Want Better Domestic Revenue Mobilization? Build a Digital Taxpayer Registration Tool

At the core of every country’s tax administration is the taxpayer registration function, which maintains and supplies vital information to other parts of the tax administration’s core functions—such as filing, collection, audit, and service—and in most cases also to external users.  

However, the reliability and integrity of the registered taxpayer database remain an afterthought for many tax administrations around the world.  

The taxpayer registry database—and, more importantly, the quality of the information stored in the registry—is fundamental in supporting the rest of the core tax administration functions and instrumental to successful domestic revenue mobilization. 

DAI has led the assessment, design, and implementation of taxpayer registration modernization efforts in more than a dozen countries, including most recently in El Salvador, Guatemala, Jordan, and Liberia. Our experience bears out the central importance of the registry and in particular of digital taxpayer registration. 

One recent engagement with the U.S. Agency for International Development (USAID)—supporting Guatemala’s Tax and Customs Administration to launch a cloud-based taxpayer registry called Digital Registro Tributario Unificado( RTU) through USAID’s Fiscal and Procurement Reform Project (FPRP) and the National Institutions Strengthening (NIS) Project—yielded a number of benefits and key lessons.  

The Digital RTU, initially launched in March 2020, has become a pioneer initiative in the country’s broader modernization agenda, framed around a new operating model focused on facilitation and service delivery. Deployment was not pain-free, coinciding as it did with the COVID-19 pandemic lockdown period, but the effort ended up being timely and crucial during those lockdown months. Key achievements include expansion of the tax base through a 51 percent increase in identified taxpayers with tax obligations; a 60 percent reduction in taxpayer information errors; enhanced exchange of information with other government agencies; and automated validations to ensure the sustainability of data cleansing efforts. 

Photo: USAID Guatemala Fiscal and Procurement Reform Project.

Key Lessons 

The taxpayer registration digital transformation journey is not straightforward, but by applying DAI’s Public Sector Transformation (PST) Framework and other proven techniques and tools, our assistance to Guatemala’s Tax and Customs Administration resulted in more efficient processes and systems that promote integrity within the Administration.   

Become a trusted advisor. Working closely with all the organization levels and being honest in what can and can’t be achieved is crucial in earning the trust of government counterparts. Never promise what you know cannot be achieved. Always look for a position where you are considered a strategic partner, not just another time-consuming advisor. 

Strengthen the project management office (PMO) function. The Tax and Customs Administration’s PMO was crucial to the success of the project. It provided a single point of contact for issue resolution, progress reports, and access to upper levels in the organization. A well-established and efficient PMO makes a big difference in implementation. 

Understand how the organization assigns resources. Government institutions are guided by strict processes. Take the time to understand how resources are assigned to the engagement, and always look for your initiatives to be included in the annual planning process. 

Facilitate change management. In the business process re-engineering activities, DAI provided guidance in change management to the Tax and Customs Administration, including developing a communications strategy and providing training to its modernization and core process improvement teams.  

Interoperability is crucial. Data exchange with other government agencies is hard to achieve. Political hurdles are usually harder to overcome than technical issues. Understand the political and technical requirements for data exchange early in the project.  

Data quality is fundamental. Focus on typical data issues such as duplicates and incomplete fields but also pay special attention to data that drives other functions in the administration, such as economic activity. Fix those first. 

A white paper describing these digital transformation tools can be downloaded here 

Photo: DAI.

Better Data Leads to Better Compliance 

 With USAID’s assistance, Guatemala’s Tax and Customs Administration today has a solid taxpayer registration function with more accurate information on taxpayers, no duplicate and dormant records, a complete view of taxpayers’ data accessible to all staff who require it, and integration with other subsystems and government agencies. The Administration is in the process of generating pre-filled or estimated tax assessments to facilitate the compliance of small businesses.  

The Tax and Customs Administration has been praised by the business sector, other government entities, and the international community for its efforts to facilitate tax compliance while contributing to significant increases in tax revenue collection. Notably, it surpassed the annual collection target in fiscal year 2023 by nearly 10 percent and reached a tax-revenue-to-GDP ratio of 12 percent—the highest since 2000. Much of the credit for these achievements can be attributed to the development of a sound taxpayer registry. 

Eunice Heredia-Ortiz is a DAI Senior Lead Specialist in Public Finance. Guillermo Jimenez is a Senior Tax Administration Consultant to DAI.