The Office of Tax Simplification (OTS) has published a discussion paper on the opportunities and challenges associated with the use of emerging technologies to achieve tax simplification. One particular risk the OTS highlights is that, as taxpayers come increasingly to rely on technology, they may not fully engage with their own tax affairs. The report makes several recommendations, including the possibility of automatically enrolling taxpayers into a personal tax account.
The discussion paper, Technology review: a vision for tax simplicity, explores what can be done to ensure that taxpayers sufficiently understand their tax and their obligations, while benefiting from advances in technology.
Launching the paper, Paul Morton, OTS tax director, said: ‘Technology has transformed much of our day to day lives, in some areas almost beyond recognition. Although many tax-related activities have benefited from a digital approach we are still at the early stages of the potential transformation. This paper explores some of the more difficult questions that new technology presents. It is important that some of these areas are addressed sooner rather than later and we hope our paper will encourage this’.
In the future, technology has the potential to manage the complexities of the tax system, leaving taxpayers ‘needing to only press a button’ to meet their tax obligations. Making tax digital is an obvious current example of technology being applied by individuals and agents to facilitate online completion of tax returns.
However, the OTS is aware these developments may also create a future risk for taxpayers, since easier completion will not remove the need for individuals and businesses to understand and take responsibility for their tax obligations, particularly when things go wrong.
The report makes six key recommendations, inviting the government to:
consider how to mitigate the risk that taxpayers might lose sight of their obligations through the use of technology – the paper suggests the exchequer could lose out if activities fall outside established technological processes for recording and accounting for tax, while taxpayers may lose out if they do not fully understand their obligations and lack the knowledge to challenge HMRC decisions;
continue to monitor private sector technological innovation – one option might be a government-established ‘sandbox’ to test practical applications of new products in a controlled environment (similar to the Financial Conduct Authority’s regulatory sandbox for fintech);
consider the potential for new technology in engaging with the public to deliver efficiency and cost savings – the OTS suggests blockchain technology could provide a means of administering access to records held by the state, possibly leading to the introduction of a single identification number as the key to personal information across areas such as tax, health and driving;
monitor the impact of the General Data Protection Regulation (GDPR) on how taxpayers see the balance between security, privacy and convenience, and watch for any sign of changes in public attitudes to the GDPR requirement for ‘privacy by design’;
consider enhancing HMRC’s current personal tax account to deliver better targeted guidance and information while also looking at automatic enrolment into this service for all taxpayers; and
consider active monitoring of the impact of moves towards a cashless society and risks of digital exclusion.
The OTS says it will publish an online survey in due course to gather further evidence on public perceptions of the role of technology.
In a follow-up to its July 2018 paper, Platforms, the platform economy and tax simplification, the OTS intends to consider in more detail the concept of introducing withholding tax regimes for the self-employed in the platform economy.
The Office of Tax Simplification (OTS) has published a discussion paper on the opportunities and challenges associated with the use of emerging technologies to achieve tax simplification. One particular risk the OTS highlights is that, as taxpayers come increasingly to rely on technology, they may not fully engage with their own tax affairs. The report makes several recommendations, including the possibility of automatically enrolling taxpayers into a personal tax account.
The discussion paper, Technology review: a vision for tax simplicity, explores what can be done to ensure that taxpayers sufficiently understand their tax and their obligations, while benefiting from advances in technology.
Launching the paper, Paul Morton, OTS tax director, said: ‘Technology has transformed much of our day to day lives, in some areas almost beyond recognition. Although many tax-related activities have benefited from a digital approach we are still at the early stages of the potential transformation. This paper explores some of the more difficult questions that new technology presents. It is important that some of these areas are addressed sooner rather than later and we hope our paper will encourage this’.
In the future, technology has the potential to manage the complexities of the tax system, leaving taxpayers ‘needing to only press a button’ to meet their tax obligations. Making tax digital is an obvious current example of technology being applied by individuals and agents to facilitate online completion of tax returns.
However, the OTS is aware these developments may also create a future risk for taxpayers, since easier completion will not remove the need for individuals and businesses to understand and take responsibility for their tax obligations, particularly when things go wrong.
The report makes six key recommendations, inviting the government to:
consider how to mitigate the risk that taxpayers might lose sight of their obligations through the use of technology – the paper suggests the exchequer could lose out if activities fall outside established technological processes for recording and accounting for tax, while taxpayers may lose out if they do not fully understand their obligations and lack the knowledge to challenge HMRC decisions;
continue to monitor private sector technological innovation – one option might be a government-established ‘sandbox’ to test practical applications of new products in a controlled environment (similar to the Financial Conduct Authority’s regulatory sandbox for fintech);
consider the potential for new technology in engaging with the public to deliver efficiency and cost savings – the OTS suggests blockchain technology could provide a means of administering access to records held by the state, possibly leading to the introduction of a single identification number as the key to personal information across areas such as tax, health and driving;
monitor the impact of the General Data Protection Regulation (GDPR) on how taxpayers see the balance between security, privacy and convenience, and watch for any sign of changes in public attitudes to the GDPR requirement for ‘privacy by design’;
consider enhancing HMRC’s current personal tax account to deliver better targeted guidance and information while also looking at automatic enrolment into this service for all taxpayers; and
consider active monitoring of the impact of moves towards a cashless society and risks of digital exclusion.
The OTS says it will publish an online survey in due course to gather further evidence on public perceptions of the role of technology.
In a follow-up to its July 2018 paper, Platforms, the platform economy and tax simplification, the OTS intends to consider in more detail the concept of introducing withholding tax regimes for the self-employed in the platform economy.
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