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The Re-invented VAT Refund for Tourists: A Collaborative Information System (Cloud-VRT)
The Revenue Department
Thailand

The Problem

Tourism has been an engine of Thailand’s economic growth since 1960s. The number of international tourist arrivals in Thailand has been in the world’s top rank. As tourism revenue contributes around 6% to GDP each year, Thai government has developed many policies and measures to promote tourism.

VAT refund for tourists (VRT) initiated in 1999 was one measure. With this incentive and together with other tourism stimulus packages, the number of foreign tourists and the amount of their spending have increased drastically. The amount of VRT has also been increasing continuously, from USD 4.4 Million in 2000 to USD 46.22 Million in 2012. As a result, VRT Office under the Revenue Department of Thailand (RD) has deployed more staff to service 24/7 at 8 international airports throughout the country. However, the number of tourists has been increasing beyond their capacity. Besides, the manual process of VRT has restrained the expansion of VRT Office’s capacity. Their study found that the manual process in issuing a VAT paper refund form (P.P.10) causes some difficulties and inconveniences to the participating stores and their customers. Normally, issuing P.P.10 takes not less than 3-5 minutes which is considered too long. The research by Chulalongkorn University has confirmed these findings.

A manual process has also led to errors in filling P.P.10 and issuing the tax invoice. These errors together with the lack of data-linkage system require the VRT staff to thoroughly investigate the forms as well as the invoices and correct all mistakes before the refund can be made. Such process usually takes more than 15 minutes per tourist. Moreover, manual process requires the customs officer to manually stamp and sign each form which makes the VRT process even longer.

All the above situations have brought about a significant delay to the VRT process. During the peak hours, the pictures of tourists’ discontents can frequently be seen at the airports, reflecting the inefficiency of Thailand’s VRT service.

In order to maintain the image of Thailand as the world’s top tourism destination, the RD and the Customs Department were working together to ensure that all tourists will receive better services. These two organizations agreed that their collaborations, the public-private partnership, and the integration of information and services are the keys to success. Hence, the VRT Office in consultation with the Customs Department and the participating stores has developed an initiative named “The Re-invented VAT Refund for Tourists: A Collaborative Information System (Cloud-VRT)”.

The Cloud-VRT is a cloud computing-based system designed to integrate all information and services. It has conformed to the National and the RD’s ICT Master Plan. To illustrate, the Cloud-VRT is not only a service project but also the e-whole-government project focusing on the information management. This project is part of the RD’s e-Revenue initiatives which aim to computerize all tax collection processes. Cloud-VRT can accommodate the growing number of tourists in the long term which will help the VRT system meet Thailand’s Tourism Strategic Plan to become the best tourism destination of the world.

Solution and Key Benefits

 What is the initiative about? (the solution)
Cloud-VRT is a system that employed Cloud computing technology to connect the RD with participating stores and the Customs Department as well as link several offices within the RD together. All information will be submitted to the central database managed by the RD and can be used by all relating parties. This system also uses a smartcard instead of the paper refund form.

The system runs as follows.

The participating stores: Record their customers’ personal and purchase information at the time of purchase. Then, submit them immediately to the central database and issue smartcards which record all necessary information such as purchasing information to their customers.
The customs officers: Use smartcard as a key to retrieve the information from the central database in order to perform the customs checks on the system.
The RD officers: Use smartcard as a key to retrieve the information from the central database in order to proceed the refund process.

A significant delay in process was problematic to all parties concerned. The VRT Office had made its best effort to solve the problem. Their solutions included (1) Making P.P.10 easier and more convenient to fill in. (2) Providing advices and developing manuals for the participating stores. (3) Expanding space of the service units at the airports, increasing the number of revenue staff, and developing guidelines for its staff. Moreover, participating stores had increased their staff and developed their own computer systems. The Customs Department also increased its staff at the airports and applied risk management to perform random checks.

Unfortunately, the above solutions could not eliminate the root of the problem which was the lack of integration and collaboration among governmental organizations and between those organizations and the private sector, especially in information sharing.

Therefore, the VRT Office in collaboration with the Customs Department and the participating stores has implemented the Cloud-VRT.

