DOI https://doi.org/10.

36059/978-966-397-126-1/169-184

CHAPTER 10
TAX ADMINISTRATION: THEORY
AND RETROSPECTIVE ANALYSIS

Melnyk V. M.

INTRODUCTION
Lorenz von Stein has rightfully noted that taxation is a point where
the science of public finance meets the science of public administration.
Along with absolute accuracy of the statement, this also invites the need
to consider, within the tax issue, organizational and management aspects
(besides the traditional fiscal and regulation planes). The latter ones have
been under-researched, though in some historical periods in the
development of financial science they were given certain attention
(in particular, by German representatives of Cameralist school and other
devotees of the idea on the leading role of “financial technique”, “tax
technique” or “tax levying technique”).
However, the available current developments in the tax
administration domain are basically applied and directed at the solution
of urgent problems of efficient taxes and duties levying arrangement.
Some of these problems though have already had some settlement
options in the past, and many of them could be useful today as well (at
least, in a part). Besides, the development history is rich material for
scientific and abstract construction of tax administration methodology.
All of this confirms the need for its study.

10.1. Nature of tax administration

The researches we have carried show that in most cases the start of
active use, by practical experts and politicians, of the term “tax
administration” pre-empted justification of its nature by financial theory.
This caused the situation when every use of this term was another
confirmation of difference in meaning and, at times, the indefiniteness of
sense. However, as the issue was of reference points for specific decisions
that needed clear perception, the problem of defining tax administration
was quite acute. In Ukraine, in particular, this became noticeable at the
brink of the late 90s of the previous century and beginning of this one,
and made the author to, among others, undertake corresponding studies.

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 We have offered our own approach towards tax administration
definition development. We consider that it should be based on the
general term “administration” defined as “administrative activity of
managers and management bodies, performed mainly through orders and
instructions”1. Taking into account the specific nature of tax levying
process arrangement, we have offered the following definition: tax
administration is an administrative activity of public executive bodies
that involves the arrangement of taxation process, is based on public
legislative and regulatory documents and applies socially induced and
accepted rules.2,3,4,5
As we can see from the offered definition, the tax administration is
based on adherence to two types of rules: defined by the state in the
legislative and regulatory documents, and developed by the society in
the form of traditions or habits. The first ones are usually called the same
way – “rules”, the second ones are most often denoted by the term
“habit”. In the science of the economy, they are usually interpreted as
follows: habits (customs) are “rules of behaviour in certain spheres of
economic activity, business life, not reflected in laws, regulatory
documents and agreements, but adhered to in practice”6; a rule is “a
collection of obligations, requirements, established by higher
management segments for lower segments that ensure consistency,
coherence and arrangement of the working process…”7
In the course of their implementation, the rules require the
intentional performance of activities. The habits are vice versa, a result of
people’s adjustment to certain procedures. They are concerned with
psychological and physiological peculiarities of individuals, are
implemented through the periodical repetition of actions by inertia and
1
Mochernyy, S. V. (Ed.) (2000). Ekonomichna entsyklopediia [Economic Encyclopaedia]. (Vol. 1,
p. 25). Kyiv: Academy. (in Ukrainian)
2
Melnik, V. M. (2003). Problemy teorii ta praktyky administruvannia podatkiv v ukraini [Problems of the
theory and practice of tax administration in Ukraine]. Actual problems of the economy, 5, 40–43.
(in Ukrainian)
3
Melnik, V. M. (2006). Opodatkuvannia naukove obgruntuvannia ta orhanizatsiia protsesu [Taxation:
scientific substantiation and process organization]. Kyiv: Computerpress. (in Ukrainian)
4
Melnik, V. M. (2008). Do pytannia formuvannia teoretychnykh zasad administruvannia podatkiv [The
question of the formation of the theoretical principles of tax administration]. Finance of Ukraine, 9, 3–9.
(in Ukrainian)
5
Ivanova, Yu. B., & Mayburova, I. A. (Ed.). (2010). Podatkova Polityka Teoriia Metodolohiia
Instrumentarii [Podatkova policy: theory, methodology, tools]. Kharkiv: VD "INZHEK". (in Ukrainian)
6
Mochernyy, S. V. (Ed.) (2000). Ekonomichna entsyklopediia [Economic Encyclopaedia]. Vol. 1, p. 594.
Kyiv: Academy. (in Ukrainian)
7
Mochernyy, S. V. (Ed.) (2000). Ekonomichna entsyklopediia [Economic Encyclopaedia]. Vol. 3, p. 27.
Kyiv: Academy. (in Ukrainian)

