The influence of Information Technology on Tax Administration performance

ABSTRACT

This study examined the impact of information technology on tax administration in South West Cameroon Tiko taxation to be precise. It especially investigated the effect of information technology on tax productivity and efficiency, and the relationship between information technology on tax implementation and tax planning. Descriptive research design was employed, of which questionnaire was used to gather data and analyzed.

CHAPTER ONE

INTRODUCTION

1.Background of the study

 The use of automated systems has been proven to be capable of introducing massive efficiencies to business processes at a minimal cost (Wasao, 2014) due to the bureaucratic structure of government which is costly to manage with little or no result, tax authorities as an agency of government are turning to e-government led solutions like electronic tax filing (e-filing), (Amabali, 2009) based on the arguments that it enhances the delivery of public services and fiscal profundity without incurring costly recurring overheads (Harrison and Nahashon, 2015). United Nations (2007) stated that e-taxation is a process where tax documents or tax returns are submitted through the internet usually encompasses the use of internet technology, the worldwide web and software for a wide range of tax administration a d compliance purposes.

Electronic tax filing was first coined in United States where her internal revenue services (IRS), began offering tax return e-filing for tax refunds only (Muita 2011), this has now grown to the level that currently is now filing electronically. This however, has been as a result of numerous enhancement and features being added to the program over the years. Today, electronic filing has been extended to other development countries like Australia, Canada, Italy, United Kingdom, Ireland, Germany, France, Netherlands, Finland (Ramayah, Ramoo $ Amlus, 2006), Nigeria and other developing countries such as Uganda, Rwanda and Kenya have also embraced electronic filing of tax returns (Muita 2011).

Dowe (2008) disclosed that tax authorities around the world are using electronic tax administration systems to interact with tax paying public in tax collection, administration and compliance settings so as to improve effectiveness and efficiency in tax administration. Globally, previous studies on the suitably of information technology complied tax systems have it that a positive impact of automation system usage and the cost of tax administration, automation and effectiveness of revenue collection of Ghana Revenue authority using a case study of custom division (Gidisu, 2012) Wasilewski cited in Muthama (2013) with focus on the economic development and taxation system by comparing the case of Brazil and Japan. Japan’s experience demonstrated that a country does not need to postpone a real change in the tax structure unity. It achieves a high stage of development, while in Brazil, how-income taxpayers bear most of the tax burden.

Gasteiger (2011) indicated that automated system enhances administration with the provision of multiple scenarios that allow senior management in a multi-campus university system to generate multiple income scenarios, make well-informed decisions concerning the operation of their institution and timely calculation and allocation of resources to academic departments. In Kenya, Kicko (2012) indicated that the macro model performs better the variations on funds allocated to countries than the representative tax system, Kibe (2011) disclosed that planning for revenue collection can best be carried out by a system that combines spatial and attribute data management capabilities like geographical information system. Harrison $ Nahashon (2015) with focus on small tax payers revealed that online tax system does affects tax compliance level, while Otieno, Oginda, Obura, Aila, Ojera $ Siring (2013) stated that relationship existed between information systems and revenue collection efficiency and effectiveness. More so, there is a strong positive relationship between internal control systems and revenue collection.

Over the last decade, public administration around the world has been following the goal of increasing its efficiency and flexibility by using information technology (IT). This has been inspired by the success of IT in other environments, especially in the private sector.

Various authors have demonstrated that IT enables improved quality and performance of services (easier, faster, better) (Gupta, 2008), improved quality and increased operational efficiency, reduced costs, and increased productivity (Gil-García & Pardo, 2015). Wang and Liao (2016) stress that throughout the various efforts of understanding the use of IT in business; the focus must be multidimensional and interdependent. While the term “information technology in government” goes back at least to the 1970s, the term e-government emerged in the late 1990s with the internet boom (Grönlund & Horan, 2014). It does not rely only on the internet, but also includes other technologies and aspects. Throughout the e-government domain a classification of areas of interactions with citizens through government-to-citizens (G2C), government-to-businesses (G2B), internal employee’s government-to-employees (G2E), and other institutional government  organizations government-to-government (G2G) emerged and remain (Wang & Liao,  2016). In the case of G2C, integrated information systems are needed in order to gather,  transfer, process, and store internal data, which is the foundation for the further  elaboration of electronic government services offered to external users, namely citizens, the private sector, and other governmental organizations (Baležentis & Paražinskaitė, 2012).

According to Au and Cheng (2012), ensuring that end users are able and willing to use advanced information systems (IS) is critical for the organization to gain operational efficiency and user satisfaction. Many researchers have recognized user satisfaction as a critical determinant of the success of IS. In their work DeLone and McLean (2013) proposed that higher levels of individual satisfaction with IS usage leads to higher levels of intention to use, which subsequently affects the use of the system. Hsieh et al. (2012) proved that employees’ overall user satisfaction with their mandated use of IS has a positive impact on employee service quality. Thus, IS performance, the organizational 2 environment, and the people who use the IS are crucial. Iivari (2015) also showed that IS  performance has a positive relationship with the satisfaction of the IS user.

