Modernizing Chile's Internal Tax Service

1990 – 2001

                                                                        Public

FTAA.ecom/inf/146June 5, 2002

Original: SpanishTranslation: FTAA Secretariat

e-Government 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 taxpayersB. Be accessible to allC. Be user-friendlyD. Offer more advantagesE. Ensure security and privacy and keep a log of

visitsF. Strengthen the private sector’s role G. Encourage decentralizationH. Promote e-competition

Four Phases in the Evolution of e-Government

Presence: Provide citizens with information on the Internal Tax Service (SII)

Interaction: Communication between the SII and the public

Transactions: Introduction of e-relations Transformation: Provision of online services

Case Study: Chile's Internal Tax Service

Emphasis on knowledge and experience over management Excessive hierarchization Need for procedures manuals Failure to question procedures Growing backlog

Diagnosis: Problems in Work Methods

Mission Statement:

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

Modernization Strategies

To reduce tax evasion. To encourage taxpayers to opt for the Internet when dealing

with the Internal Tax Service To improve human resource management To develop and strengthen capacity for innovation

Strategic Objectives for 2000-2006:

Main processes Taxpayers' completion of initial registration steps ("life

cycle") Tax courts Income and VAT operations Simplified penalty plan, etc.

Restructuring CriteriaSimplificationService-oriented approach toward taxpayersMaking the best possible use of the allocated resources rather than requesting budget increasesOnline processes

Process Reengineering

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

Internet: A Strategic Option of the SII

Innovations Being Developed

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")

Implementation of electronic invoicing Changing property information over the Internet 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 infrastructureDistribution of forms Reception of forms Data entry

Better use of human resources - auditorsConsistent information across databasesAssurance of accuracy of informationTimeliness of informationTransparency 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

1993: Adoption of open technology (Unix, TCP/IP) and relational databases

1995: Adoption of the Internet as a strategic technological platform for internal communications and communications with taxpayers

Oct. 1995: Website inauguration May 1997: First transactions (consultations on proceeds and income) March 1998: Receipt of sworn statements April 1999: Receipt of income tax returns May 1999: Receipt of VAT statements April 2000: Ability to receive large numbers of income and VAT

statements 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

Authenticate identity at www.sii.cl with password or digital certificate

File tax return or payment order Select type of payment Specify bank or credit card Authenticate identity with electronic banking code or

information from card Confirm online transaction Obtain bank certificate 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 hoursTotal time < 12 hours

Users with Passwords to Enter www.sii.cl

- 23130

800

1,469

-

200

400

600

800

1,000

1,200

1,400

1,600

1997 1998 1999 2000 2001

No.

of U

sers

(tho

usan

ds)

Monthly Visits to www.sii.cl

0

2

4

6

8

10

12

14

16M

ar-

00

Ap

r-0

0

Ma

y-0

0

Jun

-00

Jul-

00

Au

g-0

0

Se

p-0

0

Oct

-00

No

v-0

0

De

c-0

0

Jan

-01

Fe

b-0

1

Ma

r-0

1

Ap

r-0

1

Ma

y-0

1

Jun

-01

Jul-

01

Au

g-0

1

Se

p-0

1

Oct

-01

No

v-0

1

No

. of

Vis

its

(Mill

ion

s)

INCOME STATEMENT: Results and Evolution 1999-2001

94.8%74.3%

61.1%

25.7%39.9%

5.2%

0%

20%

40%

60%

80%

100%

1999 2000 2001

Paper Internet

Percentage Increase in Statements Filed Returned Electronically (Without Payments)

0

20

40

60

80

1999 2000 2001

Year

%

Sw orn Returns

Income

INTERNET: Some Figures for 1999-2001

Internet: Additional Considerations

Greater transparency (clear instructions, uniform rules, structured procedures, tracking)

The Internet improves on paper-based procedures

The Internet transforms and revolutionizes the relationship between taxpayers and the tax administration

Issues Still Unresolved

Coordination of strategies for, and the pace of, modernizing state institutions involved

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.