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define, to some extent, the behaviour of the members of society, being
reflected in their decisions. With the course of time, they are transformed
into national customs, cultural and historical traditions of the nation.
Taking the latter into account in taxation is extremely important as the
efficiency of applying fiscal mechanisms is very much dependent on the
reaction of society, psychological perception of novelties by the payers.
Along with the mentioned, we cannot omit the fact that separate
habits of individuals may be unjustified both in terms of optimal
economic behaviour in certain economic conditions and in terms of the
interests of society in general and the state as its political organization.
Under their influence, the unjustified, inappropriate, and irrational
decisions are made. (At this, the provided assessments may be
considered from the viewpoint of any of mentioned agents – other
individuals, state, etc.). In cases like this, the habits get into an argument
with rules. The major task of the rules becomes to correct behaviour of
subjects, to overcome habits. In the tax administration, such corrections
are especially topical as regards the habits to reserve what belongs to
someone as a private property as these habits become decisions and
activities on avoiding taxation, etc.
On the total, the habits and the rules are most important, basic
sources of decisions in tax administration. They serve a basis for
coordinating the activity of all the subjects in taxation relations and
regulating all the concerned processes.
The practical fulfilment of decisions in tax administration requires
the availability of adequate management tools and technologies of their
use. The humankind developed all the relevant tools in the course of
solving taxation optimization and rationalizing issues. Having the range
of objectives in taxation, they have developed a system of measures for
their achievement (on the basis of the available habits and developed
rules). In the process of historical development, these measures were
somehow rationalized for maximum neutralizing of subjective
components. Depending on the technological specifics of applying the
mentioned measures, the corresponding tax administration procedures
have formed and management activity directions were defined. The main
of them are as follows: accounting activities (taxpayer register and tax
accounting); mass awareness-raising and consulting activities;
prognostic and analytic activities; control and audit activities.
The mentioned management activity directions consequently provide
for use of accounting, social, analytical, and control technologies.

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 Besides, tax administration should include the strategy and tactics of
levying process management. The management tactics are aimed at the
attainment of basic tax objectives within the specific social and
economic, political, and legislative framework. In the course of operating
activity of the state executive bodies, responsible for tax levying, the
issues of assuring adherence to the acting rules, administrative spending
optimization, the rational arrangement of mutual relations with payers,
etc. are resolved. Fiscal services, on the one hand, have to maximize
budget incomings and, on the other, to exclude, to the maximum extent,
direct intrusions into the sphere of economic activity and not to lead, with
their work, to deterioration of business conditions.
In the recent changeable economic and political situation, the role
of developing the tax administration strategy is increased. The changes
of political authority after every election process must not have a serious
influence on efficiency and continuousness of the state fiscal services’
activities. All the political forces, replacing each other in the authorities
of any country were a priori not interested in irregular tax incomings and
subsequent shortages in the funding of state spending. The reason for
this is the fact that this has a significant impact on their reputation and
terms in office… Therefore, the first task is forming the unchangeable
(depending on the election cycle) administrative apparatus that would
promptly and skilfully fulfil the decisions of any group of political
leaders, elected by the nation. Besides, an important strategic task is a
substantiation of the directions for modernizing fiscal and administrative
technologies pursuant to possible changes of market conditions, the
behaviour of economic subjects – taxpayers, change of orientation of
business operations, etc.
The strategy of tax administration should consider the present
situation in the country’s economy and state political system, as well as
perspectives regarding the development of the national market,
globalization processes, and the emergence of various risks.
Modern tax administration technologies are hard to apply.
Therefore, implementation of specific managerial decisions of strategic
and tactical character requires the availability of specifically skilled
workers, each with sufficient level of financial and economic knowledge,
understanding specifics of establishing relations with people, forming
and directing them in accordance with major taxation objectives and
acting rules. Among the basic qualities of an officer, needed in the sphere
of tax administration, we should single out internal self-sufficiency,

