GERMANY: Consolidating tax management systems, the KONSENS mega project
As a rule, responsibilities for assessing and collecting tax lie with Germany’s federal states. A share of the revenues from income tax and turnover tax goes to the federal government. For this reason, we study the IT processes used by the federal states’ tax authorities.
Since 2007, all tax processes have been incorporated into the KONSENS project (German abbreviation that stands for coordinated new software development of tax authorities; visit https://www.steuer-it-konsens.de ). The federal government and all 16 federal states have taken a joint effort to develop, implement and maintain a uniform tax management solution. This uniform successor system will replace the diverse IT systems used across the federal states. A total of more than 900 software products are to be developed to help enhance managing annual tax revenue of more than €600 billion across government levels.
Even 14 years after project inception of KONSENS and with almost €2 billion of budget funds spent so far, the goal of a uniform IT system for tax authorities is far from being achieved. This is down to outdated project structures and cumbersome decision-making processes which – the term says it all – build upon the “consensus” among all the parties involved.
We have conducted audit work on the KONSENS mega project for a number of years. We made recommendations on project organisation, risk management, key sub-projects and the software use in all 16 federal states.
Right from the start, we urged for disciplined project planning with the federal government taking a more active role. Our recommendations have clearly made a difference. Parliament even adopted new legislation governing the mega project. The KONSENS Act took effect in early 2019. The KONSENS Act is the first of its kind in Germany and provides binding guidance on project governance in a digital environment. The law lays down the details of traditional IT governance processes – from requirements to release management. This move ensures that for the first time ever, in fiscal administration, IT governance rules have the force of law.
What is the impact of the KONSENS Act?
It is yet too early for a final conclusion. It may be seen positively that the unanimity principle no longer applies. Still, software requirements often need to be modified to reflect frequent amendments of tax legislation. Since IT expert markets are characterised by high competition, IT job vacancies are difficult to fill.
We currently place audit focus on project controlling and concurrent evaluation of target achievement. This is done on the basis of applicable law imposing on the finance ministry the duty to report to parliament at annual intervals on the current status and progress of the KONSENS project. We often use this opportunity to report to parliament on current shortcomings and make recommendations to policy makers on how to enhance the project.
When will tax systems be fully consolidated?
Currently, the finance ministry expects the development of central software products to be concluded in 2029. It remains to be seen when exactly the software is set to be rolled out to the all staff work stations at hundreds of tax offices nation-wide.
Until this time (and beyond), we will continue to conduct audit work on the progress of the KONSENS mega project.