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The OECD Digital Transformation Maturity Model (DTMM) is a framework developed by the Organisation for Economic Co-operation and Development (OECD) to help governments and tax administrations assess their readiness for digital transformation. The DTMM consists of five stages of maturity that organizations can use to evaluate their digital capabilities, identify areas for improvement, and develop a roadmap for digital transformation. The five stages of maturity are: (1) Basic, (2) Intermediate, (3) Advanced, (4) Innovative, and (5) Leading. Each stage represents a higher level of digital maturity, with organizations at the Leading stage having fully embraced digital transformation and integrated it into all aspects of their operations.
Tax monitoring is the process of continuously monitoring and evaluating tax-related operations in order to maintain compliance with tax legislation and to identify any concerns early on. As tax authorities throughout the world speed up their efforts to combat tax evasion and fraud, this process is becoming increasingly vital for businesses of all kinds. Installing a tax monitoring system can provide numerous benefits to firms, including lower penalties and fines, enhanced tax reporting accuracy, and increased transparency. In this post, we will go through the advantages of tax monitoring in greater depth, as well as analyze alternative approaches for creating a centralized tax monitoring system.
Tax authorities around the world have been adopting electronic systems for various tax-related activities, such as filing tax returns and making tax payments. One such activity that is increasingly being digitized is the process of requesting documents from taxpayers. Instead of traditional paper-based requests, tax authorities are now allowing taxpayers to submit electronic copies of documents through their online portals. This shift towards electronic document requesting has many benefits for both taxpayers and tax authorities, including increased efficiency, improved accuracy, and reduced costs. In this article, we will explore the details of taxpayer's electronic document requesting by tax authorities, including its benefits and implementation methods.
The real-time economy is fast changing the way businesses, consumers and governments interact, opening up new avenues for efficiency and innovation. Governments and tax administrations are playing an increasingly critical role in developing the regulatory framework and policies that will govern the real-time economy as this notion gets traction. We will look at the definition and benefits of the real-time economy, as well as the prospects for its growth and development, in this post. We will also discuss the critical role that governments and tax administrations play in ensuring that the real-time economy is secure, ethical, and tax-compliant.
Once we identified the functional requirements, we should design a system architecture and chose technologies and infrastructure to put the architecture into operation. Tax administration is an extremely attractive customer for IT service providers, so there are constantly a plenty of vendors gathering around it and pitching their "greatest" solutions. Some tax administration may not have own system specialists. That makes choosing a right solution a challenging experience
Tax authorities often introduce the concept of goods taxed at preferential rates, for example, if they are socially important. To understand whether a reduced rate is valid, they must identify the stock keeping unit and cataloged. By introducing online cash registers, tax authorities receive real-time sales data, but they also want to extract information about prices and consumption volumes from it. Of course, the tax authorities could process a non-standardized text string and try to get relevant information. However, without standards for describing stock keeping units and with a vast number of taxpayers using "Product 1" or "Product 2" as the product description, this approach is a dead end.
In some countries, a separate desk audit (also known as "cameral control"), follows a collection of tax returns. The tax administration checks the filed tax return, and either informs the taxpayer that there are no questions about it or, during the audit, asks taxpayer questions and receives explanations or clarifications regarding the tax return. In this article, we will discuss methods for organizing and optimizing desk audits with the help of digital tax administration solutions.
Tax authorities need a strategy to define long-term goals and develop a systematic action plan to achieve them. Obviously, tax authorities' principal goal is to perform efficient tax administration and collect taxes for the state budget, but it is necessary to understand the country's real tax potential via the ability to assess the tax gap for all types of taxes. The overall strategy should focus on minimizing the tax gap as a key function of tax administration.
Banks have an important role to play in the tax administration system. Since the banking sector has already implemented digital communication tools with its customers, it makes sense to use the established channels, instead of wasting resources on creating new own ones. Given the significant role of the banking sector in the interaction of the tax system with taxpayers, it makes perfect sense to assign the function of a tax agent to banks so that the payment of the accrued tax is conducted automatically.
Despite the obvious differences in the culture and lifestyle of different states, the corporate culture of tax authorities has common features. As once said by a Tax Administration Head: “Why do tax officials love themselves and their service so much? Because no one else loves them". It is impossible to implement successful digital tax transformation projects without changing the corporate culture of tax authorities. Automation of illogical contradictory provisions of the tax code and current processes will bring even more confusion and mothball all modernization efforts. To start automation, it is required to modernize the corporate culture at first and inspire other values and attitudes in tax officials.
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. But when they affect millions of taxpayers and change their behavior—from a digitalization and automation, a tax project is turning into a socio-economic program.
A Google tax, also known as a diverted profits tax, refers to anti-avoidance tax provisions that have been introduced in several jurisdictions to deal with the practice of profits or royalties being diverted to other jurisdictions that have lower or zero tax rates. In this article, we'll discuss how to organize taxation of cross-border online transactions.
In May 2022, the Asian Development Bank (hereinafter, the “ADB”) published a comprehensive study titled "Launching a Digital Tax Administration Transformation. What you need to know". This publication sets out considerations for policymakers embarking on planning and implementing a digital transformation of tax administration. ADB’s approach adds many valuable thoughts and insights to DTT’s Digital Tax Administration Concept. In this article we provide a summary and excerpt of the main topics from ADB’s publication based on permissions set by CC-BY 3.0 IGO license.
Tax authorities often see a transition from business or tax invoices (VAT, GST, and Sales Tax invoices) to submission of electronic forms as a fundamental tax administration project that will increase tax collections and narrow the tax gap.
Value-added tax (VAT) is a consumption tax on goods and services that is levied at each stage of the supply chain where value is added, from initial production to the point of sale. VAT also presents the enormous potential for evasion via the organized fraud. It alters collection of the corporate income tax, since the reduction in VAT base achieved via bogus expenses. VAT fraud alone creates in EU a tax gap of 60 billion euros annually according to Europol. Therefore, the fight against VAT fraud is one of the most important tasks for the states and the tax administrations.
Digital transformation plays a critical role in improving the efficiency of the tax administration processes. It helps implement innovative digital technologies to minimize tax gaps, increase tax and excise collection, and reduce the share of the shadow economy. The primary goal of the digital transformation of the tax authorities is the transition to digital tax administration through the development of an applicable concept. Our approach to the digital transformation of the tax administration translates principles we have implemented in several countries around the world. Most of them have already proven their efficiency or are being evaluated in the ongoing pilot projects.
The inevitability of punishment is considered one of the most significant principles of legal responsibility and the basic condition for its effectiveness, since the preventive value of punishment depends not so much on its severity as on the very awareness of its inevitability. Automating the tax accounting system makes it possible to identify and eliminate shortcomings in the work of regional tax authorities, which will immediately increase tax collection rates and strengthen the inevitability of punishment principle for tax crimes in the minds of taxpayers.
It is extremely difficult to conduct tax control over the activities of organizations that are in the shadows, especially if the share of shadow businesses in the country's economy is noticeably large. To create the most comfortable environment for transitioning to legal methods of doing business, a comprehensive approach to reforming the tax system is needed.
Digital Tax