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strive for self-development, the ability for self-control, and ability to
influence the surrounding people and convince them.
A tax officer who, pursuant to his or her official duties, has to
contact (directly or indirectly) with a vast amount of people, has to
continually analyse his or her actions and give them objective account,
recognize characters and moods of the payers and, correspondingly,
select style of communication with them, striving to create the
atmosphere of cooperation, partnership, and interaction.
The interaction itself does not exclude an opportunity for conflicts. If,
at this, we take into account that it is about managing the processes, after
which a part of the property, belonging to a person according to the private
property right, is withdrawn for the sake of redistribution, the probability
of conflicts is increased. The basis of conflicts in tax administration may
arise from the collision of interests, disagreement of thoughts, different
vision of values and ways of their achievement. The first case in taxation
is inevitable. Representing the interests of the state and performing his or
her own duties, the fiscal officer is interested in withdrawing a part of
income. A payer, with an account of natural aspirations regarding
preservation and collection of private property, is apt to the minimization
of such withdrawals. Overcoming of such a conflict is possible only
through the clear application of the established rules of tax administration.
The second and the third cases are more complex and require a
result-oriented approach of both parties. It is important to reach a mutual
understanding of the situation subject matter as soon as possible. The
official should apply maximum efforts for smoothing the conflict and
reaching the compromise. Although the compromise does not always
allow making an optimal decision, a conflict might be made away with
and the atmosphere, acceptable for interaction, might be established.
However, in case of clear non-conformity of the payer’s actions to the
defined rules (mainly peculiar to the third case of conflicts), the public
representative has to occupy the position of counteraction, oriented
exclusively on the acceptance of one point of view.
Therefore, the role of the human factor in tax administration is one
of the leading ones. In the perfect situation, its realization allows
reaching fairness in taxation, robustly ensuring the levying management
process. However, close personal contacts with payers may also generate
negative consequences, noted yet in the late 19th century by the classics
of financial science, who recommended minimizing personal meetings
with tax inspectors and, thus, decreasing the risks of corruption. But in

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this case, we should stress that obviously direct contacts were meant. In
modern times, there exist obvious opportunities for their replacement
with indirect ones (with the mediation of technical means). Therefore, it
is important to find the optimal correlation of these two contact types for
the arrangement of efficient interaction with payers, as well as spheres
and volumes of their implementation.
All sorts of strategic and tactical managerial decisions and actions
are directed to specific conscious need of a person or society. In the tax
administration, they are oriented at solving issues, important for society,
achieving desired taxation results, overcoming irrelevance between the
desired and actual situation in taxation. Implementation of the above-
mentioned provides for the need in an organizational system what is an
inevitable attribute of managerial activity. Its major task is the
coordination of actions of separate people regarding the solution of the
said problems.
The structure of tax administration organization system in every
country was actually formed pursuant to social and political, economic,
as well as organizational and technical conditions. It is represented by
the public services with fiscal functions. There might be several of them
(in Ukraine, these are: state taxation service and state custom service).
Each of these services might be viewed as an independent organizational
system of lower level as they have all the features, necessary for this: are
clearly problem-oriented, have management centres, as well as a certain
hierarchical structure.
However, it is already clear that in the countries with several
services, instead of one, engaged in tax administration, there must be a
unified centre for their coordination. Of course, the Cabinet of Ministers
may be considered this sort of centre. Though, it is not clearly problem-
oriented with a specific focus solely on taxation. Therefore, this sort of
centre is, as a rule, the Ministry of Finance. An equally important in the
conditions of multiple tax administration services is an issue of the
optimal distribution of functions between them and their subdivisions in
order not to allow, on the one hand, responsibility of different sectors for
fulfilment of one function and, on the other hand – loss of function in the
list of obligations. However, the mentioned, in its turn, brings an issue of
arranging interaction of services for the sake of informational exchange
and assuring the performance of functions, laid upon them.
Therefore, the tax administration organization system, being formed
individually in every country under the influence of specific conditions

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and subjective decisions, continually requires rationalization of its
structures on the basis of scientific substantiation and further account of
regularities and general principles of tax levying process management.

