Digital Transformation and Taxation: Challenges and Possibilities

The consequential and regularly developing technology brought by the new era is rapidly changing businesses. Companies are investing in big data, automation, and artificial intelligence solutions to improve their business capacities. The pandemic has also pushed companies to accelerate the existing digitalization plans to have data and processes continuously available and operable securely to ensure the progression of the business.

The impact of the coronavirus pandemic on business and customers was unexpected and immediate. Virtually overnight, businesses had to limit or shut down in-person encounters and the internet became the only way to engage colleagues and customers. Ecommerce saved numerous businesses during that difficult time, and many businesses and consumers will continue to depend on it even after the pandemic.

As a result, businesses face the possibility of greater examination, more tax audits, and digitization requirements. But these are not the only pressures. Internally, tax functions are frequently challenged by the board to have more efficient operations so they can focus more on presenting insights to senior decision-makers. At the same time, the digital wave confusing whole businesses is now proceeding its way to the tax function.

It suggests the digitization of tax functions. Companies are comprising tax technology, partly to comply with new electronic reporting requirements but more importantly to influence computerization and make their tax functions operate more precisely and efficiently.

There are different tax operating models, which can range from maintaining all activities in-house supported by technology to outsourcing some, or all, activities to third parties. Co-sourcing and outsourcing are ways to access innovative technology solutions, expertise, and capacity immediately and at lower costs. Some critical policy objectives at this point are:

  • Broadening the tax base. Such as: requiring e-commerce platforms of VAT, analyzing past tax filings, and supporting the collection of property taxes by matching the land registry with the taxpayer file.
  • Enhancing transparency and trust. Establishing electronic platforms for tax registration, filing, payment, and dispute resolution makes processes clear for citizens.
  • Reducing the compliance burden. 
  • Improving administrative efficiency. 
  • Advancing extension and other policy objectives.

Although Tax leaders are often confronted by the high price of digital transformation, the gap in expertise and capacity, in most cases, it has become evident that the current ways of working will no longer suffice.