On 17 January 2019 the Office of Tax Simplification (OTS) issued a paper entitled “Technology Review: A vision for tax simplicity”. This looks at the role of new technology in improving taxpayer experience and taxpayer interaction with the tax administration.
Risk that taxpayers lose sight of their obligations through use of technology
The use of technology could make taxpayers less aware of their tax responsibilities. The government could lose tax revenue if taxpayer activities do not come within an established technological process to record and account for tax. Taxpayers may pay too much tax if they do not fully understand their obligations or possess enough knowledge to challenge a tax assessment. The government should engage with future taxpayers, such as school and college students, to clarify the role of tax and their future responsibilities in complying with their tax obligations.
Government should monitor private sector technological innovation
Private sector fintech innovations can be aligned with HMRC’s own work on technology. One possibility is for the government to test new innovation by setting up a ‘sandbox’ to explore practical applications of new products in a controlled market place. This type of procedure has been introduced elsewhere, for example the Financial Conduct Authority’s regulatory sandbox for financial technology. HMRC should consider whether such a scheme could help in testing technology in a tax environment.
Potential for applying new technology in engaging with the public to deliver efficiency
A single taxpayer identification number could be issued to act as a key to access all types of records held by the state, for example tax records, health records and driving records. This could be regarded as intrusive and would require ease of taxpayer access to the data. Blockchain is being used in many jurisdictions, including the UK, but not to link records across different government agencies.
Monitoring the impact of the General Data Protection Regulation on taxpayer choices
The collection of taxpayer data online must be done in a way that ensures privacy and guarantees security of the data. It is important that the use of any data is as transparent as possible. The OTS considers that together with a focus on privacy and security administrators should continue to monitor public attitudes and digital behaviour.
Enhancing HMRC’s personal tax account to deliver better targeted guidance
Technology could create opportunities for taxpayers to lose all oversight of their tax obligations, if their tax is automatically calculated and paid to HMRC. Expanding the scope of the current personal tax account could help taxpayers to develop a sense of ownership over their tax affairs and could also be expanded to cater for other services and interactions with taxpayers. For example, when an individual registers as self-employed through the online personal tax account, guidance for self-employed people could be made available and they could be provided with the latest tax announcements relevant to them.
Active monitoring of the impact of moves towards a cashless society
Further work on the opportunities and risks for tax administration presented by the increase in electronic transactions should be undertaken by the OTS. There are concerns over how a cashless society may marginalise sections of society and concerns that many of the poorest and most vulnerable people feel excluded from advances in technology.
Next steps
The OTS will continue to look into the role of technology in tax simplification and will publish a further paper considering in more detail the concept of introducing withholding tax regimes for the self-employed in the platform economy.