10.2. Retrospective Analysis of Tax Administration

The results of the retrospective analysis show that the arrangement
of the taxation process and its management depend on the degree of the
state’s development. Actually, the latter has also defined methods of
public functions (demesnial, regalia, tax) funding. In the Middle Ages,
they mainly used the pre-bate form of tax levying. At those times, taxes
were considered extraordinary proceeds. In the need of money, a
monarch addressed classes and communities that (in case of consent)
divided the needed amount between themselves. The methods of
dividing were arbitrary. “The great vassals collected the needed amount
from their people according to their possessions, or, bluntly counted by
the head”8. This sort of taxation did not require any special methods of
control, but for brute force. Thus, one could not speak of any tax
administration methods.
However, at the same time, the different sorts of charges started to
be levied (court charges, for various state services, for toll roads, for use
of bridges, etc.). Some feudal lords started building bridges in the open
plains, making the merchants pay charges. At this, by no means all of the
paid amounts reached the royal treasury, staying in the ownership of
feudal lords. Due to these artificial obstacles to the development of trade
and pocketing of the king’s money, the state had to interfere. Though at
those times, it was weak and underdeveloped and this did not allow for
strictly regulated management of tax levying processes and efficient
control of local policymakers. They only thing the state managed to do
was to find methods for attracting to treasury more of the collected
money. This was the objective, with which they introduced the sale of
political offices, concerned with levying of charges. The first experience
of this sort was demonstrated by France in the 14th century. The
authorities sold an office, receiving the necessary amount for their budget
and a purchaser was given a right to levy charges for his own benefit.
There were quite a lot of such offices, especially in the court system. The
relevant practice had a range of negative consequences. For instance,

8
Ozerov, I. Kh. (1917). Osnovy finansovoy nauki [Fundamentals of Financial Science]. Issue 1. Moskva:
Printing house Association of I.D. Sytina. (in Russian)

175
“judges, in an attempt to return monies they have spent for purchase of
office, dragged the trial out”9, etc. Somehow modified French experience
was introduced by the Polish-Lithuanian Commonwealth, including
Poland, Ukraine, and Lithuania. They provided the title for a collection
of taxes for lease10. Lease takers were increasing due amounts (if
compared to those, demanded by the king) for their own benefit.
While levying the taxes from city residents, the principle of
collective responsibility was applied. It consisted of the following: the
city community was imposed with an obligation to pay the established
per annum amount of taxes. The state did not bother with control over
every payer – the responsibility for payment of the total amount was
borne by the community. The issue of dividing the amount by individual
payers was also considered its own business. Professor I. Ozierov called
this practice “the most absolute type of state’s withdrawal from
levying”11. In the case of big debts, the authorities could apply force and
even destroy the entire settlement as a punishment for the community.
Who was responsible for debts was often the issue of no importance.
The state simply had no resources to find this out. “The collective
responsibility with the low financial technique was thriving”12.
Over time, the taxes became regular proceeds of the state.
A significant differentiation of income sources, caused by rapid
economic development, led to the emergence of new taxation methods.
Their multitude and complexity already require a special tax levying
method. To use it, there arises a need to establish the entire apparatus of
fiscal bodies. The first to develop was a special methodology of land
taxation that provided for measuring, self-assessment of the parcel,
declaration of property, and keeping of cadastre. With the course of time,
the problem of dishonest declaration generated a need to develop unified
regulations for assessment of immovable property with a division of
lands by the classes. In the taxation evolution, the land cadastre was
developed from a simple representation of geometric data on the parcels
to carrying the assessment of their earning power for the classification

