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Inland Revenue Authority of Singapore
Singapore

The Problem

IRAS has introduced several initiatives to provide our taxpayers with excellent taxpayer service and to reduce their compliance cost of filing tax returns.

The Auto-Inclusion Scheme (AIS) was first introduced in 1995 where information on our taxpayer’s income and relief is transmitted directly to IRAS from source, for example employment income is transmitted to IRAS by employers who participate in the AIS scheme. This initiative removes the need for taxpayers to fill in the information when they file their returns. It also helps IRAS eliminate the risk of under declaration of income to IRAS.


In 1998, E-filing of Individual Income Tax returns was launched enabling our taxpayers to file their tax returns online at their own convenience. Coupled with higher participation in the AIS scheme over the years by employers, taxpayers who e-file would have their employment income automatically included in their returns.


The introduction of Pre-filled returns

With effect from 2006, personal reliefs are also automatically included to provide greater convenience to taxpayer when they e-file. Today, when taxpayers e-file their returns, they are able to view the pre-filled income and relief particulars and the e-filing process is reduced to just two clicks of the mouse! AIS and E-filing has reduced the need for taxpayers to track, compile and ensure the accuracy of their tax information before submission to IRAS (assuming there are no other sources of income).

However, the current filing framework requires all individual taxpayers to submit their returns by 15 April each year. This has given rise to a heavy influx of forms and a surge in contacts (“bunching effect”) during this period, resulting in the need to deploy extra resources to handle the situation. IRAS would have to incur extra manpower cost to employ temporary staff during this period to handle the extra load.

IRAS still sees an average of 45,000 taxpayer walk-ins during the March to April filing period seeking assistance for the following:
a. To re-issue e-filing Personal Identification Number (PIN) for taxpayer who have misplaced their PIN and
b. To seek assistance to e-file their returns

The majority of walk-ins who come to seek assistance to e-file consist of the following group of taxpayers:
a. Taxpayers who do not have internet access
b. New taxpayers who are e-filing for the first time
c. Taxpayers from the lower education group who do not understand the instructions for e-filing
d. Taxpayers who are above 50 years old and are less IT savvy

With the requirement to file returns by 15 April each year, taxpayers who fail to file their returns by 15 April, would be subject to enforcement actions from IRAS for the submission of the outstanding returns. This results in greater inconvenience for our taxpayers.

Solution and Key Benefits

 What is the initiative about? (the solution)
The simplification of individual income tax filing and the expansion of the AIS to more employers, have made it more convenient for taxpayers (who are in the employees group) to file their returns.

No- Filing Service – A new way of filing returns:

IRAS then took the bold step forward from pre-filled returns to a system where taxpayers are not required to even file a return to IRAS.

In 2007, under a new initiative called No-Filing Service (NFS), instead of a return, taxpayers received a NFS Letter to inform them that they were not required to submit a return. Their assessments were finalized based on the auto-included information and their relief claims for previous year.

Under NFS, taxpayers who receive the NFS letter would only need to e-file a tax return if he/she has additional income to declare or there are changes to the relief claims.
Key benefits for:

a. Taxpayers under NFS:

The NFS reduces the filing burden for taxpayers and makes fulfilling tax obligations a non-event for eligible taxpayers. This group of taxpayers will also not be liable for penalties for non submission of returns as they are not required to submit annual returns.

b. Other taxpayers

The reduction in filing contacts also makes it smoother for e-filers since the NFS results in fewer users logging into the e-filing system during the peak filing season.

c. IRAS:

NFS has also met its objective of alleviating the filing load for Individual Income Tax and cutting down on cost and effort in issuing and processing returns.

IRAS operating costs are also reduced as there is a reduction of load on IT systems as NFS taxpayers are not required to submit their returns.

NFS also enabled a faster turnaround for issuance of tax bills and the collection of taxes. These savings has allowed IRAS to channel our valuable human resources to more value added tasks.

How impact of initiative was measured:

The key mark of the success of this initiative was that for 2008, NFS benefitted 332,335 taxpayers.

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
The senior management team in IRAS saw the potential of bringing taxpayer services to a new level by not requiring them to file returns as we had sufficient information to raise an assessment for them. This is a radical change in the mental model of providing services to our taxpayers.

A cross functional project team was then set up to study the legal impact of the initiative, the feasibility and subsequent implementation of the NFS.
Given that this is a major initiative, we also sought feedback from taxpayers on their receptiveness and concerns for the new service. Feedback was solicited via the Taxpayer Feedback Panel (TFP) which comprises 20 representatives who are members of the local business associations and individuals from various industries.

Three Taxpayer Focus Group (TFG) sessions were also conducted where taxpayers had the opportunity to share their concerns for the new initiative and their inputs were included in the final launch of the NFS. The TFG comprises of a cross section of taxpayers from all walks of life.

