Improving the tax compliance rate in the Caribbean by redesigning the enterprise architecture with the application of information technologies

In the Caribbean islands the tax compliance rate is low compared to more western countries. In this master thesis we research how to improve the tax return compliance by designing and redesigning the enterprise architecture for the Caribbean tax authorities with application of information technologies. We answer the question “How do we redesign the tax return process in an enterprise architecture by applying information technologies to improve the tax compliance in the Caribbean areas? ” by using the Design Science Research Methodology (DSRM). Tax compliance is defined in four rules. The first is that the taxpayer needs to report the exact tax base to the tax authorities. Secondly, the taxpayer needs to compute the correct tax liability. The third rule is that the taxpayer needs to file the tax return on time. Finally, the fourth rule is that the taxpayer pays the correct amount of tax due on time. From the range of twenty-four influencing factors of tax compliance that we found in scientific literature we narrowed down to six factors that can be influenced by Information Technologies. These six factors are taxpayers’ perception of audit probability, taxpayers’ knowledge of tax, taxpayers’ perception of the quality of services provided by the Tax Authority, easiness of retrieving tax related information for taxpayers, taxpayers’ perception of fairness, and strength of tax information systems of the Tax Authority. Information Technologies (IT) we define as the development, implementation, and maintenance of computer hardware and software systems to organize and communicate information electronically. Enterprise Architecture (EA) is a coherent whole of principles, methods, and models that are used in the design and realization of an enterprise’s organizational structure, business processes, information systems, and IT infrastructure. By applying literature research, we found improvement opportunities of multiple Information Technologies. Based on conducting semi-structured interviews with experts in the field of taxation we designed and redesigned the enterprise architecture. The application of IT in the design and redesign of the enterprise architecture we evaluated during semi-structured interviews. These IT applications are an overall data-layer, prefilled tax returns, online platform, mobile tax application, risk profiling, tax knowledge engineering, and external data exchange. The results of the research reveal a positive correlation by applying the Information Technologies in the redesign of the enterprise architecture. All proposed Information Technologies show positive relation in tax compliance by applying the IT. Only for a mobile application it was just half of the experts that agreed on the positive effects on tax compliance. In the other applications we find a clear positive relation between the IT and influencing factors on tax compliance. The most relevant Information Technologies we find is the foundation of one uniform data-layer, which is also the basis for other Information Technologies as risk profiling and an online portal. We evaluated the results of our semi-structured interviews by applying recursive abstraction. In our conclusion state that we can improve the tax compliance rate by redesigning the application of the IT applications proposed in our enterprise architectures of the tax return process of the Caribbean. We conclude that using TOGAF in combination with the modelling language ArchiMate enables us to design and redesign this enterprise architecture. In addition, we conclude that the implementation of all IT applications that we include in our redesign will improve tax compliance in the Caribbean. Key words: tax compliance, Information Technologies, Enterprise Architecture.