Influence trust through digitalisation
Digitalisation plays an important role when it comes to trust. The growth of digitalisation may create a barrier between taxpayers and the Tax Administrations. Therefore, when developing digital solutions it is important to consider a trust based approach. This could create a positive experience for the taxpayer, minimise burdens, provide the relevant assurance that taxpayers seek and this will contribute to building trust which will positively influence voluntary tax compliance.5.1 Let the taxpayers perspectives influence digitalisation
The taxpayers’ perspective should always be considered when designing new or enhancing existing digital services. For example, many taxpayers need assurance that they have used the online services correctly and that their transaction has been submitted successfully. This can be achieved by designing-in an acknowledgement/notification service that provides the necessary confirmation to the taxpayer that their submission has been received and is being processed. Taxpayers need clarity and certainty and this will reduce any follow-up contacts from taxpayers seeking confirmation that their submission was received. If the systems are created in such a way that they are easy to use and make it easy to comply, this will instil confidence in taxpayers and will positive influence their compliance behaviour.
Although digital services assist taxpayers to comply with their obligations, they can also be seen as being ‘impersonal’. Notwithstanding this, digital services allowed ‘business as usual’ to continue, to a significant extent, during the COVID-19 pandemic and this meant that the existing relationships between taxpayers and Tax Administrations continued. On foot of this, digital services may become the preferred method for taxpayers, putting pressure on Tax Administrations to ensure that people who are unable to use digital services are not left behind.
To build trust with taxpayers, it is essential that their information, either provided directly by the taxpayer or obtained from a third party, is used only as provided for by law. In most jurisdictions, the confidentiality of the taxpayer data is grounded in law.
Each Tax Administration must have proper processes and procedures in place to ensure that data breaches do not occur. Transparency is important so that taxpayers will trust the systems in place to protect their data. From a taxpayer’s perspective, one way of doing this could be to have access to a personal tax portal that contains all the information the Tax Administration holds on you.
In this digital age, Tax Administrations must have robust methods of authentication in place to confirm the digital identity of the taxpayer accessing their online records. These methods should be secure but cannot be overly complex. The methods implemented by Tax Administrations to date, include advanced electronic signature, secure verification codes and even block chain technology.
Big Data provides Tax Administrations with opportunities to develop new and customised services for taxpayers. It also supports Tax Administrations to create tools to address tax risks and improve other activities such as debt collection. The main challenge for Tax Administrations is how to leverage Big Data into information to enhance compliance, improve services and reduce costs.
It should be clear to the taxpayer that data received by the Tax Administrations is used to verify non-compliance with the law, but also to help Tax Administrations to make it easier for taxpayers to comply. In most countries, the available data is used to fill prepopulated tax returns and the amount of data prefilled will increase as more information is made available to the Tax Administration. This reduces the time spent completing tax returns and assists the taxpayer to make a complete and correct return.
There are some concerns that the use of Big Data might lead to taxpayers feeling that they are under surveillance. In a system where voluntary compliance prevails and the information provided to Tax Administrations is supposedly correct, then there should be no need to gather and verify the relevant supporting documentation, even if this was possible to do.
Integrated solutions are important to ensure the secure exchange of data. Software developers are a key player when it comes to creating digital solutions that are integrated with business systems. They can help integrate the needs of the Tax Administrations with business systems software, thus making the transfer of data seamless and secure while at the same time ensuring compliance with tax obligations. It is crucial to engage with trustworthy external partners in the design of new applications or business systems software to get buy-in from taxpayers.