Finnish Tax Administration by Davide Comuzzi

Davide Comuzzi Lap Duong Marko Pelgonen Yufang Shao Prof. Katariina Kemppainen Prof. Johanna Bragge Prof. Esko Penttinen Prof.Christa Uusi-Rauva

Tax Learning Center How the Finnish Tax Administration digitalises public services EXECUTIVE SUMMARY For over four months, we have worked as one team embarking on a journey of change: change for the client and change for ourselves. We have hacked through discussions, arguments, meetings, interviews, surveys, supports, etc. – and we are proud to present our final suggestion for a more digitally disruptive Finnish Tax Administration.

We bring forward the Tax Learning Center, which is a human-centric approach to increase the usage of digital services with high customer satisfaction. This solution combines our understanding and the collective wishes of how public service could and should operate: it surrounds people and it is complete by people. Therefore Tax Learning Center takes the importance of the service oﬃcers and the citizen equally. Initiatives to make and manage changes are clarified throughout this report. In between the challenge to improve the digital services for the client, we ask ourselves: What makes a winner in the digitization race? With consideration of macroeconomic environment, we include a roadmap for continuous improvement at the Tax Administration.

No story is ever only about the ending, and we value the development we have gained through this challenge. We have had confusion and argument, yet we have had guidance and assistance along the way. We have learnt not only the operation of Finnish Tax Administration but also how to work in a team and how to share knowledge and thoughts in respect to each other. We have made friends, we have had fun and we have reached an outcome.

1. BACKGROUND INFORMATION According to our research and our finding, we develop a concept which drives a cultural change for a radical solution to our problem. Our client, the Finnish Tax Administration – Verohallinto – challenged our team to bring innovation into increasing the usage of their digital services.

The Finnish Tax Agency wants to be more eﬃcient and wants to drive up the usage of digital tools, such as online services for taxes. Self-service platforms and digital service channels are central to their operations, and also important to their customers. We were asked to increase the percentage of the customer which are using the digital channels because right now only the 50% of them are using them regularly.

Researching about the customer experience of the tax office’s clients (observing, shadowing and interviewing), we encounter many complains about the digital services, mainly regarding the user interface of the website. Even if a great graphic can make the difference in the success of an online platform, we believed there were deeper reasons why the people were not using the online services. We discovered a feeling, common to the most of the people who were refusing to use these services: the fear of failing. This bad sensation is currently pushing away a lot of people from the online platform, obliging them to spend hours and hours in the tax office even if their need is only to complete the Tax Card at the beginning of the year.

The hackathon days were spent understanding how to properly address this challenge, which we reframed in “How might we provide a service which helps the tax oﬃce’s customers to fulfil their needs online, alone and without the fear of committing any mistakes?”. Thanks to the support of the designers from Fjord, the tutors and the coaches from Vero, during these 3 days, we were able to think out of the box, designing a radical solution which challenge the current cultural people’s assumptions on the Finnish Tax Oﬃce.

We believe an active attitude towards a learning experience can better impact the people’s approach to the “tax process thing” which right now is considered unknown, complex and insidious (ref. Research Paper). We based our concept on the assumption that if the people who needs the tax office’s service can learn – guided by an authoritative officer from the Tax Office – how to understand and correctly use the online services, in the future he/she will not require assistance anymore and will be able to accomplish his/her needs alone and in complete security.

Nowadays the process appears to be completely different, almost the opposite: the people visit the tax office without knowing anything about their tax request and leave the office with the same lack of knowledges. So the same people who are at the office this year will

come the next one and the percentage of the people using the online service will not increase. With our solution we aim exactly at the 50% who is not using the online services, we provide them the tools, the support and everything is necessary to learn how to become free from the tax oďŹ&#x192;ce and how to be able to accomplish their need alone at home and most important in a positive mood.â&#x20AC;Š

2. CONCEPT Abstract Once upon a time, there was a wise man said “If you give a man a tax card, he will come back next year. If you teach him how to do it online he will do it at home next time.” Our team’s solution for Tax Administration Office is not some fancy high technologies but simply changing the mindset of people: to teach is better than to give. The overall concept is very straight forward. We are going to turn the tax office right now into a tax learning center. When the customers come to the tax office, they can learn how to do all kinds of tax service online so that they don’t have to come back year after year. Our goal is to increase the percentage of online customers from 50% now to 80% in five years. Meanwhile, we change people’s impression on Tax Office from bureaucratic into fashionable and educational. The new tax learning center will be a combination of three areas: waiting area, new office, and remain counter.

