If the Coronavirus pandemic has taught people anything, it is the value of digital agility. Businesses and governments alike have learnt in recent months that in times of crisis, companies must be able to quickly adapt their operating model. This pressure is especially intense for tax administrations.
As the global recession refocuses attention on revenue strategy, tax administrations find themselves on the front lines of a rapid and intense digital transformation, figuring out how to conduct everyday and emergency business while adhering to mandates to maintain social distance.
Economies with a strong underlying information technology infrastructure are proving to be more resilient than those without this infrastructure. Many economies, particularly those in developing countries, rely on deeply entrenched systems and face an uphill battle in terms of public trust. In fact, many of the world’s poorest countries struggle to collect enough taxes to cover basic government functions. When a global crisis enters the picture, these shaky bonds between taxman and citizen are likely to fray.
To address this, a multinational bank in Singapore has partnered with the Inland Revenue Authority of Singapore (IRAS) to integrate the tax authority’s payment application programming interface (API) with the lender’s digital platform, allowing taxpayers to view and pay their income and property taxes on a single platform.
Following the December launch of Singapore Financial Data Exchange (SGFinDex), the bank enabled customers to consolidate their financial information on a single platform and view their assessable income. Customers can now view their tax balance amounts and make tax payments immediately on the same platform due to the recent integration of a direct payment method through the bank’s platform. The solution alleviates a common inconvenience for taxpayers, who previously had to switch between the IRAS platform and the bank’s platform in order to view their tax details and then make payments.
The bank’s head of consumer financial services, Singapore, says: “With an all-in-one view of tax information and the ability to pay them instantly, customers will obtain a holistic picture of their financial health as they can now take into account their tax expenditure and make their tax payments easily via our digital channels. This overview will help customers work out their budget, income and expenses better.”
The current crisis is an excellent opportunity to rethink revenue strategies in order to make them more digitally driven. Tax administrations must shift their focus away from simply processing taxpayer data and toward proactive improvements in compliance, policies, and efficiency. Modern revenue strategies will, to a large extent, must run on digital platforms as they are necessary to effectively pursuing critical policy objectives such as:
- Broadening the tax base: Data-centric approaches can be used to close gaps and take advantage of missed opportunities without necessarily increasing the level of taxation.
- Enhancing transparency and trust: Establishing electronic platforms for tax registration, filing, payment, and dispute resolution clarifies processes for citizens, ensures that tax payments are deposited in a legitimate government account, and reduces the risk of officials abusing their discretion.
- Reducing the compliance burden: Based on a survey of 190 economies that it is getting easier for people and businesses to pay taxes. There are now 106 economies using electronic filing systems, double the number in 2004. Digital technology is reducing the time spent on paying taxes as well as the total number of individual payments taxpayers must make each year.
- Improving administrative efficiency. As governments mature in their use of information technology, they will be able to achieve substantial efficiency gains. For countries beginning their digital transformation, AI-enabled data capture of paper-based records can speed up the digitalisation and reliability of the data.
- Advancing growth and other policy objectives. Tax administrations, as the central repository of citizen data, are increasingly playing a role in advancing non-tax related goals.
Progress toward these goals has been uneven, and the World Bank cannot lift this “modernisation boulder” to the summit on its own. In this case, companies need partners with multidisciplinary expertise that can help pull as the World Bank pushes to help countries accelerate digital transformation.