The advantages of the new solution can be explained as follows:

1. The information generated through all VRT processes is linked and shared among relating parties.
2. The information is accurate and credible as all errors caused by incorrect filling of P.P.10 and misunderstanding are removed.
3. The RD and Customs Department can use the information for headcount management while the participating stores can use it for sale and marketing purposes. Furthermore, the database also benefits other governmental organizations such as the Fiscal Policy Office which uses the information on VRT for macroeconomic analysis and fiscal policy development.
4. Replace manual processes with electronic processes. For example, the customs officers no longer need to manually stamp and sign P.P.10 which in turn reduces the customs check processing time. Also, the participating stores do not need to manually create reports to the RD. Moreover, the RD and participating stores require less space for document storages.
5. Reduce all relating parties’ administrative costs.

As a result, the whole VRT processing time has decreased significantly from 12 minutes to 2.20 minutes, and the tourist satisfaction has increased from 74% to 92%.

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
To increase Thailand’s competitiveness with other top tourist destinations, stakeholders (i.e. tourists, participating stores, officers of the Customs Department and RD) have been continuously asked to fill out monthly surveys. Those feedbacks and comments are then analyzed by the VRT Office. The RD took the lead and decided to explore the possibility of utilizing ICT to enhance the VRT system in collaboration with all stakeholders. As a start, the RD established a steering committee as a center of coordination.
1. Internal Steering Committee: In 2010, a steering committee chaired by the RD Principal Advisor of Information and Communication Technology was created. The committee consists of Director of the VRT Office, IT Specialist of the Bureau of Information Technology, 2 working groups of the VRT Office and the Bureau of Information Technology. In order to obtain outside perspectives; the RD has invited an academic specialist from the Computer Science Department of the Faculty of Science, Kasetsart University to join the Committee.
a. Director and the working group of the VRT Office started out by analyzing the previous year surveys. The results have shown that the inaccuracy of the information in P.P.10 was the main trouble. Several survey fillers suggested that there should be an online tool where stores and officers can easily retrieve accurate information and promptly identify the amount of refunds to be received by tourists. The survey results were then presented to the Committee.
b. Chairperson of the Committee invited an expert from IBM, a pioneer in building and revolutionizing the computer industry, to give a lecture on cloud-computing and the security of the smartcard system. Although the cloud-computing technology is unfrequented in Thailand, it was decided that the RD could be among the firsts.
c. Specialist from the Computer Science Department helped setting out the terms of reference (TOR) for the initiative. After discussing specific requirements with the Customs Department, the two working groups worked closely with the Specialist to finalize the TOR.
d. The working group of the Bureau of Information Technology led by Specialist IT Officer created a system prototype after comparing the new Cloud-VRT process with the current paper VRT procedures.
2. Merchants: In addition to the monthly surveys, the RD and Customs Department co-hosted a public hearing. Prospective participating stores were invited to provide feedbacks and comments. Before the testing period, the outsourced company reviewed computer systems of the stores. Later, the stores provided description of their goods in order for the RD to match with International Standard of Industrial Classification of All Economic Activities (ISIC code) and register the information onto the system.
3. Officers of the RD and Customs Department and the stores: The actual Cloud-VRT users did their system test runs. The RD’s officers provided a special training for stores and officers of the Customs Department. Supporting technicians were available 24/7. These valued comments from these hands-on users greatly contributed to the sustainable development of the RD Cloud-VRT system.

(a) Strategies

 Describe how and when the initiative was implemented by answering these questions
 a.      What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
The initiative was established in 2010 under the RD’s vision “To deliver service and collect taxes fairly by applying international standards” and “Proactive ICT Utilization” strategy to enable the RD to provide transparent integrated services while acting as a knowledge base for the public and private sector. The RD has set its main objective of the Cloud-VRT initiative as follows:
“Towards a collaborative information system that integrates and coordinates information from all stakeholders, thereby ultimately improve tax administration and tourists’ satisfactions”
To achieve this, 3 strategies were formulated.
First Strategy: Seeking cooperation from all related parties to achieve a win-win environment. The RD seeks cooperation from all related parties – tourists, stores, the Customs Department and the RD’s officers. Suggestions and comments were taken into account before launching Cloud-VRT as new central controls to ensure greater consistency and integration. Participating stores would contribute details of their goods while the RD applies International Standard of Industrial Classification of All Economic Activities (ISIC code) to ensure accuracy of the information on VAT refundable goods. By using the same set of information stored in cloud system, everyone would enjoy a win-win outcome. Stores could record information onto a smartcard easily while tourists know the exact amount of refund. Officers of the Customs Department and the RD can access reliable online real-time information easily; therefore, VRT is fast, easy, accountable, less time-consuming, great cost-efficient for all than ever before. This could not have happened without a strategic partnership with all stakeholders.
Second Strategy: Utilizing innovative ICT as a tool for a collaborative information system. In accordance with the RD’s ICT Master Plan, the RD has realized that Government ICT is essential for efficient public services which are responsive to the needs of tourists and businesses. A well-optimized and reliable ICT would help reducing overall operational costs of all stakeholders and, at the same time, decrease administrative costs. Fortunately, advances in technology and communication over the past two decades have created a capacity for a collaborative information system that integrate and coordinate information from diverse sources. Therefore, the RD decided to implement cloud-computing technology for faster data access and information consistency.
Third Strategy: Taking the lead and being the pioneer. The RD believes that change will not come if the RD stands idle and waits for others. The RD took the stand of being the pioneer in the integrated public service using innovative ICT and wanted to prove that collaboration between the public and private sectors would contribute to a greater public service. Therefore, the RD took the lead in using cloud-computing and being the service provider. To encourage the use of the shared system, the RD has invested on the cloud-computing infrastructure, including software interfaces, and allowed information sharing among relating parties without additional fees charged. By taking the lead and acting as the center, the RD could also ensure maximum data security.