9
Ozerov, I. Kh. (1917). Osnovy finansovoy nauki [Fundamentals of Financial Science]. Issue 1. Moskva:
Printing house Association of I.D. Sytina. (in Russian)
10
Nechai, N. V. (2002). Narysy z istorii opodatkuvannia [Essays on the history of taxation]. Kyiv:
Bulletin of the Tax Service of Ukraine. (in Ukrainian)
11
Ozerov, I. Kh. (1920). Osnovy finansovoy nauki [Fundamentals of Financial Science]. Issue 2.
Moskva: Printing house Association of I.D. Sytina. (in Russian)
12
Ozerov, I. Kh. (1917). Osnovy finansovoy nauki [Fundamentals of Financial Science]. Issue 1.
Moskva: Printing house Association of I.D. Sytina. (in Russian)

176
purposes. The latter provided for defining the gross income according to
different methodologies. Thus, in Prussia, they carried calculation with
an account of proceeds for 24 years (before the compilation of cadastre in
19th c.), in Württemberg and France – for 15 years, in Austria – for the
least expensive year out of last fifty13. The industrial taxation, taxation of
houses, monetary capitals and movables were first performed with the
similar methodology: levying according to external features of the
objects (fields, trade, merchants’ belonging to guilds, etc.). The reason
for this was rather an absence of other methodology as in the period
under analysis, the financial science fixed the taxation practice rather
than created novel re-distribution mechanisms. However, some authors
state that the reason for this situation was adherence to the “financial
technique saving principle”14.
Since the 19th century, the tax levying according to external features
has transformed into taxation according to income level. Capitation,
industrial taxes are replaced with income ones. The earning power is
considered while imposing taxes on capitals, buildings, etc. The states
had to change the tax levying strategy due to considerable stratification
of society according to income. In the early 20th c. professor I. Ozierov
used the example of capitation tax for the following conclusion: “With
the low level of economic life, the capitation tax was most appropriate
source of receiving funds as the difference between economic situations
of separate members was not as stark as the present one when some
people are starving and some, like Rockefeller, get 100 million roubles
of net income per annum…”15
In its turn, the income taxation required a change in levying
technology. The new conditions did not allow applying the principle of
collective responsibility and the pre-bate form of levying anymore. The
simple census and count of the population for capitation tax also turned
to be insufficient. The issue of a payer’s individualization is brought to
the agenda. In fact, every citizen and legal entity had to declare their
income. This provided for a need in the development of the unified
methodology of their defining, accounting, and control. The latter
required increasing and enhancing fiscal services.
13
Kulisher, I. M. (1919). Ocherki finansovoy nauki [Sketches of financial science]. Petrograd: Nauka i
Shkola. (in Russian)
14
Ozerov, I. Kh. (1917). Osnovy finansovoy nauki [Fundamentals of Financial Science]. Issue 1.
Moskva: Printing house Association of I.D. Sytina. (in Russian)
15
Ozerov, I. Kh. (1917). Osnovy finansovoy nauki [Fundamentals of Financial Science]. Issue 1.
Moskva: Printing house Association of I.D. Sytina. (in Russian)

