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How five countries have modernised their tax systems

13 January 2020: it’s time that tax goes online, and the UK has plans to digitalise the tax process from start to finish. How could the experience of other countries pave the way for future UK developments?

Making Tax Digital is the next step in the UK’s plan to digitalise the tax process, but all eyes are on global strategies to bring tax into the digital age. What can we learn from around the world when it comes to the tax process? Here, we look at other countries' tax digitalisation programmes.

Australia: AI assistance and personal access

The Australian government kick-started its Digital by Default programme in 2013. Pre-populated personal tax returns can now be accessed through a programme downloaded to taxpayers’ personal devices and completed and filed from there. The Australian Tax Office uses artificial intelligence (AI) to respond to queries about subjects such as international VAT regulations and has significantly adopted voice recognition technology as a means of identifying taxpayers who call the ATO directly.

Brazil: mandatory e-invoicing

Under its extensive system of mandatory e-invoicing, an electronic form must be created whenever a taxable act takes place, which automatically passes details to the tax authority for approval. All companies must submit transactional accounting information in a prescribed electronic format to the authorities who use the enormous amount of data collected since 2000 to search for errors. In future, it is likely that e-audits will be triggered when things don’t add up.

China: government approved software

All businesses must use government-certified tax software to generate VAT invoices. However, reconciling companies’ own accounting data with what has been reported through the government system demands significant resources and robust change processes. China plans to go even further by announcing its intention to harness blockchain technology for tax reporting.

Estonia: streamlining services

Pre-population of tax returns with relevant third-party information has made huge strides in making tax-filing quicker and easier, not to mention reducing the chances of omissions and errors. The single shared platform, X-Road, effectively unites all government services and links all aspects of citizens’ digital identity together from a single secure log-in.

Poland: a collective format

VAT returns can be submitted using a standard audit file for tax, or SAF-T (an international format for the exchange of accounting data) also used in Portugal, Austria and Norway. It asks taxpayers to provide transactional data in a pre-defined auditable format to tax authorities, either periodically or on the tax authority's request. Poland is planning to replace the VAT return entirely with the SAF-T filing from 2020.

David Lyford-Smith, Technical Manager in ICAEW’s Tech Faculty, commented: “The increased data available to authorities should make their compliance activities more efficient, but it also increases their presence in taxpayers’ lives and the demands put on them. Tax professionals will have to renegotiate their place in the tax ecosystem.”

ICAEW’s report on tax digitalisation analyses drivers for change, obstacles and explains what it means for the tax professional. Read it here.