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
2007–2008
- Conducted research and set out project framework
- Set direction for change for all stakeholders
o Analyze current conditions and discuss problems and difficulties
o Specify aspects that needed improvement
o Comparing past/present flow chart

2008–2009
- Evaluating the result of the design of the system. Following all orders. Evaluating problems.
- Design the foundation of the cloud system using existing resources

2010
- Seek authorization of the project
- Set directions for change for all stakeholders
o Authorization of the project
 Development of the use of smartcard
 Select participating stores for pilot project
 Analyze potential problems
o Publicize the project
 “We are Partner” Exhibition
 “RD Symposium” Seminar

2010–2011
- Obtain necessary machines and equipments
o Network
o Smartcard / Cloud-VRT
o Smartcard reader
- Authorities continuously monitor the result of the use of the system
- Adjust, change, and adapt according to suggestions of different involving parties
 Stores
 Tourists
 Authorities
 The Customs Department
2011 onwards
- System installation ready for use
- Set directions for change for all stakeholders
o Further develop the project through knowledge and suggestions
o Train officers about Cloud-VRT

The Principal Advisor on ICT of the RD, advisor from university, VRT officers, and IT officers, unanimously viewed that VRT process must be reformed. The use of cloud computing is an appropriate tool for such reform. The implementation steps are:
- Gather relevant information on VRT and ICT in order to prepare for the development of the work system.
- Analyze potential and possible problems after the implementation of the system and notify relevant parties (ie. The RD Officers, Customs Officers, and stores).
- Develop a system prototype in order to train the users of the system.
- Provide user’s handbook on online social network in order for every user to have access to instructions.
- Provide training and seminar for the operation of the system.
- Provide question and answer web board for sharing problems and ideas in order to further improve and develop the system continuously.
- Provide a specialized technical contact person for the system.
- Provide a help desk for user’s inquiries and consultation. The aspects of service that had been improved are as follow:
o ICT aspect: The VRT system had been continuously developed using Client Server since the year 1999 and thereafter the web based VRT-49. Hardware is continuously updated for the highest quality of use.
o Services aspect: Qualified officials are selected to provide quality services. Trainings are carried out frequently for the continuous quality of service.
o Regulation aspect: Suggestions, ideas, problems and needs from the service receivers had been compiled in order to improve the system (i.e. Amendment of the RD regulation on the VAT Refund for Tourists in 2008).

