A report entitled “Rethinking Tax Services: The Changing Role of Tax Service Providers in SME Tax Compliance” was published during the meeting of the OECD’s Forum on Tax Administration (FTA) on 9 to 11 May 2016. The report looks at the interaction of tax service providers with their small and medium enterprise (SME) clients and with the tax administration. The rise of big data, advanced analytics, the internet and social media have created new patterns of interaction with customers and new types of business offering tax services. The report looks at how these changes affect tax administrations and the new opportunities for provision of better taxpayer services and ensuring better compliance. SMEs are in a better position to develop more integrated systems in which taxation is part of the daily operations. The report therefore looks at technological and business developments and the new service possibilities opening up.
SMEs traditionally face relatively high compliance costs but now have an opportunity to receive better tax services at lower cost. Tax administrations may increase compliance by embedding taxation in business processes and reducing their costs by adopting a system-based approach. The new technology has enabled new business models and new entrants into the tax services market. The new service providers have core capabilities in areas such as software development, data analytics or other non-tax areas. They offer digital versions of existing services or new types of tax related services.
The OECD report emphasizes the changes in the tax services market including the shift in roles performed by tax service providers towards highly skilled advisors and increasing software support; broader roles encompassing activities outside the traditional scope of tax services; and new types of tax service providers such as software developers.
The report outlines strategies that tax administrations can adopt for cooperating with tax service providers. Generally these strategies can be more closed, looking specifically at tax processes, or more open, considering the broader business processes. The strategies may be government driven or market driven. Most tax administrations will adopt a combination of those strategies to suit their particular circumstances.
In places where there was previously no established network of tax service providers the new technology could provide the means to develop a supporting infrastructure for SMEs. In developing and emerging economies the spread of mobile phones and smart phones can give rise to new possibilities for facilitating tax compliance.
The OECD report recommends that tax administrations should look at the role of tax service providers in SME compliance strategies and monitor technological and business developments to assess opportunities to better integrate tax services into the broader business operations of SMEs. Tax administrations could stimulate the development of tax services by entering into joint initiatives with government and business partners, setting standards and monitoring quality. They could consider the need for regulations.
The report considers that tax administrations should adopt a structured approach to cooperative initiatives with tax service providers or others, putting the experience and expectations of the user in the centre and remaining aware of public expectations. They should also share their best practice and experience within the FTA to encourage further cooperation between tax administrations.
