Additional note on The Digitalization of Tax Administrations

In order to face the challenge posed by the COVID-19 pandemic, the tax administrations are making a great effort by implementing telework mechanisms and maximizing electronic systems. This accelerated process of digitalization goes beyond the electronic filing of tax declarations or the establishment of electronic means of payment -present in most countries of the region.

Among many other things, this process requires the incorporation and adaptation of the rules on which administrative action is based so that it is valid, effective, and respectful of the rights of taxpayers.

Articles 96 and following of the CIAT Tax Procedure Code Model: The Ibero-american approach / 2015 – and the Spanish tax and administrative regulations on which it is based- provide a list of matters that must be addressed in accordance with the regulatory status and detail demanded by each country.

The Model provides that citizens and businesses may interact with the Tax Administration -TA- to exercise their rights and comply with their obligations through electronic, computerized or telematic techniques and tools with the guarantees and requirements set forth in each procedure. A controversial question arises here as to whether to establish the obligation to relate to the TA by electronic means for all taxpayers and all procedures or only for certain procedures and for certain groups of individuals and legal entities which, as a consequence of their economic capacity, technical skill, professional dedication or other reasons, are shown to have access to and availability of the necessary electronic means.

Another essential issue is the guarantee of identification of the tax administration and the exercise of its competence. The Model itself also addresses the case in which the tax administration acts in an automated manner by providing for the identification of the competent bodies to program and supervise the information system and the competent bodies to resolve the appeals that may be filed. Automated action is understood to mean, for example, the issuing of certificates or acts by the IT system itself in accordance with the specifications made.

The electronic signature – or other systems – of the responsible of the public agency or  public employee is another necessary issue not only for massive acts but also for acts within the control or audit procedure such as proceedings, reports or the documents that generate the audit assessments .  Also that the interested parties may sign through any means that allows to accredit the authenticity of the expression of their will and consent, as well as the integrity and unchangeability of the document.

The Model also addresses the prior approval of programs or applications to be used by the TA for the exercise of its powers by means of a standard with a range to be determined. Tax administrations should also ensure that the necessary access channels are available to interested parties así́ as well as the systems and applications determined in each case.

Another fundamental issue is the equivalence of documentary supports. The documents issued, whatever their medium, by electronic, computer or telematic means by the tax authorities, or those issued by the tax authorities as copies of originals stored by these same means, as well as the electronic images of the original documents or their copies, must have the same validity and effectiveness as the original documents, provided that their authenticity, integrity and conservation are guaranteed, as well as compliance with the guarantees and requirements demanded by the applicable regulations.

The Electronic Registries in which the corresponding entry is made of any document that is submitted or received in any administration office. Registries must be interoperable, to ensure computer compatibility and interconnection, and the telematic transmission of registry entries and documents submitted to any other registry.

The tax administrations will also need rules to maintain a single electronic file of electronic documents corresponding to completed procedures, which will establish a series of conditions, providing, for example, that the documents submitted in person to the TA shall be digitalized for their incorporation into the electronic administrative file, and the originals will be returned to the interested party.

Provision should be made, for example, for electronic documents to be kept in a format that guarantees the authenticity, integrity, and preservation of the document. It must remain accessible for consultation regardless of the time that has elapsed since it was issued. The possibility of transferring the data to other formats and media that guarantee access from different applications or authorisation for the deletion of such documents will be other matters to be provided for.

The regulation of the TA’s site as an electronic address, available to citizens through telecommunication networks, whose ownership corresponds to the Tax Administration -or whoever is decided-, is another issue that seems to need to be addressed together with the necessary identification of the services that can be accessed and the establishment of secure communications. And let us not forget the Electronic Mailbox. In short, electronic notification systems to which we have dedicated another post in this same blog have now become an urgent need.

The CIAT Model offers us a first approach to these matters. There are certainly many issues that were not addressed at the time – such as some provision for electronic audits and no presence of the taxpayer or his representative. Many other issues emerge as necessary in a situation like the present one. And others will emerge from the various technologies and technological models that continually faces new challenges.

To paraphrase Mario Draghi and Vitor Gaspar, you must do everything you need to do, when you need to do it… but you also must do it well. Therefore, it would be good to pay attention to all these matters with sufficient legal rigor and flexibility to ensure the validity, effectiveness and respect for the rights of taxpayers -with high information security standards that ensure the confidential nature of tax data- throughout this process, which has been forcibly accelerated, of  the digitalization of the tax administrations’ activities that has  come to stay.

Disclaimer. Readers are informed that the views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group the author might be associated with, nor to the Executive Secretariat of CIAT. The author is also responsible for the precision and accuracy of data and sources.

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