Tax authorities can quickly evaluate such payments, and they frequently leave a digital trail that may get scrutinized.
Fremont, CA: Paying taxes is amongst the most complex and time-consuming engagements with the government for residents worldwide. Enhancing tax compliance and collecting adequate money has become a priority for many governments to support public goods and services.
As a result, tax administrations are undergoing digital transformation and system automation. Technology adoption may aid in implementing effective and long-term tax changes, as well as the correct taxation of the digital economy and the reduction of compliance barriers. The COVID-19 epidemic, which resulted in a surge in the usage of digital commerce, made this shift even more critical for tax authorities.
Over the last decade, the shift has accelerated as the value of digital technology has decreased and sophisticated tools for developing apps have grown more user-friendly. One example of cost reduction is cloud storage, which is currently almost 50percent less expensive than a few years previously.
The emergence of big data is a key driver in the move since it allows for quick cross-checking of data, which improves taxpayer compliance. Between 2020 and 2024, the volume of data generated by mobile payment providers, electronic cash registers, online marketplaces, and other digital sources gets predicted to nearly treble.
The fast expansion of e-commerce, expected to rise by 24percent from 2020 to 2025, is also driving digital transformation, making it an increasingly essential element of the tax base. The growth of cashless payments via smartphones and tablets also fuels the change. Tax authorities can quickly evaluate such charges, and they frequently leave a digital trail that may get scrutinized.
Digitalization makes the authorities' lives simpler because it reduces administrative burdens, allowing them to focus on higher-value operations. It does, however, allow authorities to streamline processes and lower the cost of compliance for taxpayers.
Despite all of the advantages, this change faces significant obstacles. According to research, the majority of digital transformation attempts fail. The digitization of tax systems requires a wide coalition of parties to implement the legislation needed modifications and provide the necessary funds to achieve the intended outcome.
The move should also emphasize delivering value to taxpayers by streamlining procedures and permanently integrating them into the e-filing, e-payment, and e-document ecosystem. Reduced compliance costs, better tax certainty, and increased compliance might add value.
Finally, tax administrations must design scalable and interoperable technologies that can be utilized across departments, both in the office and in the field.
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