a niche way of providing the much needed assistance.

Ability to mobilize multi-stakeholders has been another unique and enabling factor in the initiative's success with 15 partner administrations, regional / international organizations, variety of donors, and experts (audit experts complemented by industry experts to help local auditors understand the industry value chain for a more consistent audit) on board.

Sustainability and replicability

Sustainability - The initiative enables countries to generate domestic resources through taxation, instead of countries just relying on foreign aid or foreign resources. It tries to make the world a level playing field by providing developing countries access to knowledge, skills, expertise, experience in international taxation, which they would not have received otherwise. This enables that profits are not shifted by organizations to other countries, instead they pay taxes where economic activity occurs and where value is created. The initiative also provides hands on training for the entire audit process, develops manuals and guidelines, helps build capacities as well as knowledge management systems for consistency. Support is provided through hand holding and not substitution which provides for the local auditors performing audit steps on their own during the on-site missions which helps build confidence. Thus, TIWB results in skill transfer to developing countries, improves confidence of developing country personnels in conducting future audits independently and builds their organizational capacity. Examples are – Nigeria and Kenya previously received TIWB assistance and have now become partner administrations under the TIWB programme providing assistance to other countries in the south. which shows transfer of skills and sustainability of the initiative proving the initiatives' sustainability. In addition, TIWB enables change in taxpayer compliance behavior in countries receiving assistance, and positively impacts the overall investment climate in the country.

Replicability - The initiative could provide a blue print of how multi-stakeholder partnerships can work and make an impact across the world. Today TIWB is doing it in taxation services/expertise through Tax Inspectors Without Borders. The same could perhaps be replicated in other services / expert fields such as Law, amongst others.

Future expansion - The TIWB approach is currently being piloted for tax crime investigations, interpretation of data from exchange of information and options for joint audit work are being explored. This initiative has applicability in other areas of work beyond the tax community as well such as wider development work.

Conclusions

Other sources of information

www.tiwb.org

Well-acclaimed Initiative with visibility across the media worldwide, through various articles/publications including in The Economist, Le Monde, amongst others. Details to be provided upon request.

SDGS & Targets

Goal 16

Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels

Goal 17

Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development

Deliverables & Timeline

N/A

Resources mobilized

Resources

Other, please specify

Combination of Financing (UNDP ~USD 2Mn and OECD ~USD 4.5Mn) and in-kind contributions from Partner Government Administrations, Regional/International Organizations, and Other Donors

Partnership Progress

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