This lesson examines the essential role of the collection function within tax administration. It describes the features of a modern tax debt collection function and introduces the strategic principles that guide effective debt management.

• Scope of the Collection Function: The collection function involves engaging with, and potentially taking enforcement action against, taxpayers who do not file a return on time and/or do not make a payment when due .

• Resource Allocation: Given the scale of outstanding debts, the collection function is a significant operational focus for tax administrations. On average, around 10% of total staff numbers are attributed to the collection function .

• The Cost of Late Filing: Even with modern systems, over 130 million returns were not filed on time in a single year across the jurisdictions surveyed . This generates a substantial volume of work for the collection function in pursuing late filers and payments.

• The Dual Mandate: Tax administrations must balance two objectives: taking firm action against taxpayers who knowingly do not comply, and using more customer-service-oriented approaches for taxpayers who want to comply but are unable to due to short-term challenges . This “fit for purpose” approach is essential for maintaining confidence in the tax system.

• Essential Features of a Modern Debt Collection Function: The OECD has identified key features of a modern collection function:

  • Advanced Analytics: Using all available data to accurately target debtors with the right intervention at the right time .

  • Treatment Strategies: A range of interventions, from preventative measures to support taxpayers to proportionate enforcement actions .

  • Outbound Call Centres: Efficiently pursuing a large number of debts .

  • Organisation: A specialist function with the right performance measures and a continuous improvement approach .

  • Cross-Border Debts: Proper and timely use of international assistance to collect debts from taxpayers with assets abroad .