Waiting Area Have you wondering how much time does each customer going to the Tax Oﬃce waits for their turn? In the rush time such as January or May, there are more than 200 people waiting at the same time. On average, it cost each person about one to two hours waiting time. We are going to turn this waiting time into Tax Oﬃce asset. The way to do it is to recreate the waiting area.

Picture it: you walk into the Tax Office and take your number as you usually do. There are about 198 people ahead of you. Sigh deeply for the misfortune, but you decide to find a place to sit and play with your cell phone. At this moment, you got attracted to three big TV screen on the wall of the waiting area. The first one is showing the data of how much money the Tax Office collected last year, on which project the tax has been used, and what basic tax knowledge you can use in your daily life. You can see the road which is renovated next to your grandmother’s house. You can see the hospital that your friend just gave birth to her baby girl. You can see the answer for your question in the morning before you came to the Tax Office. The second screen shows who is working in the Tax Office today and some fun facts about them. You will get to know the people who serve you later. This will make the Tax Office with more personal touch instead of cold bureaucracy. You can find out the instruction of what you are going to do in the new office area and what information do you need to bring with you on the third screen. This 4

will increase the eﬃciency when customer is doing their tax service online. Soon your number is one the screen and you don’t even notice how the time flies when you are learning the tax knowledge and history.

Teaching Room There are 12 sofas in the new office area. Each sofa will attach with an iPad. There is only one function which can be used on the iPad: vero.fi. Customers of the Tax Office will be seated in these sofas. They will try to do the tax service online by themselves first filling all the information they know. When problems occur during customers do tax service online for example they don’t know what to fill in some columns, they can push a HELP button on the iPad. The staff working here will come and guide the customers to solve the problem but not give the answers simply. This involves with our team’s core idea: to teach is better than to give.

Traditional Counter According to our team’s interview with the staff of Tax Office, there are certain tax service has to be done by physical appearance such as international tax to verify the person. Or there will always be foreigners newly arrived in Finland. These group of customers will require the traditional counter service in person. Based on the material of this case, 50% of the customers of Tax Office do not use online service. According to the staff, there are two third of customers are foreigners. We assume that half of these foreign customers will turn to use online service but the rest will always need traditional counter service. This will be up to 16.7% of total customers group. To satisfy these customers need but not to jeopardize the trend of encouraging customers to use online service, we will remain a small amount of tradition counters for these purposes.

3. IMPLEMENTATION There are four main areas that we are focusing in our implementation plan / roadmap and these are: change management, renovation of new oﬃces, re-allocating the workforce and opening the new Tax Learning Centers (TLC). The implementation plan and schedule are presented in the picture 1.

Since the way of working in the TLC will be very different from the previous work at the tax offices, change management is one of our biggest concerns. All people react to change in a different way, some might think it is necessary and a good thing, while some might feel more doubtful or even hostile towards the change. This kind of concern have to be properly addressed already from the beginning.

Change management starts already from the beginning (summer 2016) of our implementation plan and continues throughout the whole process of changing the old tax offices to TLCs. We need to prepare the office workers of Tax Administration for the new way of thinking and working, but we also need to measure and evaluate how the change is developing. Workers should be able to express their worries, new ideas or any other opinions that they have, concerning the new workplace. Furthermore, we also need to know what the customers think about the new offices and what kind of concerns or development ideas they have. Because change management is such a big part of the implementation of our idea, it is described more broadly later.

Our plan is to renovate the five most frequently visited offices in Finland. The cities that these offices are located in are Helsinki, Tampere, Turku, Oulu and Jyväskylä. We would do this by renovating the existing offices to TLCs and rent temporary office space for the time it takes to do the renovations. However, if the existing offices don’t meet the criteria for TLC, for example not enough office space or the layout doesn’t meet with the criteria (we want to create open and inviting TLCs), then new office space has to be found and the old office is just given away for another use (i.e. the rent agreement will not be continued). We have a real life example of this, since Finnish Tax Administration is designing a new office to replace the old Kaisaniemi office and the old office space will not be used by Finnish Tax Administration anymore.

Timing is an important issue, when considering making these changes and moving to new TLCs. We would start renovating the old offices (or renovating the new office spaces if the old offices are not good enough for TLCs) in the summer of 2017, when the amount of customers in the tax offices are the lowest. If the old offices are renovated and they meet the criteria for TLC, the workforce that are going to work in the TLC, will have to be reallocated to temporary offices during the summer 2017 and after the renovations are done, the workers will start their work in the autumn (August-September) of 2017.

