Chapter 16 Taxation
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Chapter 16 Taxation Computerization. Agenda. Introduction Directorate of Internal Revenue in Iceland Taxation Related Systems Direct taxes VAT Related Projects Gap analysis Expected changes Contacts. Tax offices in Iceland. IT Department - Human Resources. Personnel

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Chapter 16 Taxation Computerization

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Chapter 16 taxation computerization

Chapter 16 Taxation

Computerization


Chapter 16 taxation computerization

Agenda

  • Introduction

    • Directorate of Internal Revenue in Iceland

  • Taxation Related Systems

    • Direct taxes

    • VAT Related Projects

  • Gap analysis

  • Expected changes

  • Contacts


Chapter 16 taxation computerization

Tax offices in Iceland


Chapter 16 taxation computerization

IT Department - Human Resources

  • Personnel

    • Hardware division 5

    • Software division7

    • Manager 1

  • Outsourced Services

    • Programmers 11

    • Technical Personnel 5

  • Maintenance and development of IT systems is, to a large extent entrusted to an external contractor, SKYRR hf. et al.


Chapter 16 taxation computerization

Infrastructure of IT Systems

  • Administration of most of the IT components for the tax system in Iceland is under supervision by The Internal Revenue Directorate

  • Technical structure of the WAN for the tax system:

  • 11 local networks

    • The Internal Revenue Directorate Head Quarters (Reykjavík)

    • 8 tax offices located all around the country,

    • State Internal Revenue Board (Reykjavík)

    • Directorate of Tax Investigations (Reykjavík)

  • Those networks are connected via MPLS


Chapter 16 taxation computerization

Infrastructure of IT Systems

  • Information systems are located physically and running either inside the office of The Internal Revenue Directorate or are outsourced

  • Data flows regularly between systems located either inside or outside the network

  • The engineering of the information systems is performed by the IT Division of the Internal Revenue Directorate


Chapter 16 taxation computerization

Infrastructure of IT Systems

  • Computer system located at the Internal Revenue Directorate’s office:

  • 11 production servers and several other servers running minor services

    • The most important servers:

      • Database servers (Oracle)

      • File servers

      • Mail servers (LotusNotes)

      • MS server (AD, IIS).

  • The operating systems are chosen with the best practice in mind:

  • Unix, Linux and Microsoft solutions are used in various combinations


Chapter 16 taxation computerization

Infrastructure of IT Systems

  • Outsourced information system (SKYRR hf.)

    • Running partly on mainframe computers (Adabas-Natural)

    • The oldest system was constructed in 1987

    • Most of the central tax administration systems were running on mainframe until 10 years ago

    • Since then some systems have been moved to other platforms (UNIX, Oracle), others are still running on the mainframe

    • The transition to distributed environment is still in progress and new systems will be developed on other platforms


Chapter 16 taxation computerization

Tax related

Computer systems

  • Income Tax

  • Screening system

  • eTax in Iceland

  • Withholding Tax (tax witheld at source)

  • Value added tax (VAT)

  • Year End Data for Tax Returns

  • Capital Income Tax

  • Other taxes


Chapter 16 taxation computerization

Income Tax

Computer System in General

  • Web

    • ASP and .NET Clients og web services

    • Oracle Databases

  • Harpa (Tax return processing system)

    • Windows Client

    • Oracle Database

  • Adabas/Natural

  • Mainframe: IBM z/890

  • Assessment function running since 1980


Chapter 16 taxation computerization

Income TaxTechnical Overview


Chapter 16 taxation computerization

Income Tax – System Overview


Chapter 16 taxation computerization

Tax Register


Chapter 16 taxation computerization

The use of screening system

  • The system helps with the process of assessing electronic tax returns (both from individuals and companies)

  • Nearly all tax returns in Iceland are now delivered electronically (few still on paper) (95% vs. 5% for individuals)

  • All incoming tax returns are put through the screening system

  • The system uses ca. 1.500 rules to validate the tax returns and pinpoint possible errors in them. Tax inspectors look at the results


Chapter 16 taxation computerization

Flowchart of incoming tax-returns

Tax-return via the Internet (skattur.is)

XML/SOAP Message with web services from accountants

DataBase for incoming tax-returns (Oracle). Error check!

