Overfulfillment of the plan is not enough: performance evaluation criteria for customs and tax authorities will be determined
10 April 16:49
The Parliamentary Committee on Finance, Taxation and Customs Policy has recommended adopting the draft laws on amendments to the Tax (No. 12359) and Customs (No. 12360) Codes of Ukraine on assessing the efficiency and effectiveness of tax and customs authorities in the first reading. This was announced by Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, "Komersant Ukrainian" reports.
According to the documents, the efficiency and effectiveness of the tax and customs authorities will be assessed based on KPIs to be determined by the Ministry of Finance and published on the official websites of the State Tax Service and the State Customs Service. Based on the results of the assessment, the STS and the State Customs Service will prepare reports to be published on the websites of these authorities.
Why is it necessary to define evaluation criteria?
For example, the existing method of measuring the effectiveness of tax authorities by measuring the increase in budget revenues, according to the authors of the draft law, does not correspond to the current practice and methodology of assessing the effectiveness of tax authorities in developed countries.
First, assessing tax compliance requires a more global approach, in particular by analyzing such an indicator as the tax gap.
Secondly, the evolution of relations between regulatory authorities and taxpayers encourages the search for new criteria and directions to measure the effectiveness of the tax authorities’ performance of such new functions as compliance and taxpayer services.
The MPs also point out that the International Monetary Fund recommends assessing the effectiveness of tax authorities at the strategic, operational and individual levels.
With regard to the assessment of the performance of customs auctions, the initiators of the legislative changes believe that the national legislation does not currently provide for a mechanism for measuring the efficiency and effectiveness of the customs authorities in fulfilling their powers and tasks, as well as a mechanism for measuring the effectiveness of the implementation of plans and strategies for reforming the customs authorities. In fact, now the expediency of measuring the effectiveness of the customs authorities depends on the will of the management of the State Customs Service.
What innovations are envisaged for tax authorities?
First, the draft law defines the concept of “key performance indicator of tax authorities” (KPI) and sets requirements for KPIs.
Secondly, it defines the concept of “tax gap” and introduces the annual calculation and publication of this indicator.
Thirdly, the draft law provides for the introduction of the IMF-recommended classification of KPIs for the State Tax Service into strategic (for more than one year) and operational (annual).
In addition, the draft law establishes the relationship between the individual performance appraisal of an official and the evaluation of the STS, as well as regulates the procedure for the quarterly publication of information on the implementation of KPIs for the STS.
The first reporting period for assessing the efficiency and effectiveness of the tax authorities should be 2025.
How is it proposed to assess the performance of customs officers?
First, the draft law defines the types of evaluation: internal (conducted by the State Customs Service on the basis of KPIs developed by the Ministry of Finance) and external (conducted by independent experts appointed by the CMU on the basis of proposals from international and foreign organizations);
Secondly, it establishes that the following areas of customs activities are subject to internal assessment
– creation of favorable conditions for trade facilitation and development of competition
– administration of customs payments;
– protection of society, public health and environmental safety, and combating the illegal movement of drugs and weapons;
– organizational development of the customs authorities;
The Ministry of Finance is also recommended to take into account the WCO Performance Measurement Mechanism developed by the World Customs Organization when determining KPIs for customs.
What does this performance measurement mechanism envisage?
It was approved by the World Customs Organization (WCO) in June 2023. The mechanism covers all the powers of the customs service in the following areas: trade facilitation and economic competitiveness; revenue collection; law enforcement, security and protection of society; and organizational development.
Each performance parameter of the mechanism proposed by the WCO is divided into expected results with corresponding key performance indicators.
For example, it is proposed to evaluate the performance of customs authorities in the area of Trade Facilitation and Economic Competitiveness by the following expected results
– increased confidence in trade relations,
– smoothed movement of people,
– smoother movement of goods,
– paperless trade,
– improved quality of services,
– greater efficiency in e-commerce processing and delivery.
It is proposed to define several key performance indicators for each expected result.