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
1. The stores standpoint
1.1 Lack of confidence in the Cloud-VRT system whether it can run efficiently as well as the concern of their commercial information leakage.
In the pilot project, teams were appointed to go to participating stores to monitor and advise on the system operation in order to demonstrate the participating stores of the practicality, security and efficiency of the system.
1.2 Lack of understanding on the use of Cloud-VRT system and a smartcard.
The appointed teams advised the stores on how the system worked as well as promoted the use of smartcard to tourists visiting the stores. Moreover, there are Hotlines, help desk and contact persons for stores to be easily reached in case of any problems.
2. Tourists standpoint
As Thailand is the first country to introduce a smartcard replacing a current global paper refund form, it was found that tourists were not familiar with a smartcard; therefore, the solution is to have staff on hand to promote and advise on the use of smartcards at stores and customs checkpoints. After a trial period, tourist satisfaction had risen to 92%for smartcard, comparing to 74% for the P.P.10 because the smartcard is convenient, handy, and beneficial receiving a privilege of ‘Fast Lane’ VAT refund. This caught an attention from the tourists and encouraged them to call for the use of smartcards from stores. Thus, this could be an indirect way to promote a smartcard.
3. The Customs Department standpoint
It was found that the importance of the Cloud-VRT was not adequately realized since it materially changed the working process from a paper-based system to an electronic-based system.
The RD as a responsible party solved this problem at 2 levels:
1. At the executives’ level, Director-General of the Revenue Department exhibited how the system would benefit the Customs Department as well as the country as a whole. This changing step would also promote collaboration between the RD and the Customs Department horizontally on the information sharing via the IT system, which supported Ministry of Finance’s ICT master plan. This created the tone of collaboration at the top of the organizations to drive policy towards the use of Cloud-VRT in the whole Customs Department.
2. At the officers’ level, the RD provides guidance, training courses, and feedback survey to the Customs officers along with staff as contact persons to help them on the use of the system.
4. The RD standpoint
Smartcard readers and smartcards need to be distributed and installed at stores at the RD's expenditure. However, the government procurement regulation does not allow the purchase of equipment or tools to be used in the private practice. To solve this problem, the RD has sought an approval from the Comptroller General’s Department for the benefits of the nation and the RD will sign an MOU with stores that they will be held responsible for Smartcard reader and smartcards loss or damage while in the possession of the stores.

(d) Use of Resources

 d.      What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
The resources contributed are divided into 3 main parts:
1. IT
Apart from hardware and software used in the current VRT system, additional hardware and software procurements have been made at 790,000 USD and 72,400 USD respectively in order to accommodate Cloud-VRT. The software was sold with 15-days training program for the RD officers.
2. Budget
In addition to the IT cost, the cost on smartcard reader and smartcards is about 51,670 USD. Therefore, the total cost of this project is 914,070 USD and the maintenance cost will be about 333,300 USD per year onwards.
3. Human Resource
In the Cloud-VRT system, it requires knowledge and expertise in the field of VRT and IT. Consequently, 40 officers are used in this project; 9 officers in Steering Committee to act as project manager and 31 officers from VRT Office to run system and develop best practice for the new Cloud-VRT and from IT Office to develop technical mechanism.
Multidisciplinary teams are allocated to be help desk and contact persons with stores and the Customs Department to work with them at their business place for 7 working days to help and advise the stores employees, tourists and customs officers of all their VRT concerns.
The RD foresees that it is worthwhile to invest on the Cloud-VRT considering its benefits.
Benefits from Cloud-VRT system:
- Tourists enjoy the convenient use of Smartcard for VAT Refund since it requires no paper work, avoid complications, and very time efficient.
- Stores can improve accuracy in issuing receipts and invoices. Also, our database allows stores to set out appropriate marketing strategy.
- The Customs Department can work more efficiently and accurately. The VRT database allows the Customs Department to foresee the amount of tax authorities required in order to serve tourists.
- The RD will be able to extract information from the smartcard and Cloud-VRT for the efficient and accurate assessment of VAT Refund. This will create confidence for VRT officers to refund the tax. Also, the information can simply be transferred to the Fiscal Policy Office and other related departments in order to regulate fiscal policies for the tourism industry.
- A tie is created between the government sector and the private sector
- The competitiveness of Thailand’s tourism industry is boosted
- The waste of paper and human resources is reduced.
Key indicators
- Service Efficiency
o The system reduces work process, paper documents, and time consumption. Whole VRT processing time has decreased significantly from 12 minutes to 2.20 minutes
- Customers’ Satisfaction
o 92 percent of tourists are satisfied with Cloud-VRT.
- Stores’ Satisfaction
o 100 percent of participating stores are satisfied with the use of Smartcard
- Stakeholders’ Satisfaction
o 90 percent of the project staffs are satisfied with Cloud-VRT
o 80 percent of the Customs authorities at Suvanabhumi Airport are satisfied
o 90 percent of the Revenue authorities at Suvanabhumi Airport are satisfied

