During the plenary meeting of the OECD’s Forum on Tax Administration (FTA) held from 28 to 30 September 2022, a report was released with the title: Digital Services: Supporting SMEs to Get Tax Right. The report is one of a series that are planned, dealing with the issue of support for small and medium enterprises (SMEs).
The report sets out the ways in which tax administrations have developed support for SMEs using digital services and how these services have evolved in recent years. Tax administrations are now ready to develop their services further and integrate tax into the routine business records of SMEs. The report outlines a roadmap effectively integrating digital services into tax administration systems.
The FTA is creating a Community of Interest (COI) on SMEs to gain deeper knowledge of the SME sector and find ways of offering more support on tax compliance. The COI will bring together tax officials from FTA member jurisdictions to meet regularly and exchange information on the latest developments in the SME sector. The COI will be a forum for discussion of new ideas and approaches for closer interaction with SMEs.
The FTA considers that enabling SMEs to actively participate in discussions on digital transformation will support inclusive globalisation. The ongoing consultations will allow tax administrations to stay informed on ideas and experiences to support tax compliance by SMEs.
Data protection
If SMEs are to trust the services provided to them, data protection and data security are essential factors. The SMEs are especially vulnerable in these areas because they may be an easier target for cyber attacks than larger enterprises owing to their resource constraints, resulting in inadequate digital security. Tax administrations can also be vulnerable and need to show SMEs that their data will be secure in the hands of the administration.
Engagement with SMEs
Some businesses within the SME sector do not have the knowledge to access and use online services. Tax administrations need to support all SMEs, including those that have challenges in the area and may be initially reluctant to adopt digital services.
Lessons learned
During the pandemic digital services became more important for tax administrations. Some SMEs that had previously hesitated to adopt digital services had to embrace them as digitalisation became prominent in the conduct of business operations. In the pandemic tax administrations gained a better appreciation of the advantages of digital services and these lessons need to be borne in mind going forward.
Tax administrations must also learn more about the situation of SMEs and their challenges in relation to digital administration.
International expansion
With new digital technologies available to them, SMEs can more easily expand their operations across national boundaries. The technology reduces the costs normally associated with international expansion such as the cost of transportation and border operations.
International collaboration and adoption of global standards can facilitate digital compliance and reduce the cost for SMEs engaging in international business operations. Certainty and uniformity are important for SMEs and if the various tax administrations they interact with have similar systems this can support their expansion. International collaboration also enables different tax administrations to share knowledge and best practices.