177
 The very declaration as a note of property state has been known in
the tax history for quite a long time. However, there was no methodology
for processing and check of declarations. Only external data on the
occupation and field could be checked. “There was no control, but for
person’s own conscience and a holy terror”16. We have to emphasize that
for theopathetic people of those times, this was enough. The nobility
though was paying taxes, governed by the ideas of nobiliary honour.
“Prince-electors, counts and barons, cardinals and prelates were paying…
according to their conscience, pursuant to the handshake (that replaced
oaths) and even the very amount, contributed by them, was infrequently
beyond re-counting – their position had to be factored in and their vanity
had to be spared”17. In the Russian Empire, yet since 1775 (since
Catherine II has introduced the guild tax) even for merchants (who could
not have noble status), there was a provision, according to which the
merchant’s announcement of his capital for attribution to 1st, 2nd or
3rd guild was performed “according to the conscience”, there were no
checks and denunciations were not considered18. However, until the
19th century, the tax imposed for each of the three guilds was the same –
1% from the announced capital. Along with that, attribution to higher
guild guaranteed winning of state orders. This fact, to some extent,
induced merchants to declare bigger amounts. However, upon merchant’s
attribution to the 1st guild (if the capital amounted to more than
10 thousand roubles), the state’s hopes for truthful declarations were
becoming vane.
The legislation of European countries though even in the 19th century
adhered to the principle of careful and delicate attitude to the payer. In
Bayern, Hessen, and Austria, the demand to indicate the amounts of
proceeds from certain sources was prohibited. It was considered that the
payer has to announce only the general amount according to the
conscience. In Prussia and Sachsen, they decided not to use declarations at
all as the latter diminish social and personal freedom. The tax commission
had to, without payer’s assistance, establish his financial situation and,
besides, not to hold studies of the circumstances, burdensome and difficult
for the payer. In the legislation of Switzerland, they did not even mention
16
Kulisher, I. M. (1919). Ocherki finansovoy nauki [Sketches of financial science]. Petrograd: Nauka i
Shkola. (in Russian)
17
Kulisher, I. M. (1919). Ocherki finansovoy nauki [Sketches of financial science]. Petrograd: Nauka i
Shkola. (in Russian)
18
Nechai, N. V. (2002). Narysy z istorii opodatkuvannia [Essays on the history of taxation]. Kyiv:
Bulletin of the Tax Service of Ukraine. (in Ukrainian)

178
possible violations but only a need to additionally pay tax in a case of
discovered fact of “tax amount decrease”19.
However, the new capitalist reality did not correspond to the
patriarchal taxation manners. The ideas of nobiliary honour were either
gradually forgotten or simply unknown to the new property class. The
poor people started imitating their employee leaders forgetting their
former theopathy. Therefore, a change in the psychology of payers,
influenced by vivid development of the new social and political formation,
led to the death of governments’ expectations for manifestations of
patriotism. The incomings to the budget were disappointing. The tax
commissions, in their attempt to increase incomings, started violating laws
by themselves – they were levying the excessive amounts from the
suspected of embezzlement and concealment of income, though their fault
has not been proven. And with this generalized declaration without
indication of different sources of income, there was no opportunity to
check faithfulness of the data. The situation could be remedied only
through the declaration of all types of property and amounts of income (all
together and with a breakdown by separate sources), along with the strict
state control. The first measure for income representation completeness
control was a comparison of the data in payers’ declarations with average
rates of earnings. However, the labour payment of employees considerably
varied and application of average rates led to exceedance (or, vice versa,
shortage) of tax amounts for a significant part of the population. Thus, the
subsequent step was comparing, in the early 20th c., the declared incomes
with the so-called “indirect declarations”, provided by employers
(regarding remunerations, paid to salaried employees). The declarations of
legal entities (regarding industrial or income tax) were compared with the
data in trading books. Though there was no unified methodology for
keeping these books, as well as very obligation to fill them in. Therefore,
they simultaneously applied the methods of check by comparing with
average rates of earnings and with expenses held. However, assessment of
incomings according to expenses caused a lot of complaints as it deformed
the very nature of income taxation. Considerable difficulties, likewise in
our times, were concerned with the check of proceeds from monetary
capitals due to the confidentiality of the banking information. This was the
reason why in the early 20th c. credit and insurance institutions of the
19
Kulisher, I. M. (1919). Ocherki finansovoy nauki [Sketches of financial science]. Petrograd: Nauka i
Shkola. (in Russian)