Sustainability and Transferability

  Is the initiative sustainable and transferable?
Yes, the Cloud-VRT system is sustainable and transferable. There are many reasons to support the sustainability of Cloud–VRT system as follows.
First, the Cloud-VRT system brings considerable benefits to all stakeholders in several ways. For example, the RD can refund tourist’s VAT faster, more accurately and efficiently. The stores can use tourist purchasing data from the system to formulate an effective marketing strategy. Besides, e-stamp deployed in the Cloud-VRT system allows customs officers to work more conveniently.
Second, the stores and the Customs Department can use the Cloud-VRT system without any charges. This is because the RD is responsible for the expenses incurred in implementing the system, including software, smartcards, and smartcard readers and writers.
Third, this project has received strong support from the Thai government and the RD. To illustrate, promoting tourism in Thailand has been one of the main policies of Thai government, and the improvement of VRT service has played an important role in the government’s strategies to encourage tourism.
Finally, the Cloud–VRT system can operate without financial support from the government. The VRT fee charged from the tourists is sufficient to cover the operating cost of this system.
In sum, the above reasons ensure the sustainability of the system in terms of its great advantages without financial burden to stakeholders. Furthermore, the RD has a plan to expand the number of participating stores to encourage the extensive use of the system in the near future.
Regarding transferability, the Cloud-VRT system is the first cloud computing system deployed by the RD. Due to the great success in Cloud-VRT system, the RD is considering to apply cloud computing knowledge obtained from implementing the Cloud-VRT system to other systems such as a corporate income tax refund system, a personal income tax refund system, and others.
The knowhow is transferred not only within the RD, but also to other organizations. Using Cloud-VRT system as a prototype, the Immigration Bureau and Tourism Authority of Thailand can develop its own cloud computing system to support their operation management such as forecasting the number of tourists in each period.
Last but not least, the RD is willing to disseminate the implementation and methodology of Cloud-VRT system, including the way to design, develop, and deploy the system, to other interested foreign tax authorities. The RD is confident that Cloud-VRT system will help them work more efficiently and effectively.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
Before the success of Cloud-VRT system, the RD has passed through many obstacles. The RD has learned many lessons from the implementation of this system and can summarize the main keys to success as follows.
First, the leaders must have a vision for change. From the initiative of the RD executives to upgrade the VRT service, the Steering Committee and working groups have been formed for the purpose of finding new and innovative ways to improve VRT services.
Second, look at the problem from the outside in but solve the problem from the inside out. At the beginning, the RD explored the problems and gathered requirements by conducting many satisfaction surveys and interviews with the stakeholders. After the problems have been identified, ways and means have been found to improve the RD and to solve these problems.
Third, think win-win and look all stakeholders as the RD’s partners. One of the main challenges in implementing Cloud-VRT system is to motivate the customs officers to use the system. Cloud-VRT system has changed the customs officers’ working process from manual stamp on the P.P.10 to e-stamp in the system, but there are no rules or any regulations from the Customs Department to enforce its officers to do e-stamp; consequently, the customs officers rejected to use Cloud-VRT system in the first place. The effective solutions are to show the customs officers the benefits they will gain from the system, to develop working manual for customs officers, and to train its officers to use the system. The RD also convinces the stores to use Cloud-VRT system by showing them the benefits they will gain. The collaboration of the RD, Customs Department, and stores as the public-private partnership helps implementing this project much easier.
Finally, think out of the box. To promote the usage of Cloud-VRT system, the RD intends to offer the smartcards and smartcard readers to stores for free; nevertheless, it was initially prohibited because no governmental entity has ever provided equipments for private use before. With strong belief and determination that it can be done, finally this problem has been solved. Thus, this is the first project that government lends its asset to the private sector.
In conclusion, the main key success factors consist of the leader’s vision towards change, the way to deal with the problems, and having an effective thinking process. Based on the RD’s experience from this project, it is strongly believed that the main key success factors mentioned above could be applied for any projects to overcome the obstacles and can create productivities.
From all evidences, Cloud-VRT has many advantages and increases stakeholders’ satisfaction especially tourists. This project is one of Thai government strategies to promote tourism; also, it is one of major factors that impact the tourists’ decision making in revisiting Thailand and will assist Thailand to be the top of the tourist destination.

Contact Information

Institution Name:   The Revenue Department
Institution Type:   Government Agency  
Contact Person:   Kalchalee Nimmanhaemin
Title:   Director of VAT Refund for Tourist Office  
Telephone/ Fax:   +(66) 2 272 8199/ +(66) 2 617 3559
Institution's / Project's Website:   www.rd.go.th
E-mail:   arthit.th@rd.go.th  
Address:   90 Phaholyothin 7, Phaholyothin Road, Phyathai
Postal Code:   10400
City:  
State/Province:   Bangkok
Country:   Thailand

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