Screening system (runs 24 hours a day)

Working environment (Harpa) for Revision/Auditing of tax returns

Tax Assessment. Calculation of taxes.


Chapter 16 taxation computerization

The use of screening system

  • The system uses information from received tax returns and external information from other sources

  • If no rule fires in the screening process the system automatically accepts the tax return, and no human intervention is required. 75% of all incoming tax returns accepted as OK by the system

  • The system has also been designed to make special automatic changes to the tax return when specific conditions are met (changes that the tax inspector would otherwise have to do manually)

  • The system is now an essential part of the taxation process in Iceland


Chapter 16 taxation computerization

The benefits of screening

  • All taxpayers get exactly the same check for errors or “missing” information in their tax returns

  • Pinpoints exactly what is incorrect in most cases (and therefore also what is correct). It therefore saves a lot of time, when the tax office is auditing the tax return

  • Saves time by automatically accepting “error free” tax returns

  • Saves time by automatically making specified necessary changes to the tax returns


Chapter 16 taxation computerization

eTax in Iceland

  • eTax for businesses

  • by web-services and on the web

  • since 1997

  • 99% used etax 2010

  • eTax for individuals

  • by web-services and on the web

  • since 1999

  • 95% used eTax 2010


Chapter 16 taxation computerization

eTax in Iceland - secrets of success

  • High internet penetration

  • User-friendly system

  • Preprinted information

  • Available around the clock

  • Helpdesk outside office hours

  • Extention for efilers

  • Extra services for efilers


Chapter 16 taxation computerization

eTax in Iceland

  • Preprinted information

  • Salaries

  • Real estate info

  • Housing loans

  • Government student loans

  • Cars

  • Car loans

  • Pensions

  • Social security payments

  • Information from financial institutions:

    • Loans

    • Savings accounts

    • Interest information

    • Stock transactions


Chapter 16 taxation computerization

eTax in Iceland

  • Preprinted data to professionals

  • Accountants and bookkeepers who have signed a contract with RSK/IRD

  • Preprinted data for etax on the web

  • Summary of data (preprinted or not)

  • XML form over a secure connection (SSL), summary on PDF form


Chapter 16 taxation computerization

eTax in Iceland

  • More services for professional filers

  • Same services as for those who use etax on the web (using web-services)

  • Error checking

  • Helpful hints and suggestions

  • Last years return

  • Preliminary assessment

  • Other communication


Chapter 16 taxation computerization

eTax Security

  • Web-services

    • Digital certificates

  • Web

    • SSL (secure socket layer)

    • Passwords

    • Digital certificates on smart cards (Debet cards)


Chapter 16 taxation computerization

eTax Benefits

  • Faster and easier filing

  • Higher quality of data

  • Reduced costs

  • AI auditing possible

  • 75% approved automatically by screening system

Improved image of tax authorities


Chapter 16 taxation computerization

eService pages for individuals

  • Corrections after filing

  • Preliminary assessment

  • Final assessment

  • Free certified copies of tax returns, digitally signed PDF documents

  • Select a bank account for refunds

  • Access to private data from other government offices

  • Authentication for other government offices


Chapter 16 taxation computerization

Paperless trail- from start to finish -

  • eCollection of data

  • ePreprinting of data

  • eTax return

  • eRevision

  • eAssessment

  • eRefund directly into a bank account


Chapter 16 taxation computerization

Withholding Tax

Computer System in general

  • Adabas/Natural

  • Mainframe: IBM z/890

  • Running since 1986


Chapter 16 taxation computerization

Withholding Tax

Technical overview


Chapter 16 taxation computerization

Value Added Tax

  • Value Added Tax System Iceland (VSK=VAT)

  • VSK-2000 implemented in November 1999

  • Replaced a older ADABAS mainframe system that was in use from 1990

  •  VSK-2000 is a Windows Client on an Oracle database

  • The system is housed and maintained at SKÝRR

  • VSK-2000 is used by all tax offices


Chapter 16 taxation computerization

Value Added Tax

  •  Information is gathered and put into the system manually by the tax office (paper) or over the internet. The data consists of VAT reports and also various types of reimbursement requests.

