Combating corruption in the revenue service: the case of VAT refunds in Bolivia

Combating corruption in the revenue service: the case of VAT refunds in Bolivia

Bolivia's successful anti-corruption strategy in tax administration

This brief summarises how improved inspection control contributed to reducing corruption in Bolivia’s National Tax Service and stemmed the loss of public funds.

Bolivia adopted a process flow approach that appears to be powerful in preventing corruption in tax administration. This approach identifies corruption vulnerabilities, generates measurable indicators and helps design remedial efforts, and it may well be replicated elsewhere.

The paper draws the following conclusions from Bolivia’s experience:

  • reducing the amounts of unwarranted VAT refunds paid to exporters, the institutional reform of the NTS contributes to reducing corruption in this process.
  • an anti-corruption strategy can only be successful within the context of a broader institutional reform of tax administration.
  • the process flow approach appears to be an effective tool in locating the risks and designing measures to prevent corruption in the revenue service.
  • improvements in VAT refunding procedures require the intensive use of information technology, which can reduce the discretion of tax officials and enhance transparency in VAT refund processes.
  • to maximise its effectiveness, an anti-corruption programme must engage all major stakeholders (i.e. the judiciary, the Ministry of Finance and Customs).
  • a sound legal framework, together with institutional arrangements for appointment of senior NTS authorities to prevent capture by political or economic interests, and making civil service more professional may play a role in sustaining the reform. But it may prove insufficient in the absence of political will. Hence, the only element to keep momentum and commitment to reform will be the continual delivery of critical results.
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