(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.
To ensure that the NFS was a success, our senior management team agreed that we had to focus on the following 3 critical success factors:
1 High employer’s participation rate for the AIS
2 Minimal amendments to the pre-filled returns
3 Clear communication to the public

High employers participation rate for AIS:

As at 2006, 3% of the total employer base participated in the AIS, covering approximately 60% of the individual taxpayers. As the NFS system is highly dependent on the auto-inclusion of employment income, it is important to have a high employer participation rate in the AIS to reap the benefits of the new system. In 2008 it was gazetted that all employers with 100 employees or more are to be on the AIS by 2009. This initiative will greatly increase the number of employees who can be in the NFS.


Minimal Amendments to the pre-filled returns:

With effect from 2006, returns for E-filers were pre-filled with information on income and reliefs. Income data are current while reliefs are pre-filled based on past assessment records. Adjustments by taxpayers were due to changes in their circumstances affecting relief claims. The extent of amendments made to the pre-filled returns would be a good indication of the accuracy and completeness of the auto-included information. The lower the number of adjustments by taxpayers, the higher the benefits reaped by IRAS and taxpayers from the NFS.


Clear Communication to the public

The NFS is totally from the current filing system. Hence we recognize that clear communication of the procedures and criteria was of utmost importance. This would help to minimize confusion among the affected taxpayers and bring about greater public acceptance of the new system.

These critical success factors were conscientiously monitored from 2006 to 2008 to ensure that they are in place before proceeding with the NFS.

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
Key development and implementation steps:

Obtain Feedback/Input

As this is a major initiative, we solicited feedback from taxpayers in 2006 via our Taxpayer Feedback Panel and three Taxpayer Focus Groups sessions to gauge their receptiveness to the NFS and to listen to their concerns. As the feedback was generally positive, the decision was made to proceed with the NFS initiative and their concerns and feedback was incorporated into the design of the initiative.

Prepare design requirements:

A cross functional project team was then formed in 2006 to study the feasibility and the subsequent implementation of the NFS. The team worked with various stakeholders to gather inputs and to prepare the design for the implementation such as the Law Division to make the necessary legislative changes required for the launch of the NFS and with Infocomm Division to make the system changes for NFS initiative.

Verification:

In 2007, a pilot study was conducted on 45,000 taxpayers.
The pilot was conducted to study the following:
a. Percentage of taxpayers who contact us
b. Percentage of taxpayers who filed despite receiving the NFS letter
c. Percentage of taxpayers with subsequent assessments.


Obtain Feedback and Review:

We then obtained feedback from these pilot users to identify potential problems, and enable us to fine-tune our system and put in place other measures to mitigate the problems.



Implementation and Launch

As the initiative was well received by taxpayers, with a substantial percentage of NFS cases finalized without the need for officer’s intervention, the NFS was launched on a full scale basis in 2008.

Prior to the launch, a detailed communication plan was drawn up and implemented to increase the awareness of this new initiative amongst taxpayers.

Post implementation review

A detailed post implantation review was conducted after the filing period in 2008 to gather the feedback received from taxpayers and to draw the learning points from the exercise. These are studied and improvements have been incorporated into the system in time for the next filing cycle in early 2009. With the success of the NFS in 2008, we will be extending NFS to a larger group of taxpayers in 2009 to lower the compliance cost for taxpayers and to increase operational efficiency for IRAS.

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
When the proposal was put up for the NFS project, the team was aware of the constraints and challenges ahead if they were to go through with this initiative. The 3 main challenges the team faced were the constraints of the existing system, to change taxpayers’ mindset and to ensure there is minimal tax loss.

Constraints of existing information technology system
The team had to effect changes to the existing system to exclude the pilot NFS group of taxpayers from receiving their tax returns and ensuring that the regular process flow for non-filer actions does not kick in for these taxpayers.


Change taxpayers’ mindset
This initiative is a radical shift from the traditional filing process that has been in existence for many years. It was a challenge to change the mindset of taxpayers that submission of a return is no longer required.
Besides allowing taxpayers to verify their income and reliefs data via myTax portal, separate helplines and e-mail boxes were setup to cater to enquiries this group of taxpayers. Taxpayer feedback also highlighted that many participants in this scheme will be afraid they will be penalised for not submitting a return. The team decided to emphasize the phrase “not required to file” in the NRNF letters. The team was aware that major publicity efforts were necessary to ensure the success of this initiative, especially if it were to be implemented on a full scale eventually.

Ensuring minimal tax loss
The team knew that allowing taxpayers not to file meant there could possibly be a group who may omit to declare additional income or may claim reliefs that they might not be entitled to.. These taxpayers may presume that since IRAS has issued them a NFS letter informing them they are not required to file, there is no responsibility on their part to ensure that the information is indeed correct.

To minimise potential tax losses, IRAS selected our target group cautiously ensuring that we have the necessary and accurate information to calculate the tax liabilities for the target groups.

Also, to keep taxpayers informed our their filing obligations, we inserted a paragraph in the NFS letters informing taxpayers they have to file if they have any additional sources of income or any changes to their relief claims. This will highlight that the onus is on taxpayer to file if there are any changes to the auto-included employment or/ dividend income or changes to relief claims.

Audit checks will be conducted to ensure that these taxpayers did not have any additional sources of income and qualified for the reliefs that were allowed.