Today, taxation-related services are among the most developed e-government services all over the world. At the same time, e-taxation services are among those most used by clients in many countries, sometimes even because clients are forced to use them. For instance, the e-Europe measurement reports indicate that year after year the services included in the income-generating cluster (income and corporate tax, social contributions for employees, value-added tax (VAT), customs declarations) were and remain the most developed (Baležentis & Paražinskaitė, 2012). When one explains e-taxation, they usually refer to on-line filing and assessment of tax returns, enabling electronic payment of taxes, sharing information on tax assessment between different government departments, and web-based portals for educating taxpayers on taxation issues (Wang & Liao, 2016). Use of e-taxation systems by the tax administration according to Jiménez, Sionnaigh and Kamenov (2013) has been shown to have several advantages such as: provision of support, automation, workflow management, and authorization management to tax administration functions; it provides information, education, and support to taxpayers and facilitates compliance and administration; a compliance performance system deploys risk#based procedures to detect and deter noncompliance; and a management information system facilitates the collection and dissemination of performance information to staff and management.

The electronic and automated tax filing and administration were fast used in the United States of America (USA), where her Internal Revenue Services (IRS) started offering tax return e-filing for only tax refunds. This has seen tremendous growth to the level that almost all the taxpayers are required to file and pay their taxes electronically. This has been enabled by the various features and enhancements being added to the system over the years (Muita, 2011). The electronic filing today has been adopted by many other developed countries such as Canada, France, Germany, United Kingdom (UK), Australia, Italy, Finland, Netherlands, Turkey, Singapore, Norway, India, China, Turkey, Malaysia (Ramayah, Ramoo & Amlus, 2012)

1.2 Problem Statement

Oseni (2015) stated that there is no hiding place for tax evaders with the use of this modern technology since all potential tax payers are captured by the system, but the use of information communication technology can be catastrophic if carelessly employed by both the tax payer and the tax administrators as scammers and hackers of the internet facilities can utilize the ignorance or the tax security of the system.

Efunboads (2014) indicated that these emerging global infrastructures (taxpayer identification number-TIN, Factual Accurate complete timely-project FACT and integrated system of tax administration-ITAS) could make it increasingly possible for eligible tax payers to pay tax online anywhere and anytime.

In respect of the above, none of the studies had so far been carried out to investigate information technology, in terms of online tax filing, online tax registration and online tax remittance on the level of tax administration in terms of tax productivity, planning and complementation, which depicts existence of gap in literature. Although Harrison $ Nahashon (2015) studied the effects of online tax system in terms of online tax filing, online tax registration and online tax remittance, but it was based on tax compliance therefore, this examines the impact of information technology on tax administration.

Information technology forms part of individuals’ lives in the modern world. Dependency on technology by people is increasing on a daily basis. The reason is that new innovations in technological devices and applications are encouraged all over the world. Countries around the world have adopted technology in matters tax (Masese, 2011). Technology contributes to easier, faster, and more accurate tax system. Tax administration has improved in efficiency and effectiveness as a result of information technology. Many countries are investing heavily in the tax administration systems. Governments depend on tax revenues to develop a country, hence the demand to improve tax administration systems (Wang & Liao, 2016).

Research by Muita (2011) found that the electronic and automated tax filing and administration were fast used in the USA, where her IRS started offering tax return e#filing for only tax refunds. This has seen tremendous growth to the level that almost all the taxpayers are required to file and pay their taxes electronically. This has been enabled by the various features and enhancements being added to the system over the years. The electronic filing today has been adopted by many other developed countries such as Canada, France, Germany, UK, Australia, Italy, Finland, Netherlands, Turkey, Singapore, Norway, India, China, Turkey, Malaysia (Ramayah, Ramoo & Amlus, 2012).

In Nigeria, Oseni (2015) deduced that tax evaders will no longer have loopholes to hide with the usage of the modern automated tax technology and systems because all the taxpayers have to make use of the tax system to declare all their transactions. Hadler (2000) observed the objectives for tax autonomy vary between governments. The objective of tax autonomy in SA was mainly to increase effectiveness and efficiency and tax equality in the country. The objective of tax autonomy in Uganda, Zambia, Ghana, and Tanzania was to increase tax collection, and the research by Chatama (2013) in Tanzania showed that the country adopted technology in tax administration in 2001. The technological tax systems adopted by Tanzania minimized delays in filing of tax returns and reduced operational costs.

KRA has invested heavily in technology improvements and innovations as a strategic tool to ensure tax compliance since 2003 (KRA, 2015). Technological automation of revenue collection has further added a fresh touch to the once choking KRA, with tax evasion minimized and improved business efficiency recorded. Automation has reduced the cost of revenue collection and interaction between the taxpayer and staff, a fertile area for corruption (Masese, 2011). The system has enhanced a seamless flow of information between KRA, Central Bank of Kenya (CBK) and other government departments in the areas of taxpayer registration, customer service, cargo clearance, both on air and sea, returns processing, payments on specific tax heads and tax clearance certificates and a copy of records. With this emergence of technology, the length of time used in filing tax returns has condensed from 2 weeks to 30 minutes, while that of clearing cargo reduced from between 6 to 15 days to between 2 and 6 days (Masese, 2011). However, with all these improvements, one still finds that the voluntary compliance levels have not increased as previously anticipated. This, therefore, calls for the question whether technology has been efficient in enhancing tax compliance in Kenya. It is because of the above concern that this study was therefore necessary.

1.3 Objective of the Study

1.3.1 Main Objective

The main objective of this study is to evaluate the effect of information technology on tax administrative performance.

1.3.2 Specific Objectives

To achieve the main objective, the following target specific objectives needs to be achieved.

• To investigate the effect of information technology on tax.
• To examine the effect of tax administrative performance.
• To examine the effect of information technology on tax administration in Cameroon.