179
Russian Empire had to inform tax bodies on contributions of payers, on
their current accounts, on storage of securities and commercial operations,
carried with the mediation of banks20. This sort of practice was quite
unconventional for Europe and was not admitted there. Though this fact
caused hot discussions and opposition, the scientists of those years even
recommended making all the declarations of income public, referring to
the experience of the provinces of Canada. This action, to their mind, had
to ensure public control both over the activity of payers and over the
activity of fiscal services21. And the bankers’ discontent with the
requirement to inform on the clients’ operations was seen like this: “The
movable capital uses one principle two-fold, depending on the more
convenient side: on the one hand, it develops public character of property
relations and declares it useful (bureaux of creditworthiness…); and on the
other hand – it rises against it, declaring it almost revolutionary principle,
ready to blow down the entire trade and industry, lose the credit, etc.”22
The tax bodies of separate countries yet in the 19th c. started
imposing fines not only for underpayment but also for failure to submit
(untimely submission) of declarations. This was a reflection of
governments’ endeavour to ensure universality of declaring and payers’
participation in the entire taxation process. This is because while defining
taxes from income, self-taxation is not restricted to declaring the income.
“…This is just a starting point followed by and resulting in further
payer’s participation in taxation process, two-directional participation: on
the one hand, in the establishment of tax institutions, and on the other
hand, in all the stages his own declaration comes through”23.
Taking the above-mentioned into account, the states are faced with
an assignment of the principal renovation of tax bodies. “On the one
hand, there was a need to establish self-governed bodies that are
trustworthy for the payers afraid of their “omniscience” and aware of the
fact that sincerity in this context is never to harm, while deception –
always is. On the other hand, it also required mandatory serious
supervision, on the part of the government, over the entire taxation

20
Kulisher, I. M. (1919). Ocherki finansovoy nauki [Sketches of financial science]. Petrograd: Nauka i
Shkola. (in Russian)
21
Ozerov, I. Kh. (1917). Osnovy finansovoy nauki [Fundamentals of Financial Science]. Issue 1. M. :
Printing house Association of I.D. Sytina. (in Russian)
22
Ozerov, I. Kh. (1917). Osnovy finansovoy nauki [Fundamentals of Financial Science]. Issue 1. M. :
Printing house Association of I.D. Sytina. (in Russian)
23
Kulisher, I. M. (1919). Ocherki finansovoy nauki [Sketches of financial science]. Petrograd: Nauka i
Shkola. (in Russian)

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process, control over the appropriateness of the actions of representative
offices, over the safeguarding of the interests of the treasury”24. We
might state that this task is being continuously solved up until today.
In the course of taxation evolution, along with tax administration
methodology, the tax services were developed. In the times when the
liability to pay taxes was temporary and the taxes did not have a leading
role in the state’s proceeds, they were collected by the military. Actually,
at those times, that was the only power structure that could assist in the
withdrawal of a part of private property for the benefit of the treasury. The
examples of this were the ancient Roman “riders” (commanders that
headed the military groups collecting the taxes from provinces)25, princely
watch groups of Kievan Rus (who personally accompanied the princes
during their ride around the subject tribes for collection of taxes),
Ukrainian Cossack groups (in the Middle Ages, they protected bridges and
passages, as well as levied charge from the merchants), groups of land
rulers in other countries of Europe (the sovereigns headed them in their
ride around the subject areas for collection of taxes). It was only in
medium-level state management that provided for special positions of
people, responsible for the treasury. In the medieval cities of Europe with
the domination of rebate taxation form, the duties of levying taxes at the
local level were laid upon community collectors (for instance, in Ukraine,
Poland, and Lithuania in the times of Polish-Lithuanian Commonwealth,
this was a duty of the village heads). The latter positions were most often
elective and subjected not so much to government, as to community that
was responsible to the government on the terms of collective
responsibility. Most directly subjected to the authorities were only tax
farmers. However, we cannot call them some sort of professional tax
apparatus. They performed their obligations to the state only while paying
for the post. Later on they levied charges and taxes for their own benefit.
But when the taxes obtained regular character, the state first encountered a
need to keep the regular specialized staff of officers on every authority
level. Western Europe was probably the most advanced in the issues of
establishing and reforming tax services. Yet then, the Europeans were
concerned with establishing the relations of trust with the payer.