4. CHANGE MANAGEMENT Why do we need change management? Because no innovation ever starts from standing still. Because eﬃciency is valuable for all organizations, even more for public sector – the backbone for the macroeconomic development.

Can governmental organizations change? Can Finnish public sector change? Can Finnish Tax Administration (FTA) change? Yes. Nothing is impossible.

How? Information management and ICT have been advocated to support the eﬃciency of public sector (Valtiovarainministeriö, 2016).

This session deals with how we vision organizational development at FTA, and what are the stepping stones we plan and tailor for FTA’s change management in combination with the solution of Tax Learning Center. We start with the anticipated changes at the organizational architecture: how Tax Learning Center will shake the structure of decision making and communication channels, and most particularly the functional unit-structure. Impacts and challenges of these changes are considered together with the solutions proposed in the next part of the session.

There is no better defense mechanism against obsolescence than being prepared for challenge. (Carnevale, 2009). FTA’s vision for the future totally fits into the digitalization trends, we just need to work harder and move faster to that direction.

Change Is Necessary Customers are demanding, more so with the public services, and much more with Tax Administration. If people are to part with their money, they need to understand why tax is collected, how their income are charged, where the tax money go – they need to understand and trust. The provision of information and services to customers utilizing digital devices and integrated platform is the external change. Previous session on the Tax Learning Center concept illustrates this change. Improve in client’s willingness to use the eservice and transparency are not the only change FTA could gain from going digital. FTA could change the way Finnish public services serve the customers: transforming to digital platforms with an understanding of how each personal customer needs the service to be.

But, who better understands a person than another person? To execute the Tax Learning Center plan, we need the human capital from FTA. For the Tax Learning Center project to meet its goals, FTA need to bring themselves digitally. The internal change management concerns with how FTA (i) turns their entire workforces to e-service expert, (ii) provide the enablers for employees to embrace changes, and (iii) overcomes resistance. Not everybody is equipped with technical and digital devices knowhow. Also not everybody is born a customer service expert. Tax Learning Center would aﬀect first and foremost the Individual

Taxation Unit. We will elaborate our suggestions to FTA to manage the internal change successfully.

Necessary Change is Doable We would like to emphasize that change initiatives should be pushed actively and overseen carefully by the management. For an organization to be disruptive and innovative, the employees should understand the vision and support that vision. That said, change leaders and the human capital should reach consensus in building value and developing commitment for the set target. We provides several suggestions for change management from top-down to bottom-up.

• Ensure needs

Change leaders must verify the need for change and persuade the employees (in addition to external stakeholders) that the change is necessary. Crafting a compelling vision is a determining factor in ensuring that change is vital to the development of the organization.

Through our interviews with several Tax oﬃcers at the service point, we understand that FTA has been communicate the need for turning entirely, or more focused digitally, to the employees. A common knowledge that going digital is the way FTA could improve and grow is the initial important step. FTA could, in addition, share the purposes of the digitalization plan: How other units can benefit and will be influenced by digitalizing the services? Are digitalizing all services feasible and necessary?

• Communicate plan and goal

In the same interviews we had with the Tax oﬃcers, we got to know that not all the employees are excited to the change.

“would be fine” … “but unfortunately not so many people would have IT or Swedish and English skills” (M.) “they (the project leaders) forgot that there are always handicapped and old people who cannot use digital devices, or who come here just because they want to talk face-to-face” (no name) “I’d like to do always customer service and I’d like to talk to people face to face, then I feel that I can help people” (L.) “To me it sounds great if we can make tax oﬃcers closer to customers, and I would be the first to volunteer to go digital” … “but they should take into account that working at the tax oﬃce is very demanding for certain people, how would going digital helps with the stress of communicating with customers?” (P.)

To our best understanding, a comprehensive course of action is essential for implementing change. However the more essential factor is not selling these courses of actions to the employees, the employees should be engaged from day one into strategic planning. Building empathy from the start make more senses and gains more success that coming up with a strategies and hope that the employees would embrace that change. Surveys or other kinds of ethnographic research within, or if necessary – outside of the organization could prevent FTA from overlooking any possible resistance from inside their workforce.

