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Digitalisation of tax: international perspectives

Author: Paul Aplin

Published: 05 Feb 2019

On 23 April 1997 I filed the UK’s first electronic self-assessment tax return. That single keystroke ignited an interest in the use of digital technology in tax administration (sufficiently strong for it to be the subject of my CIOT Fellowship thesis). In the 22 years since, e-filing has become the norm in the UK. HMRC has also embraced technology - such as its immensely powerful Connect data analysis tool - to better target enquiries.

Today, as hundreds of thousands of businesses in the UK gear up for Making Tax Digital for VAT, it is worth looking at how other tax administrations around the world are using digital technology. And that is exactly what the ICAEW IT Faculty has done. The second edition of Digitalisation of tax: international perspectives was published last week. David Lyford-Smith, the report’s author, has updated the chapters on Australia, Brazil, Czechia, Estonia, Italy, Russia, and the UK, and added new chapters looking at Canada, China, Nigeria, Singapore and the USA.

The report highlights common challenges as well as identifying very different approaches to the use of technology. One common challenge is the need to address digital exclusion; not everyone has access to equipment, software or adequate connectivity and not everyone has the required appetite or skills to embrace digital. A key trend is the pre-population of data, which turns the traditional process on its head; instead of the tax authority using information it holds to check entries on a taxpayer’s return, it pre-populates the taxpayer’s digital return and asks them to confirm the correctness of the data.

Some in the UK say that MTD will not do anything to capture unrecorded revenue. Other tax authorities have addressed that issue. Brazil for example has a system enabling the tax authority to digitally capture sales at source.

An area that goes beyond e-filing and accurate capture of data is artificial intelligence and here, the work being undertaken by the tax authorities in China is particularly noteworthy.

In my recent travels, I have where possible met with tax authorities to see first-hand what they are doing. In Canberra I spent an afternoon as a guest of the Australian Taxation Office (ATO), with some of their data analytics and AI team – of which I’m proud to say an ICAEW member is part. The way the ATO is using technology to identify cases for intervention is having a significant effect on compliance yields. More recently in Cyprus I discussed digitalisation with the Republic’s Tax Commissioner.

In a blog last month, I looked at the partnerships and connections we have within the international tax community and said that they are more important than ever. The updated report from our IT Faculty reinforces that point. Tax administrations learn from each other; if we are to help drive better, simpler, more efficient tax administration for the benefit of the businesses, individuals and societies we serve, we as chartered accountants must learn from each other too.