When public administration is efficient, we can achieve more with our shared funds. Digitalisation offers a variety of opportunities to renew and boost central government; the opportunity to standardise and automate administrative processes, in particular. In this series of articles, we describe – based on our audit information – which issues should be considered when starting the digitalisation of public administration. The observations are based on specific audits, but the same principles can be applied to broader administra-tive reforms.
Legislation can promote but also limit the potential benefits of digitalisation
Legislation is one of the enablers of digitalisation, services and operating methods. It can not only promote but also limit or even completely prohibit achievement of the potential benefits of digitalisation. Therefore, the issue being reformed should be studied as a whole when developing public administration to ensure that legislation and budget procedures will enable the automation of administrative duties. Similarly, when new laws and legislative amendments are being prepared, a comprehensive and systematic procedure should be used to ensure that the regulations will not hamper the digitalisation of administrative duties and the use of standardised processes.
When the opportunities provided by digitalisation are considered during reforms, the issues being reformed should, first and foremost, be studied as a comprehensive whole if it seems that the separate administrative processes should and could be standardised, merged and automated. Substantive and procedural provisions, item decisions and budgeting should be investigated. Standardised and clear regulations, item decisions and budgeting would facilitate implementation of the budget and standardisation of administrative processes. In turn, this would facilitate management of the whole in a single data system and enable standardised control measures.
Excise duty collection is an example of a reform that has already been carried out, where the key regulation, the Excise Duty Act (valmisteverotuslaki, 182/2010), supports a standardised taxation process and the process is mostly automated. Standardisation of administrative processes is wise, because managing similar tasks at several locations and in many different ways is not good customer service or efficient administration in the long term. In addition, personnel competence will improve if similar processes and duties are standardised and merged. Significant efficiency benefits could also be achieved by, for instance, merging administrative procedures related to discretionary government transfers.
Non-standardised regulations which are subject to interpretation and exceptions hamper automation of taxation
One example of the impact of legislation on the opportunity to boost public administration is the Income Tax Act (tuloverolaki, 1535/1992). Almost a hundred amendments of the Act have been carried out between 2006 and 2017, but most of them made taxation more complex and thus hampered efficient automation of taxation. Partial or temporary amendments, or amendments which involve a long transitional period or special provisions, are especially challenging in terms of automation.
Even though the structure of the Income Tax Act is still functional, getting a clear overall idea of the Act as a whole is still being hampered by the large number of tax subsidies, complexity, amendments, single exceptions and the variation of justification. This also has an immediate effect on the efficiency of administration, because it increases the costs of administration, as well as an indirect effect, because it hampers management and development.
The manner in which tax deductions are realised has a significant impact on whether the Tax Administration is able to automate the processing of tax cuts and thus continue to boost its operations. Some tax deductions are based on information provided by the taxpayer and possible requests for further information from the Tax Administration, and efficient automation is not always possible in these cases. At worst, single tax deductions may give rise to major additional expenses in public administration. Furthermore, even though the additional duties could be handled with the existing resources at the time when a regulation is amended, achieving administrative savings in the long term may be even more difficult if there is a large number of duties caused by a variety of exceptions and amendments. For taxation – or any public administration function – to be efficient and for automation to be possible, the regulations guiding it must be clear, simple and standardised.
Standardisation of government transfer processes is a major opportunity
Discretionary government transfers are a major item of expenditure in central government. They are managed by several agencies, and the management methods are not standardised. The management of discretionary government transfers could be standardised and boosted by eliminating overlapping regulations: using the Act on Discretionary Government Transfers (688/2001) more and abandoning transfer-specific acts, most of which include regulations on the same issues as the Act on Discretionary Government Transfers.
Business subsidies are a part of government transfers. When auditing business subsidies, the National Audit Office paid attention to the fact that the transfer-specific regulations often address the same issues as the Act on Discretionary Government Transfers, but in a slightly different way than the Act on Discretionary Government Transfers. Typically, there are not many deviations – in many cases, the deviations involve a variety of deadlines – but they cause differences in the administrative processes and hamper efficient automation of the government transfer process. In addition the poor opportunity for standardisation and boosting of efficiency, the key starting point of the Act on Discretionary Government Transfers, whether a transfer is necessary, is often easily overshadowed by other goals. The Act on Discretionary Government Transfers could be used much more extensively than it is being used at present, and the deadlines could probably be made more flexible by means of legislative amendments.
Another way in which the efficiency of government transfers could be boosted is by changing the budget procedures, which are – according to observations made by the National Audit Office – also very diverse. The types, allocation principles and authorisations for government transfers of the same type are often vastly different. “Mixed items” are also widely used. As a general rule, the budget procedures of similar government transfers, such as operating grants or project subsidies, could be standardised, however.
If the administrative processes, regulations and budget procedures were standardised, a specific government transfer decision or the acceptance and payment of an expenditure would lead to the same kind of processing in the year’s budget, budget accounting, commercial accounting and the monitoring of authorisations (if any). This would facilitate management of different government transfers in a single data system and enable standardised control measures. When neither regulations nor budget procedures are standardised, achieving efficiency benefits is more difficult. The Ministry of Education and Culture was of the same opinion in its preliminary study on the digitalisation of government transfers.
Comprehensive solutions can lower costs and improve customer experience
The key benefits of digitalisation will probably be achieved in the case of extensive overall solutions, as clear and standardised regulations and budget procedures will facilitate their automation. Such overall solutions include taxation and the management of government transfers and a variety of subsidies, for example. Taxes generate most of government revenue, and government transfers and other subsidies amount to 70% of the expenditure in the budget. There are still plenty of administrative tasks involving them that can be automated or merged into a larger whole. The administration of these involves a large number of routine tasks that could be automated to free up resources for other duties. A step towards standardisation has already been taken in the management of other material items in central government finances, such as procurement, wages and central government debt.
Digitalisation provides a major opportunity to significantly boost the efficiency of central government and improve its internal control and risk management. In this respect, the goals should be kept at a high level. If legislation and budget procedures are simplified and standardised, taxation and the management processes of government transfers can be clarified and automated, for example. This would decrease the costs and improve the customer experience, as well as create a foundation for flexible and efficient development of public administration in the years to come.
The chapter is based on the following audits:
Clarity of tax legislation: Amendments of Income Tax Act 2006–2017 (18/2018)
Business subsidies (10/2017)
Budget procedures (15/2015)
Budget authorities: Budgeting, monitoring and reporting (10/2013)
Other articles in this series