24
Kulisher, I. M. (1919). Ocherki finansovoy nauki [Sketches of financial science]. Petrograd: Nauka i
Shkola. (in Russian)
25
Nevertheless, the system of fiscal power of Roman Empire was quite diverse and bifurcated. The taxes
collected by the military were protected by state slaves. They also kept accounting. Some of the taxes on the
fiscal territories were collected by civil officers – procurators fiscal.

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I. Kulisher wrote: “Austria and Italy, on the one hand, England – on the
other, all the time stress that fiscalism and fiscal incomings are far from
being identical and that we may provide tax officer with the cruellest
whips and scorpions and this will cause only cease in further increase of
incomes…”26. Due to this, some states started a practice of attracting, for
tax levying, the representatives of population. They established tax
divisions of a mixed type where, beside the officers, the elected
representatives of community were working. They were engaged even to
the check of declarations. Besides, there existed appeal commissions (of
the mixed type as well) for consideration of payers’ complaints, as well as
administrative courts (appeal bodies) that settled the disputes and
interpreted disputable questions of tax legislation. This already meant the
existence of legal supervision over the activity of state bodies, as well as a
system for the protection of payer’s rights. The corresponding structures
were peculiar to German states (Prussia and Sachsen, in particular),
Austria, Hungary, Italy, Netherlands, Scandinavian countries, Switzerland.
A complication of the modern technology of tax administration in
the early 21st century requires a high level of professional education for
the fiscal service officers. Therefore, engagement of broad public to the
fulfilment of at least some functions is problematic. This segment in
today’s structure is replaced with opportunities of influencing fiscal
decisions on the part of non-governmental auditing and public human
rights organizations. What concerns court protection option, it has
acquired development up to creation, in certain western countries, of the
specialized tax courts.

CONCLUSIONS
The above-mentioned material regarding the nature of tax
administration may serve to form the priority directions of scientific and
theoretical search, as well as starting the theoretical base of its
development. The substantiation of fundamental notions, principles,
axioms are major assignments, completion of which will allow bringing
tax administration to a level of separate management theory. Its
peculiarity will consist in close interaction with public finance as a field
of knowledge. The need in such a theory is stipulated by the demands of
taxation practice that continuously provides requests regarding the

26
Kulisher, I. M. (1919). Ocherki finansovoy nauki [Sketches of financial science]. Petrograd: Nauka i
Shkola. (in Russian)

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synthesis of rational approaches, modelling of situations, creation of
efficient tool kit for levying process management, as well as methods of
solving the existing problems.
And the research of historical experience of tax administration
allows making conclusions regarding the similar character of many
problems at different times. The knowledge of them may become an
important factor for avoiding of the recurrent mistakes. This is
particularly an issue with establishing the privileged character of certain
payers in the relations with fiscal bodies (at times the so-called “big
payers”, and at times – the representatives of small business). The history
shows that both excessive trust and excessive suspicion (regarding the
payer) prejudice the interests of the treasury.

SUMMARY
The author views today’s taxation as a complex phenomenon that
requires a wide array of studies with a special sector – issues of tax
administration. He pays attention to the fact that there are currently no
unified and established views of an issue and theoretical framework of
levying process management has been not developed enough. He
considers a definition of tax administration, the issues of correlation and
coexistence of habits and rules in tax administration, management
activity directions in tax administration, strategy and tactics of tax
administration, psychological background and role of the human factor
in tax administration, organization system of tax administration. He
provides results of a retrospective analysis of tax administration
subsystem development. The author notes that development history is
rich material for scientific and abstract construction of tax administration
methodology. On the basis of the latter’s research, he provides
conclusions on the similarity of many problems at different times. The
understanding of their solution options, in the author’s opinion, may
become an important factor in avoiding the recurrent mistakes.

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Information about the author:

Melnyk V. M.
Doctor of Economics, Professor,
Professor at Department of Finance,
Kyiv National Economic University
named after Vadym Hetman, Ukraine

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