A current concern for Tax Administrations

First I would like to greet all participants of our blog, wishing you a Happy 2013! Thanks to all the bloggers, commentators and readers that have helped to grow this discussion and communication channel. To those who have not read it yet, I recommend Raul’s post ““…But this Body does Withstand”, which shows the CIAT Blog progress.

This is my 2013 first post and I would like to address one issue: the digital gap between tax administrations.

The Digital Gap issue is a well known, discussed and analyzed topic, and is part of the scientific development and educational policies in all countries. It aims at eliminating the unfair distortion caused by the rapid development of digital tools and services, and the differences in access to these technologies resulting from income distribution inequalities in our societies.

In fact, I would like to expand this discussion and learn more about the practices implemented by our countries to address this serious society problem. But – at this time – the point I want to address crosses the internal question of each country, it is focused on another area, mainly the digital gap between countries and, consequently, since it can not be different, the digital gap between our member countries tax administrations.

By following the technological development of our TAs and, in many cases, working with our countries in the adoption of information and communication technologies, I have noticed that many of our TAs are now using these state-of-the-art technologies. They are not only up to date, but become world leaders in the adoption process of services and technologies that facilitate the tax control by tax authorities and compliance with obligations by taxpayers.  They promote not only greater effectiveness in the TAs, but also, particularly, improvement in efficiency, which also reduce the tax transaction cost.

I refer not only to the already well-known technologies for taxpayer registration, and their additional services, nor the use of systems for online return submission, or the automatically search for receipts and computerized good standing certificates. Even for these well-known services, we must point out that their use is still far from becoming a world standard available to all, and there are differences between the different countries’ TAs.

I refer to new technologies and services, such as the “Tax Electronic Address”, a tool almost mandatory to solve the effective communication problem with taxpayers who live in urban and rural areas difficult to identify, which is the reality in a number of countries where some streets have no name and many homes have no number, a serious obstacle to communication between tax authorities and taxpayers.

I refer to the “e-process”, already in widespread use in some countries, in which all administrative and judicial litigation completely takes place through computer systems, as well as all queries and requests.

I refer to electronic accounting and tax systems,  to public databases for accounting registries, the use of integrated risk management systems, with automatic processing (and receiving) information from third parties; to integrated VAT control systems on imports and exports (credit).

I refer to the use of pre-filled returns forms, available on mobile technology, to cell phones, to “tablets”, to the use of “Electronic fees receipts” for independent professionals, to third parties electronic statements, and of course to online tax payments.

I refer to the massive and mandatory use of electronic tax invoices, not only in the supply chain operations, in the “Business to Business” sector, but now also in the adoption of electronic invoicing for sales to final consumers, which in the future will replace the fiscal printers, that – we must remind – are also still a pressing need for many countries that have not adopted them.

There are so many technologies in use by countries that the list should include many other new services, such as the sleeve scanner, already in use for the control of businesses in regard to public information that should be available and visible in these businesses; the use of modern and complete technologies and systems for help desk and “online call centers”; the beverage control systems, the production and sale of cigarettes, the introduction of RFID chips into commodities, facilitating  transit control and sales taxes.

My concern is that there is an ample universe of new systems and services used by various tax authorities, and many of them are already well-known. But the key question is: how can we ensure that these services are available in all tax administrations? How to avoid the occurrence of a strong difference between the TAs which have the resources needed to adopt these mentioned, and not complete, list of new services and new technologies?

The answer is complex and I’m not sure I have it, but through this blog, I would be delighted to promote not only discussion, but also contributions on this issue.

In my view, the gap will be inevitable and growing, if we do not reach a consensus on a solution to enable the rapid and effective transfer of technology between TAs. This is because in many countries, and I am not referring only to Latin America, but also to African and Asian countries, small economies from countries with  TA’s  structures and economic scale do not allow theses TAs to have large development centers and use of information technology, and neither resources for outsourcing these products within the private sector.

In this line, we can imagine a small economy: what will be the best solution: To stay out of this development in the use of technology, or to make strong, often very expensive, and even un-payable, for the return in terms of collection revenue, investments in “outsourcing”?

I remember here of a question I’ve received in a seminar, in Brazil, on the importance of IDB funds, available under the PROFISCO program, developed between the IDB and Brazilian states. They asked me why the Brazilian tax authorities should use external resources for this modernization program. My answer was that the Brazilian PROFISCO was simultaneously allowing all Brazilian states to promote the adoption of modern management technologies and systems. This was the difference! That if it was not with an external source, in this case IDB, it would have been very difficult for all Brazilian states to have the ability to perform simultaneous investments in the modernization of their processes.

I am using this practical case to illustrate what I think would be the most effective way to prevent the expansion of the existing Digital Gap between countries. The access to regional credit lines, directed to TAs for the modernization of their processes, based on a minimum common standard.

In addition, I see organizations like CIAT and ATAF, CATA, IOTA, acting as key agents to promote the identification of these solutions, available and used in many countries, as well as to identify the minimum requirements of requesting countries, and to act as a know-how transfer channel, through specific technical assistance programs, which have as mission promoting the exchange of best practices between countries.

This is not new, as it has been and remains part of the working programs of institutions financing development, as well as of CIAT, but I see it now increasingly more compelling and urgent as the Digital Gap continues to deepen, which in the end, goes against the interests of all tax administrations and favor harmful tax planning and tax avoidance.

Finally, I am concerned that on the adoption of new technologies, without the availability of international funding sources and a multilateral program of technical assistance, we can hardly avoid the deepening of the Digital Gap between TAs that have and those that do not have their own technology development centers and their own resources for development.

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