  •  After a VAT report has been processed, changed or an application for a reimbursement has been approved, data is sent to the Financial Management Authority 


Chapter 16 taxation computerization

Value Added Tax –Number of filed VAT Returns

  • Total number of VAT returns filed for the year 2009 was 124.831.

    • No. of returns where output tax > input tax 82.425 No. of returns where input tax > output tax 23.828 No. of returns with no tax 18.578

  • Electronic filing of VAT reports has been possible from the year 2001. For the year 2009 81.100 electronic returns were filed (65%)


Chapter 16 taxation computerization

Value Added Tax –Filing VAT Returns on line

  • Filing of VAT returns online is possible on the RSK service page www.skattur.is, through financial accounting systems and through web banking

    • 2009 81.100 electronic returns were filed (65%)

    • 2010 93.700 electronic returns were filed (75%)

  • From 1 st. January 2011 electronic filing is mandatory


Chapter 16 taxation computerization

Secure E-mail between

Nordic Tax Administrations

  • Inbound Mail Route (to RSK)   • Static outbound mailertable/connector rules for rsk.is from External to postur.rsk.is, ignores MX records   • Forced TLS encryption   • Signed certificate on postur.rsk.is


Chapter 16 taxation computerization

Secure E-mail between

Nordic Tax Administrations

  • Outbound Mail Route (from RSK)   • Static mail routes on MXtreme to postur.rsk.is for outbound relay to External domains   • Forced TLS encryption from postur.rsk.is to External mail servers   • Demand valid SSL/TLS certificate


Chapter 16 taxation computerization

Secure E-mail between

Nordic Tax Administrations

  • Running since 06/2010

  • E-mail Server using DMZ network

  • Secure certificates from Thawte

  • Runs on Red Hat Enterprise Linux 5.4 Server


Chapter 16 taxation computerization

Gap Analysis

  • For the purpose of intra-Community co-operation, Iceland as every other Member State must develop co-operation procedures at policy and operational levels

  • Ensure the interconnection and interoperability of its IT systems which range over the centralized national databases and the network connections capable of interfacing with EU systems.

  • In particular Iceland must have in place specific IT systems


Chapter 16 taxation computerization

Gap Analysis

  • EU IT Systems in Tax area required for Iceland:

    • The secure network Common Communications Network/Common Systems Interface (CCN/CSI);

    • CCN mail messaging system (version I + II);

    • VAT Information Exchange System (VIES version I + II) and VIES on web

    • VAT on e-services (VoeS)

    • VAT Refund

    • VAT e-forms

    • Information exchange system on taxation of Savings

    • Direct Taxation Exchange of Forms


Chapter 16 taxation computerization

Gap Analysis

  • Assistance needed:

  • Approximation organization of the EU Tax IT Projects (structures, procedures, methodology, formalities, requirements, responsibilities)

  • Approximation of EU IT Systems in Tax area

  • Help identify the possibility to use Tax IT systems from EU countries for Iceland without necessity to build some of them in Iceland

  • Help create IT strategy to prepare Iceland to join the EU in tax area

  • Help prepare the Terms of References for tenders for selection contractors for development and implementation Tax IT systems in Iceland

  • Support during the development and implementation Tax IT systems process (methodology, quality control, test organization)


Chapter 16 taxation computerization

Next steps

  • Further gap analysis needed

  • TAIEX assistance will be requested:

    • Expert Mission

    • Assessment Mission

    • Study Visits


Chapter 16 taxation computerization

Thank you 


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