Tax administration technology can potentially recover lost tax revenue, improve taxpayer morale and restore trust in the system by addressing gaps and identifying shadow economy players.
Change is already happening
What has been described above is not an imaginary future state. It is already taking place. The digital revolution, particularly with the Internet of Things, is already transforming tax administrations around the world.
In Russia, data from many checkout terminals feed directly into the country’s federal tax service. The Russian tax authorities have a comprehensive view of the entire Russian economy. With minimal human involvement, their system tracks and matches transaction data from buyers and sellers across the country, and receives the receipts of every transaction in Russia within 90 seconds.
Russia is just one example, and perhaps the most advanced. Many other jurisdictions like Mexico, India and Brazil have also gone digital. These countries have all introduced some form of digital tax administration, such as e-invoicing, which results in transactional data being sent to the tax authorities almost in real time. Such is the future of tax administration — digital, in real time and with probably no need for the submission of tax returns.
Summary
Tax authorities have the chance to rethink and redesign tax administration systems to help fund stimulus measures during the COVID-19 pandemic. By increasingly embedding compliance by design outcomes and leveraging digital tax administration systems that help address gaps and identify shadow economy players, they can potentially recover lost tax revenue, improve taxpayer morale and restore trust in the system.