Why Tax Administrations Are Embracing Digital Transformation?

Why Tax Administrations Are Embracing Digital Transformation? – FinanceTillEnd

Why Tax Administrations Are Embracing Digital Transformation?

Taxes are one of the most difficult things. Governments need to pay for things like schools and hospitals because people can’t get them if they don’t have money.

Tax compliance is when people do what they’re supposed to and pay their taxes. That’s important because we need public services, like schools and hospitals, which we can’t get without tax revenue.

Tax administrations are making changes to their systems because of the need for successful and sustainable tax reforms, the need to make sure that taxes are paid on digital commerce, and because of COVID-19.

The transformation has changed over the past 10 years. It’s become more rapid because it’s cheaper to make digital technology. For example, storage is now over 50% cheaper than it was a few years ago.

Big data is important for the shift because it can help people check information. If people check information, then they will be more compliant with paying taxes. Data from different sources will triple by 2024.

Digital transformation is happening because of the rapid growth of e-commerce. This will make it more important to the tax base. The use of cashless payments, like mobile phones and other devices, also makes it easier to review them by tax administrations.

Digitalization makes it easier for authorities because they have less work to do. This means that they have more time to think about better things and we get less paperwork. Digitalization has helped people in South Korea reduce compliance costs by 19%.

A Real-Time, More User-Friendly Future

With these changes, taxation will be different in the future.

  • Instead of storing tax information, governments will have access to a secure ledger. This will make it easier to capture the information and keep it safe. Governments would not be able to see the data anymore if they wanted to do that.
  • Tax administrations will make the process easier by connecting accounting systems with the tax administration.
  • The government can store more data about the economy. Then they have a good view of what is happening with the economy. This will give them a better idea on what to do, so they can make new policies.
  • The tax administration is going to get help from artificial intelligence. But this will need to be monitored closely because the system might make mistakes.
  • The tax system could be easier to use. People might get prefilled tax returns, and can see their information. Banks can share data with the government, which makes it easier for people to get credit. And researchers can see your tax file if you want them to.

Making Change Work

There are good things about digital transformation, but there are also bad things. We spent a lot of our money on digital transformation in 2018, including $900 billion that was lost.

To get the results that we want, we need to get a lot of people on board. They will make changes and provide funding. The values are to make things easier for taxpayers. Simplify procedures and have people do it on the computer. They can pay with the computer, too. So there are less costs for them and they will be more sure that they did it right.

The government should change the culture so that they manage data and not processes. They should focus on getting the right data. One government told us that their taxes had 15% errors and 98% of them could be filled out with just bank information.

Finally, tax administrators need to develop systems that are easy to use. They should be able to work in headquarters and in the field too.

The World Bank has helped countries by giving them money and technical help with automation and digitalization in dozens of countries. This helps governments, citizens, and anyone who does taxes in those countries.

Also Read

What Is a Debenture Redemption Reserve (DRR)?

What Is Interest Rate Parity (IRP)?


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