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Are European tax administrations staffed to meet the challenges ahead?

9 June 2020: A new survey published by the European Federation of Public Service Unions has found European tax administrations shed 100,000 jobs between 2008 and 2018 – with significant consequences on the effective functioning of their tax systems.

The European Federation of Public Service Unions (EPSU) survey of 28 countries, including the UK, provides a stark assessment of the impact of a decade of austerity measures on tax administrations across Europe, from job losses to downgraded pay and conditions.

While the study highlights the consequences for countries’ ability to counter tax evasion and fraud, the findings also raise important questions about the ability of governments to collect and administer taxes in a post-pandemic environment.

One in seven jobs gone

Between 2008 and 2018, tax authorities across Europe lost over 14% of their workforce, with many losses particularly heavy around 2010 and 2011. In all countries except Luxembourg and Norway, fewer people were employed in tax administrations in 2018 than in 2008.

Falling staff numbers have often been achieved by not replacing staff retiring or leaving, resulting in ageing workforces. In Italy, 63% of the tax authority’s employees are now over the age of 50. In the UK, the proportion of staff aged 50 and over increased from 27% in 2008 to 43% in 2018.

Echoing the findings of a research project with European public finance professionals carried out by ICAEW in 2017, the EPSU survey found that even where administrations have sought to recruit more staff, such efforts have been hindered by low pay and low morale. More positively, however, EPSU finds some increase in the number of more qualified staff.

As ICAEW noted in 2017, the recruitment and retention of high-quality finance professionals across the public sector is fundamentally important to secure their successful operation. The lack of up-to-date financial and digital skills can lead to further strain. Administering tax systems will only become harder if the right number of appropriately qualified people are not in place.

Is digital the answer?

The EPSU survey addresses the impact of the digitalisation of tax administrations, finding that in most countries it led to cost-cutting. While some think digitalisation has led to improved service and enhanced job quality, not all agree. France and the UK particularly seem to concur that service has not improved with digitalisation.

Cutting staff and relying on technology can be problematic as suggested by the Danish experience, where reliance on outdated IT was identified in a 2016 government report as a major factor behind problems in tax assessments and tax collection.

Increasing digitalisation may be inevitable. Yet, as ICAEW has highlighted in its assessments of the digitalisation of international tax administrations, it is vital to understand the advantages and potential pitfalls of such digital transformation.