Prospects for the Digital Transformation of the Tax System

Essence of Digital Transformation Projects of the Tax System

Often, even experts perceive the digital transformation of the tax administration as a business process automation project, transferring the communication and information collection methods from paper to the digital format. This is a utilitarian point of view, one that is essential but not sufficiently comprehensive. If you look at tax projects as mechanisms that affect millions of taxpayers, change their behavior, increase, or decrease the amount of taxes collected, then you will discover their alternative essence—from a digitalization and automation project, a tax project is turning into a socio-economic program, the results of which can significantly influence the development of the country. Projects of this nature require a completely different approach to design and implementation.

Key Features of Digital Transformation Projects in Tax Administration

Understanding your User is Essential to Build the Better Taxpayer’s Experience

Often tax authorities disregard the needs of taxpayers and create a product as they see fit. This can lead to several inconveniences and become grounded to boycott the filing proposed by tax authorities. To minimize this risk, it is necessary to build a system of surveys to obtain impartial feedback from taxpayers—the main consumers of the developed tax product.

Deep Understanding of Taxpayers’ Environment

It is important to evaluate taxpayers’ behavior and predict changes. It is necessary to move away from the standard work approach applied by tax authorities, when they take a meager sample of taxpayers, and apply results of working with this small group as a representation of the entire country.

Changing Mentality of Tax Authorities Towards Collaboration with Taxpayers

When developing a new tax regime or service, tax authorities focus on their own convenience, needs and risk minimization, while such projects require a focus on taxpayers and their tasks, pains, and values.

Be Aware that the Control Capabilities of Tax Authorities are Limited

Yes, they do have serious powers in relation to taxpayers, but due to limited human resources, it is impossible for them to reach out to every offender, which allows focusing only on large taxpayers. This understanding leads to the conclusion that tax administrations should significantly transform the control function.

Tax Authorities Have Many Potential Partners who can Assist Them Significantly

Banks, digital platforms, online service aggregators, and other IT companies that can create solutions and serve taxpayers. If tax authorities understand it, they should be transforming the closed tax systems into open digital platforms and ecosystem, of course with the secure protection of taxpayers’ data.

The state cannot implement a tax project of this scale without a change in the mentality and style of work of tax authorities. Sometimes it requires a radical transformation. Tax Administrations need leaders who understand the essence and possibilities of future changes and who can reform the way they work. The reward for such changes will be appreciative taxpayers and a significantly increased national budget.