Click here for search results

Guatemala's BancaSat ETax Services

 
Abstract

In August 2001, Guatemala initiated BancaSAT, an online tax filing and payment system supported by the World Bank and managed by the Guatemalan tax agency, Superintendencia de Administración Tributaria (SAT). In December 2002, BancaSAT accounted for 84 per cent of the tax revenues of the country. The online system has significantly reduced SAT’s transaction costs and improved service delivery. The system is considered largely successful and highly regarded by users, in particular because of its simplicity. Several lessons can be learned from this e-government initiative. Citizens acquiring high value from e-government initiative at a very early stage, dramatic improvements in agency efficiency and rapid delivery of the project were regarded as crucial success factors. The involvement of the private sector in the initiative was key for the success and sustainability of the project.

Application context

According to SAT figures, in 2001 Guatemala tax revenues were 16,928 millions of Quetzales or $2.1 billion, approximately 10 per cent of GDP. The taxpayer base is 130,000, of which approximately 12,000 pay more than $8,000 in taxes.

Before BancaSAT, the process of filing taxes in Guatemala could only be fulfilled with the traditional paper forms. In this context, forms and payment are handed to commercial banks. Then, the information in paper forms is typed into an electronic form by bank’s employees, then printed and sent to SAT within five days, where the information is again transferred to new forms by SAT staff. Finally, the forms are handed to a department responsible for the storage of the files, accessible for auditing purposes.

The amount of paperwork was enormous at every stage of the process. There were numerous typing errors and information lost. Long lines were formed at the banks and complaints were continuous. These problems, along with the complexity of the forms, which resulted in errors in the declarations by taxpayers, made the process tedious and slow. It was believed that this cumbersome process did not contribute to increasing the taxpayer base, could not guarantee quality of information stored by SAT and impeded carrying out reliable taxpayers’ audits.

A new approach

To facilitate tax payment for citizens and businesses, governments around the world have invested in online tax systems that allow citizens to connect to the tax agency website to file and in a few cases, pay taxes. Under the BancaSAT model, taxpayers connect to their own bank’s website. Once in the website, clients can click on the BancaSAT icon, as BancaSAT has become one of the options within banks’ websites. After registration using a username and password previously provided by the same bank, they select the tax form according to the tax to be filed (income, value added and so forth) and complete it online. The bank debits the taxpayer’s account with the amount due. Minutes later, the taxpayer gets the confirmation of the transaction from the bank and seconds later the receipt from SAT. Banks are allowed to keep the payment for five days before transferring it to the Central Bank.

Additionally, the system allows accountants to file and pay taxes in the name of their clients, as long as they present an authorization document to the bank.

While most of the companies have Internet connection, this is not the case of the majority of individuals. To address this problem, banks are deploying computers in their branches in order to allow individuals to file online.

BancaSAT project developed as follows: In August 2001 BancaSAT 1 was launched, using a software called AsistePC, by which the forms are downloaded into a PC. Every six months a new version has been launched, adding new features. BancaSAT2 added new electronic HTML forms called AsisteWeb, which allows taxpayers to file and pay taxes on the bank’s website without downloading any software, although requiring to stay connected to the website during the process (taxpayers can choose between versions at their convenience). BancaSAT3 incorporated customs’ declaration and payment. BancaSAT4 allows authorized representatives to present forms on behalf of their clients. With BancaSAT5, taxpayers will be able to check and modify their personal data, such as address, tax affiliation and authorized representatives.

In December 2002, 9,000 taxpayers filed taxes through BancaSAT, accounting for 84 per cent of the tax revenues. As mentioned above, it is expected that in August 2003 the online tax payment system will account for 95 per cent of tax revenues in Guatemala; in other words, 12,000 filings or every company or individual filing over $8,000.

Implementation challenges

A number of difficulties were encountered during project. The commitment of all stakeholders, especially SAT staff, commercial banks and users, has helped overcome these challenges.

The first challenge was organizing a team to carry out the project. This was achieved finally by a team of five people of national and international staff. This could guarantee an adequate mix of international and national experience and sufficient transfer of knowledge to SAT staff to avoid sustainability problems.
Overcoming resistance to change from public administration and taxpayers was a major challenge. First presentations of the new system to the Ministry of Finance were received with skepticism. Also, taxpayers, although receptive, were uncertain of the project’s actual benefit. The plans for a new Internet tax payment system were perceived as a threat by many stakeholders. The resistance was overcome by involving all the stakeholders in the project. Initial meetings were held at several SAT departmental levels to explain the objectives of the project and the benefits from the Internet system. The new responsibilities that staff would gain as many activities were absorbed or simplified by the system were constantly emphasized. These new responsibilities included, among others, auditing and several activities to enhance customer satisfaction. Commercial banks, accustomed to an Internet environment, showed less resistance.

Launching a new version of the system frequently had also a down side. Users noticed that every six months there was a new BancaSAT icon in the banks’ websites, which could have created confusion. In this respect, two initiatives were taken: 1) it was decided that the previous BancaSAT versions should keep running as others were added (therefore, BancaSAT2 did not substitute BancaSAT1); and 2) provide the adequate new functionality to the newest version, in order to generate more incentives for users.

Another important challenge was obtaining the approval of the new legal framework for electronic filing. This process involved intensive consultations with SAT and Ministry of Finance. In the beginning, electronic filing was seen as non-reliable and non-secure for payment transactions. However, presentations on how these systems work in other countries helped to overcome this resistance.

