Change Management in Tax Administrations: resources, regulations and requirements

To maximise value from your new tax solution, continuous business improvement must be considered a part of your IT transformation. It’s critical that a program management and change capability is in place to carefully manage all aspects of your tax administration throughout the implementation process. The level of collaboration required can often be underestimated, leading to unwanted issues, delays, and costs which could have been avoided.

The objective of a change management programme is to ensure that standardised methods and procedures are used for efficient handling of all major changes. A carefully planned change management programme is the first successful milestone of any IT implementation project.

This blog series will address key challenges faced by tax administrations when implementing a new IT solution. In this first publication, I’ll cover three common problem areas in change management, and how to overcome them.

Managing expectations

Tax policy changes take place so often that IT needs can be difficult to nail down. Therefore, the scope of your project, and any potential changes, must be effectively assessed and managed, from conception to completion. Implementing scope controls helps to ensure requirements only expand when necessary, and that all requested changes are put through a robust change control process.

Expanding requirements are usually the main cause for late deliverables and lengthy projects, resulting in extended timelines and increased costs. Inadequate scope management can be an issue when:

  • Objectives and goals aren’t properly defined.
  • Scope isn’t proactively controlled by dedicated resources.
  • Requirements and outcomes aren’t defined in measurable terms.

After initial project scope has been authorised, you must manage, control and document any changes. But when the tax landscape is changing rapidly, this isn’t easy and can result in implications. If you find yourself in this position, consider the following to identify grounds for a scope change: 

  • Does the change add value that wasn’t there before? 
  • Have additional laws or tax regulations been set? Have your requirements changed
  • Have you identified an opportunity for return on investment, previously not anticipated?

Manage legal and regulatory changes

Global tax policies have quickly evolved in recent years, take the Gulf Cooperation Council (GCC) for example, when all countries agreed to VAT and excise taxes in 2016. After implementation, the tax houses in affected countries were faced with demands to quickly align operations to meet compliance. Policy changes like these have highlighted a need for more integrated tax administrations but managing changes can be complex due to governance and approval processes. Your change control function should consider:

Legislative and regulatory changes: tax administrations must allocate specialists to necessitate clear communications across project teams, and operate with provisions to facilitate changes, throughout project implementation. It’s advisable to engage with governing bodies, municipalities and representatives of committees to bring them into the process early on.

Risk management: it’s crucial to have comprehensive reporting and documentation measure to help mitigate risks in your change programme. To manage changes, implement a robust process which includes risk assessments to identify, assess and provide mitigation strategies. Risk assessments should be actively managed and communicated regularly throughout the implementation.

Managing resources

It’s imperative to assemble the right team of experts and create collaborative working relationships across the different roles – design a resource matrix as part of your change programme. Some common reasons for resource issues can occur because: 

  • Roles and accountabilities aren’t well defined.
  • Resource planning and coordination is inadequate leading to a lack of expertise.
  • Project inputs and outputs aren’t clear and no clear owners to manage and monitor these streams.

New projects often require a functional team, analysts, developers, software knowledge, and tax-specific expertise. Stakeholders must collaborate and contribute throughout the scoping process to ensure resources are adequately identified, engaged and managed. External ministries, banks and other third parties must also be engaged to help identify opportunities to work more collaboratively. This engagement plays a key part in a smooth transition and provides end-to-end transparency throughout the duration of the project.

Keeping up with change

Tax authorities must be well-prepared to minimise the impact of inevitable change related incidents during the implementation process. Being prepared for continuous change, even with the best technology, requires a carefully designed strategy, assigned responsibilities and end-to-end transparency across stakeholders. A successful change management programme won’t just help modernise your administration and accelerate taxpayer compliance, it’ll also increase function agility — the ability to rapidly adjust to evolving tax laws, regulations, operations and processes.  

Our SAP Tax & Revenue Management (TRM) experts helped The Ministry of Finance and National Economy in the Kingdom of Bahrain deliver a modern VAT tax system to help provide VAT payers with the ability to register online, submit returns and request refunds. Additionally, VAT officers can approve taxpayer registrations, assess returns and audit taxpayers. Learn more about the VAT implementation here.

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