Integrated and Open Systems Model: An Innovative Approach to Tax Administration Performance Management

Article excerpt

The pressure for outcome-based performance management increases performance and evaluation activities at all government levels. Research on public sector performance management systems, however, points to problems in the design and management of these systems and questions their effectiveness as policy tools for increasing governmental performance. It has been reported that the problem involves the lack of integration between performance management at the strategic, operational and individual levels.

In the tax administration context, the integration issue in performance management has also been highlighted. However, the existing literature does not propose how to overcome this issue. This paper introduces an innovative way to undertake tax administration performance management based on an integrated and open systems model. The distinct feature of the model is that it highlights the critical process of transforming inputs into outputs/outcomes in a tax administration by diagnosing the interrelation of the components in the process, i.e. formal organisation, informal organisation, task and people. These components contain both institutional and behavioural factors which have significant effect on tax administration performance. A set of guidelines is also developed in this paper to enable application of the performance management model.

A case study was undertaken to test the applicability of the model to tax administration based on the guidelines developed. The case study shows that the model enable better management of tax administration performance by providing valuable feedback on the present state of a tax administration, identifying possible reasons for underperformance and highlighting ways in which a tax administration can improve its performance.

Key Words: tax administration; performance management; integrated; open systems.

ABSTRACT

Introduction

During the past decade, there has been a noticeable trend throughout the world whereby major efforts for public organisation reforms have been undertaken to achieve efficient and effective management of public sector. These efforts have shaped the delivery of public services through the use of performance management and program evaluation. Performance management involves improving strategic focus and organisational efficiency and effectiveness by continuously securing improvements in the performance of individuals and teams (Philpott and Sheppard, 1992). Performance management is viewed as a means of getting better results from an organisation, teams and individuals within an agreed framework of planned goals, objectives and standards (Armstrong and Murlis, 1994). The idea of managing organisational performance has spread rapidly throughout the public sector (Salem, 2003).

Despite the utilisation of performance management in public organisation, limited studies can be found on tax administration performance management. Studies on tax administration tend to focus on performance measurement rather than the process of performance management itself (see, for example, Klun, 2004; Serra, 2005; von Soest, 2006; Tenant and Tenant, 2007). Although performance measurement is a critical component of performance management, measuring and reporting alone have rarely led to organisational learning and improved outcomes (US National Performance Management Advisory Commission, 2009). Performance management systematically uses measurement and data analysis, as well as other tools, to facilitate learning and improvement and strengthen a focus on outcomes. While measurement helps to monitor performance, management encompasses an array of practices designed to improve performance. Alley and Bentley (2008) also suggested that performance management supports the achievement of a good tax administration through target setting, which is measured by selected key performance indicators.

Best practice in performance management involves an integrated performance management system as different organisational levels compete for managers' attention and organisational resources (Verweireand Van Den Berghe, 2004). …