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Let your overall trust based strategy determine performance

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Let your overall trust based strategy determine performance management

Performance management used in the right way can drive a Tax Administration in the right direction. This guideline looks at the possibility of using performance management in a way that support a trust based approach.

Strategy, culture and structure are all linked together. A good performance management system sets the goals, objectives and follow-ups to control and support the implementation of the Tax Administraion’s strategy. Furthermore, highlighting what is a good and result, is important when implementing cultural changes. For long-term results, structure has to support both strategy and the desired culture.

Building trust with taxpayers should be viewed as a good outcome and the right measures need to be found so it can be reported on. Performance management differs across the different Tax Administrations; however there are a number of areas that should be considered to get the right balance between quantitative and qualitative measures and between internal and external performance indicators.

9.1 Design the performance management to promote trust

Developing and maintaining a trust relationship with taxpayers should influence the design of a performance management system. This needs to be defined at the top level as it will impact all areas in a Tax Administration. When trying to earn and increase trust with taxpayers, it is important that all actions taken by the Tax Administration are in line with the Tax Administration’s overall strategy.

It may be beneficial to also use external measurements when designing the performance management system. Performance management indicators should be seen in the context of internal and national culture, structure, social context and of course the political relationship with the Government.

9.2 Clear connection between performance management and overall purpose

Traditional performance indicators may not contribute to and may even hinder, the development of trust between taxpayers and a Tax Administration. Traditional performance indicators are generally very tangible, such as the number of audits concluded and the additional revenues collected; however, these outputs may send out the wrong signals to employees. It is important to also highlight other key outcomes such as trust-based communication, attitudes, cooperation and taxpayer involvement, which are also important factors, but are more difficult to measure.

The introduction of performance indicators that support trust will provide a wider perspective and will assist in the design of initiatives that will give more robust and sustainable benefits. Taxpayers’ trust can take years to earn and only seconds to lose. Thus, trust should be linked with a sustainable perspective in order to promote mutual trust between all players (internal and external) and, consequently, an increase in voluntary compliance.

An example is how Tax Administrations sometimes strive to accomplish increased productivity. It is of importance, but used as a stand-alone goal there could be a risk, if targeted in the wrong way it won’t lead to the overall effect you want. I.e. “We do audits to raise revenue vs we do audits because tax payers face unfair competition”.

It is crucial to review indicators, objectives and follow up actions so that annual key performance indicators (KPI´s) are in line with the long term trust based purpose and not leads to a “statistic behaviour”.

In this context, it is of importance to have a dialogue with the political level to establish a common understanding and gain support for the view of the performance indicators.

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