The Tax Man Cometh - But is he Efficient?

Abstract

The paper is based on a report (Førsund et al., 2005) of the project 'Productivity studies in the Norwegian tax administration' by the Frisch Centre for the Directorate of Taxes.The performance of local tax offices of Norway is studied over a three-year period applying Data Envelopment Efficiency analysis and a Malmquist productivity index. The estimates are bias-corrected using a bootstrap approach recently developed for DEA models. The results show that bias correction and the construction of confidence intervals give a quite different picture without bootstrapping. A set of best practice offices is identified for future work on finding explanations for good performance. The productivity development of individual offices is classified into the four categories: productivity improving cost increase, productivity improving cost savings, productivity decreasing cost savings and productivity decreasing cost increase.

Efficiency of Tax Collection and Tax Management in Taiwan's Local Tax Offices

“…Førsund et al . () used DEA and Malmquist productivity indices to evaluate the efficiencies of tax offices in Norway and bootstrapping to correct DEA estimations.…”

Smoothed bootstrap Malmquist index based on DEA model to compute productivity of tax offices

“…Furthermore, the author identifies factors drawn from the literature as possible causes of inefficiency that may be applicable to the units analysed, such as the rigidity of the labour market when job tenure is not linked to performance, the difficulty of controlling managers that act on behalf of the government, the existence of asymmetric information among different offices and, finally, the x-inefficiency typical of public sectors; due to a lack of professional incentives, scarce competitive pressure and a tendency to prioritise the personal satisfaction of workers over that of the company (Albi, 1992;Leibenstein, 1966) After Spain, Belgium and Portugal it was Norway's turn to have the efficiency of its tax offices analysed. Forsund, Kittelsen, Lindseth and Edvarsen (2006) studied the performance of 98 local tax offices in Norway from 2002 to 2004 by applying an output-oriented BCC DEA, Malmquist index and smoothed bootstrap. The input variables considered were: the cost of resources (such as manpower, offices and current expenses) adjusted for compensating special circumstances (for example, rent and travel costs) in order to control non-discretionary variables such as population, price levels, area or population density.…”

Productivity in Public Services

“…Their study finds little impact of IT alone on performance. Førsund et al (2006) in their examination of tax office efficiency use measures of output including the number of tax returns from different groups (employees, pensioners, incorporated and non‐incorporated businesses) together with a count of the number of complaints with regard to tax assessments, and Kittelsen and Førsund (1992) assess the efficiency of district courts using count measures of different types of court cases such as civil, criminal, probate and bankruptcy cases. Stevens (2005) examines the provision of library services by local government using indicators of the number of books and other items both available and issued, and the number of library visits.…”

“…Examples of the use of DEA include Ruggiero (1996) in the context of measuring the efficiency of education provision, Jacobs (2001) looking at hospital efficiency and Førsund et al (2006) who examine the efficiency of tax offices. Ruggiero (1996) constructs measures of education production efficiency for New York school districts.…”

“…The paper highlights the sensitivity of the efficiency scores produced to different methods used to generate them. Førsund et al (2006) in their investigation of the efficiency of tax offices recommend the use of bootstrapping techniques to place confidence intervals around the efficiency scores to assess the level of uncertainty around the measures. Jacobs (2001) does not find strong correlations between efficiency scores for hospitals generated by SFA and DEA techniques.…”