The amount of data we have at our disposal today is endless. Each day, 2.5 quintillion bytes of data are created. Yet, data alone is useless and insignificant. In recent years, tax administrations all over the world haven’t been immune to this data surge. The last decade has seen vast amounts of tax data being collected by tax administrations through FATCA, exchange of information and other initiatives. In order to serve its purpose, tax administrations need to be able to convert this data into actionable insights, as otherwise it will be meaningless. Relying on human resources alone to process this data is not a solution. Tax administrations need to undergo a digital transformation which will process the data into real-time information which is key to decision making. Digital transformation will also assist taxpayers provide information to tax administrations, particularly those on a self-assessment basis, which will also result in an increased level of tax revenues collected. Data collected from banks, apps, digital assets is also key in assessing taxpayers. As mentioned in a previous article, digital transformation cannot happen in a vacuum but must be aligned to the country’s long term economic vision. A training and education campaign are also a key ingredient in the digital transformation which tax administrations go through. It is useless to implement new digital processes if most taxpayers, and resources within tax administrations, do not know how to make use of them, and how to get the best out of such processes. A detailed and country-wide training and education programme must happen, well before the new digital processes are launched. This will ensure that taxpayers are knowledgeable on how to make use of the new systems and will also give a higher probability of success of the transformation the country would have gone through. As with anything else, the deliverables must be easily measured. It is useless to implement new systems without being able to monitor what this will mean for the country. Is it expected that this will result in higher tax revenue, earlier payments, higher percentage of tax return filed or all the above? The goals must be clear and monitorable. Without a proper digital transformation, countries and tax administrations will not only lag their counterparts but will ultimately fail. Fail in creating economic growth and in being able to attract investors. Every aspect of our lives is now digital, tax administration and compliance cannot be any different. The writer is a co-founding partner of Seed, an internationally focused research-driven advisory firm based out of Malta, Europe. www.seedconsultancy.com