(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 NFS was a simple idea and while it required minimal additional resources to implement, it was able to result in high cost savings for IRAS and greater convenience for taxpayers,

Technical resources:
System changes were required to identify taxpayer who qualify for NFS and to enable bulk generation of NFS letters.

Human resource costs:
Additional human resource cost was expanded in the following areas:
a. 2 dedicated personnel were deployed to man the dedicated helplines and email-boxes set up to cater to NFS enquires.
b. to effect the legislative changes required for the NFS
c. to prepare the additional publicity to educate taxpayers on the NFS initiative

Financial costs:
System changes: $80,000 to modify our system (i.e. $0.24 per each of the 332,335 taxpayers who benefitted from NFS)
Printing & posting : $ 12,600
Publicity cost : $15,000
Manpower cost : $ 8,100
Phone line cost : $1,800

Sustainability and Transferability

  Is the initiative sustainable and transferable?
The NFS is highly sustainable as more employers come under the AIS scheme. Currently, we have about 6333 employers on AIS, accounting for 1.1 million employees’ records out of which approximately 67% or 740,000 employees are taxable. AIS will be made compulsory in phases for employers over the next 3 years. For a start, from 2009, employers with 100 employees or more would be required to be on the AIS. This would mean about 7,800 employers are expected to partake in the AIS covering approximately 1.28 million employees out of which 73% or 940,000 employee are taxable.

Over the last 2 years, IRAS has shared our experience from implementing this initiative with the following :
a. The Singapore’s National Healthcare Group
b. Representatives from the various ministries and statutory boards in Singapore

IRAS is also looking forward to sharing our experience from implementing NFS at an impending visit by the Fiji Islands Revenue & Customs Authority. This initiative could be easily replicated by tax authorities throughout the world should they currently have or are able to implement a scheme similar to AIS in their country.

IRAS has also shared our experience in launching this initiative at 38th SGATAR (Note 1) Meeting held in Nov 2008 and published a brief write up on it in the Sept 08 issue of the Commonwealth Association of Tax Administrators (CATA) Newsletter.

The NFS initiative has clinched the Bronze medal, beating 12 other local public agencies at the prestigious Singapore Public Service ExCEL Convention (Note 2) 2007 on 1 Nov 2007. In addition, the NFS project won the “High Impact Award” at Ministry of Finance (MOF) Productivity Day (Note 3) 2007.

Note 1: SGATAR - The Study Group on Asian Tax Administration and Research (SGATAR) aims to provide participating countries the opportunity to get together annually and exchange information, ideas and experiences in the field of taxation.
Note 2: A competition/convention to showcase innovative projects in the Civil Service
Note 3: A competition/conference organised by MOF to recognise and reward the agencies within the MOF Family for their active participation in Innovation and for implementing outstanding projects/suggestions.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
The NFS is quite a simple idea. Yet it could easily have been rejected because it is a very radical idea – changing the requirement for taxpayers to submit a return, to not requiring taxpayers to submit a return. IRAS has a strong innovation culture and the NFS was made possible as we were willing to embrace and try new approaches to tax administration.

We were able to make the decision to introduce the NFS initiative as
a. we saw the potential benefit to taxpayers (reduction in the filing burden for taxpayers and lowering their risk of compliance actions for non-filing) and cost savings for IRAS
b. we know that most taxpayers are generally compliant and omission of information would probably be due to ignorance or lack of knowledge of the tax. We therefore focused our effort on educating our taxpayers on their tax obligations. Where necessary, we are able to mitigate any revenue loss with our the audit and compliance program in IRAS.

In implementing the idea, it was also important to listen to the taxpayer’s voice. In the NFS initiative, we sought the feedback of the taxpayers throughout the implementation and the various improvements suggested by taxpayers helped contribute to the success of the launch in 2008.

Once upon a time, the taxpayers found it an onerous task to track, compile and ensure correct information when submitting their tax returns. With the AIS, E-filing and NFS, 332,335 taxpayers did not have to do anything to have their tax assessed. It is envisaged that more taxpayers will continue to benefit from NFS. In 2009 we have plans to extend the NFS to 493,000 taxpayers.

The NFS is a reflection of IRAS’ continual commitment in seeking improvements to bring about greater taxpayer satisfaction and convenience to taxpayers.

Our vision to partner taxpayers means that we at IRAS will continue to make a conscious effort to reduce the cost of compliance for our taxpayers and use the appropriate technology to reduce the compliance cost of taxpayers. It is with these enhancements that IRAS is able to make quantum improvements in our service delivery to taxpayers, bringing us a step closer to achieving our vision of being the “leading tax administration in the world”.

Contact Information

Institution Name:   Inland Revenue Authority of Singapore
Institution Type:   Government Agency  
Contact Person:   Ernest Lee
Title:   Director (Organisation Excellence)  
Telephone/ Fax:   63513037
Institution's / Project's Website:   63513050
E-mail:   ernest@iras.gov.sg  
Address:   55 Newton Road, Revenue House
Postal Code:   307987
City:   Singapore
State/Province:   Singapore
Country:   Singapore

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