• Build internal support for change and overcome resistance

As one of the tax officer mentioned, not everybody is equipped with the knowledge and skills needed for the change. Community for exchange knowledge could be one of the actions FTA could take to ensure that everybody is prepared for change initiatives. We think that having employees sharing knowledge and skills – for example ICT, e-service support, and customer service – among themselves not only pushes the progress of change, but also improves organizational bonding. We learnt from our surveys and interviews that public sector employees often work for the service for a long time, sometimes longer than the leaders. The longevity of staff should be utilized by the change leaders in seeking strategic action and building the vision as well. While the Tax learning center needs time to renovate, FTA can start with an internal learning center, connecting the expertise of different units and different employee level.

It is commonsense nature that some parts of the employees will be receptive to the change initiatives, some parts will be resistant. Nurturing the receptivity of the employees is as important as overcoming the resistance. Again, in-depth surveys, interviews and questionnaire could be used to understand the reasons for both receptivity and resistance. In addition, the receptive employees should be included to all the training programs and team building initiatives.

For people that FTA cannot change their mind and attitude with the digitalization process, we think about other functions of the organization and the Tax Learning Center that they could fit into. For example, long-time officers who know by heart the history of FTA could contribute developing the Waiting Area – where facts and figures of the tax office and officers are needed. In addition, collaboration with other public service administrations such as Kela, Police, Maistraatti (Local Register Office) or TE (Employment and Economic Development Office) are vital to synchronize the flow of public information and the improvement of real-time database in all sectors (see Public Service Info).

Finland is very provocative with public-private partnership, and the expertise of tax oﬃcers who do not fit into the digitization process would still be needed in connecting, supporting, and consulting these partnerships. Going digital does not mean that non-digital tasks would be obsolete, and it is much better to both solve the human resource issues while contribute to economic growth.

• Institutionalize change

As mentioned, Individual Tax Unit will be the first and most influenced unit within the FTA regarding the digitalization initiation in general. With our Tax Learning Center solution, we have considered how the influence can be positive.

Our solution implies a radical redesiging of the organizational functions and competencies. We thought that, instead of having the Individual Unit, Corporate Unit, Customs and other departments as now, the functional division could be e-service platform supports and customer service supports – for all taxation purposes. This institutionalization change would require extensive trainings, yet would result in increasing possibility for task rotation among diﬀerent units. Therefore, instead of having IT support as a separate unit, now IT or ICT will be the needed function of all the departments or unit.

• Commitment from top management

We have been pressing the importance of top-down effort in manage change initiatives from the concept to implementation and especially in this change management chapter. The three previous recommendations for change management have, to some extent, linked the effort needed from both top management and employees. This suggestion however emphasizes the crucial role of top management in success. Studies have shown that change leaders very often “ignore, overlook or underestimate” various determinants of successful change management. (Fernandez & Rainey, 2006). To deal with possible deviations, top management provides the umbrella support and push for change initiatives, so in this case, FTA top management should continuously motivate themselves on the importance of digitization. We think that initiatives such as this Accenture Hackathon or other cross-function, cross-disciplinary collaborations are the way for the change leaders to continuously reflect on the change vision, measure the progress as well as consider different possibilities that could pamper the magnitude of change. After all, reflecting and correcting is a way to renew commitment, and to ensure that the commitment to a project does not necessary mean commitment to no changes in that project.

Changing “Change Management” Is Necessary When talking about the magnitude of change, we do not mean only the change inside FTA. Change initiated by the FTA could and should take into account the overall economy environment as well. In one hand, we think that Tax Learning Center could set the bar for public services, in Finland and to the world, on how digitization of services could be human centric and disruptive. In the other hand, digitization of public services should be the starting point to answer the question: What is the next big thing?

All the suggestions that we discuss above would make no contribution in the eﬀort of improving e-service uses by the public if they are not considered seriously and simultaneously. We do not suggest that change management can be done as a linear progression as a step-by-step plan or each action can be carried out by each specific unit. 11

Plan to manage change initiatives should be worked on same level as plan to change. Successful implementation of organizational change often resembles a hybrid of all-level participation and direction from leaders. We think that going digital is the strategy, but going digital also means changing the strategy.

Works Cited Carnevale, D., 2009. Organizational Development in the Public Sector. Westview Press. Fernandez, S. & Rainey, H., 2006. Managing Successful Organizational Change in Public Sector. Public Administration Review, March/April, pp.168-76. Valtiovarainministeriรถ, 2016. Ministry of Finance - Julkisen hallinnon ICT/Public Sector ICT. [Online] Available at: http://vm.fi/julkisen-hallinnon-ict. Retrieved 3.5.2016.