Digital taxes in a digital world

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Digital taxes in a digital world

Read on for a holistic overview of the tax digitalisation journey, complete with pithy insights and detailed case studies from across the globe.

The digital revolution is creating massive changes in society, the economy and government. Forces such as the internet, social media, big data and automation are altering the landscape. Tax systems are an integral part of this picture, but changes to digitalise taxes are advancing haltingly in many jurisdictions. The complex and competing forces that affect tax mean that many countries are struggling to reap the full benefits of modern technology in their tax system.

This timely report from the ICAEW IT Faculty, with input from the Tax Faculty looks at the whole story of digitalisation, from the goals of taxation right down to the specific tools used to administer it. It considers the needs and desires of different stakeholders in the tax system and how each affects the way that digitalisation will be carried out. It reviews what good looks like for each. The paper also discusses how to transition from current methods to the new digital world.

A selection of countries and their tax systems were reviewed, building a guide to the key goals, methods, and influences on the process of digitalisation. From a wide-ranging literature review and interviews with practitioners in several key case study countries, several key patterns are identified.

This paper draws heavily on interviews with ICAEW members and other tax specialists in a variety of countries around the world, comparing and contrasting the tax digitalisation journey in each with the unique circumstances of that country. The interviewees come from business, practice, and tax authorities from all corners of the globe and from all sides of the debate on best digital tax practice.

Key lessons

  • Pre-population of returns can provide substantial benefits, but requires extensive collaboration with third parties and will change the nature of the agent / authority / taxpayer relationship.
  • Simplicity drives success: the older and more complex a tax system is, the harder it will be to create an understandable and reliable digital equivalent.
  • Digital exclusion must not be ignored or underestimated; those that cannot or will not use digital methods must be properly considered and catered for.
  • There are key factors which make different tax systems variously harder or easier to digitalise. For example, pre-existing universal filing, or high levels of tax morale, or a pressing need to crack down on the grey economy can all work in favour of digitalisation.
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