Susan Ball
President, Chartered Institute of Taxation (CIOT)
It was less than 23 years ago that the first UK tax return was filed online. We’ve come a long way since then. But the potential of technology to change our tax system still has a long way to go.
The Government’s 10-year strategy paper, published in 2021, highlights their plans: more use of third-party data, more effective pre-population of data and more timely uploading of data.
Tax administration
While Making Tax Digital (MTD) — with its requirement for self-employed businesses and landlords to keep digital records and report their income quarterly — gets most of the attention, the more useful element for taxpayers promises to be the Single Customer Account.
This is the plan where every taxpayer will eventually be able to see and manage all their tax affairs, including all the data HMRC hold on them, through a single digital account, removing the need for annual tax returns.
This project sadly remains well behind schedule; however, if the recent tax app is anything to go by, then if and when the Single Customer Account is realised, it should be a game-changer.
Moreover, HMRC will need to ensure data is accurate and secure and that taxpayers who struggle to access services online are protected. Their delivery of Covid-19 support schemes was impressive, but it also showed up holes in their data.
One benefit of MTD should at least be to give HMRC an up-to-date picture of business trading and profitability levels, so they can deliver schemes like the Self-Employment Income Support Scheme more comprehensively in the future — and with less risk of abuse.
One under-explored area is the impact
technology will have on what and how we tax.
Tax compliance
Technology is a big part of HMRC’s plans to reduce the ‘tax gap.’ It remains to be seen whether MTD will reduce taxpayer error.
But an area where there is undoubtedly potential is using data analytics to analyse the large amount of data they now have access to — including from banks and other tax authorities — in order to identify and target illegal activity.
Tax policies
One under-explored area is the impact technology will have on what and how we tax. One suggestion is it could open more opportunities for ‘taxing as you go’ on a transaction-by-transaction basis, for example for people who work via platforms.
Technology, including blockchain, might also make environmental taxes such as a carbon border adjustment mechanism more feasible, as well as having a role in areas such as transfer pricing.