In 2001, the Tax Law was modified, allowing taxpayers to file taxes by electronic means. In order to identify taxpayers filing electronically, a security and identification password was given to each of them by the commercial banks in which the taxpayer file and pay taxes. Commercial banks have, therefore, three roles that are usually carried out by the tax agency in other countries. In Guatemala, the banks are authorized to certify taxpayer identity, collect tax forms and collect the payment.

The continuous changes among the SAT personnel made progress of the project more difficult. This was partly overcome by maintaining the same project director throughout the project.

Benefits and costs

The cost of the project is estimated at $220,000, spent mainly on consultants, IT equipment (two servers) and small training modules. There were no layoffs, as most of the people were assigned new responsibilities within the agency. Commercial banks, important partners in BancaSAT, were responsible for the following at no cost for the agency: Front-end design, interconnection with SAT systems, security (firewalls, TOKEN cards, etc.), identification of tax filer, agreement with tax filer to use BancaSAT, advertisement and Internet servers, software and communications. The commission paid to the banks has been maintained, and it is the same for paper and electronic filings. Currently, this amount is 0.085 per cent of tax collected and $0.1 per filing.
The achievements of the project can be outlined following the straightforward criteria that countries such as the United States (see http://www.whitehouse.gov/omb/inforeg/egovstrategy.pdf) are now using to evaluate and achieve success in e-government projects. This simple criteria is based on: (i) value to citizens of the e-government initiative, (ii) potential improvement in agency efficiency and (iii) probability of project delivery within 18 to 24 months.

Value to citizens and businesses. The main objective of the system is to improve the service that SAT delivers to citizens. For taxpayers, the benefits have been considerable. Citizens and businesses can now file and pay taxes at anytime from anywhere. Transaction costs for both citizens and government have been reduced. Operational costs have also declined as paperwork, typing errors and use of cash is eliminated. Similar cost reductions can be estimated for SAT. Moreover, data errors and citizen complaints to the SAT have been significantly reduced. BancaSAT has notably contributed to the 13 per cent increase in SAT’s revenue collection from 2000 to 2001. In past years, growth in revenue collection stayed between 9 and 10 per cent.

Also, in 2001, BancaSAT initiated a newsletter (InfoSAT) service managed by a private company at no cost for the agency and the taxpayer. The company finances the newsletter through paid advertisements. This newsletter contains general information in the area of taxation in Guatemala and other countries and also technical advice for professionals in the field. The newsletter is highly regarded by the 17,000 subscribers, of which 90 per cent are taxpayers in Guatemala.

Improvements in agency efficiency. From the beginning, the project demonstrated the impact that the new system could have on the agency operations. The new system has streamlined many of the procedures in SAT, and has served as a catalyst for improvements in other areas, such as the new system for auditing taxpayers and important advances to modernize customs. For SAT, there has been a dramatic reduction in the time to collect filers’ information from banks; from five days, the time has been reduced to seconds. The system has also helped to increase the quality of the data handled. There has also been important savings in infrastructure, paperwork and printing.
The system also had an important impact on increasing the efficiency of civil servants. Staff that were responsible for paper processing have been redeployed to conduct work in auditing. The increased effort in auditing has helped improved SAT’s ability to detect tax arrears and evasion. The reduction of errors in filings has also helped to improve reliability of information and tax monitoring.

Quick project delivery. One of the key successes of the project was its rapid delivery. The project delivered the first product within 6 months after the starting date. Building on this, new versions of the system with new functionality were developed every 6 months.

Key Lessons

Keep it focused. Many e-government projects fail to define a realistic scope. These make projects to take too long, limiting their achievements while going very high in cost. On the contrary, BancaSAT was well defined from the beginning and was kept relatively small. This helped to set clear targets that could be achieved in a reasonable timeframe. While defining different stages of project development, the long-term objective was well kept in mind.
Deliver rapidly. This was essential to keep the cost in line with the outcome, achieve stakeholders buy-in and deliver quick gains to citizens. For this reason a more advanced version of the system was produced every six months and launched to the public, instead of waiting for the final system with all the functionality. The first version was delivered within 6 months of the beginning of the project.

Establish adequate legal framework. The legal framework was designed to help BancaSAT reach a critical mass of users. It was important, however to find a balanced legal framework that, while obliging some tax filers to go online does not put excessive burden on those without the adequate capacity to file taxes online. However, the current legal framework is pushing to increase the online taxpayer base. In March 2003, every filing over US$8,000 had to be made with BancaSAT. Since April 2003, the threshold has been reduced every month until August 2003, when every filing over US$1,200 will have to be made through the system.

Prioritize quality of service. It is difficult to succeed in an e-government project (and in any other in the area of service delivery) if the quality of the service is not high. In this case, the Internet signified a new medium. To persuade businesses and citizens to switch over the Internet incentives had to be offered: among others, reduction in transaction costs and timeframes for tax filing and payment, elimination of waiting lines and the introduction of value added services such as a tax newsletter and tutorials for assistance in tax filing online. Also, the simplification of both documents and processes is considered as one of the key success factors of the project.

Consider partnering with private sector. In this project the role of the private sector has been a critical success factor. SAT partnership with commercial banks has had a dramatic impact in the costs of the system for the tax agency. Almost every element of the infrastructure needed for the systems is managed by the banks, with little or zero maintenance cost for the SAT and for taxpayers. Banks are paid a commission for every declaration filed. BancaSAT is accessed through the banks’ websites, and this has promoted a healthy competition among banks to attract clients. Quality of service is therefore kept at high level, as banks compete in order to retain and add customers.

Case authors: Roberto Wajsman, BancaSAT project consultant; Miguel Solana, Public Sector, Latin America and the Caribbean, World Bank.
 




Permanent URL for this page: http://go.worldbank.org/1GN1PJEW70