Jul 30, 2018

Towards the Digitization of Tax Administration

In the paper “Towards the Digitization of Tax Administration”, Marija Vuković, professor of International Taxation Higher School of Professional Business Studies, Novi Sad, Serbia analyzes the achievements, challenges and possibilities of digital transformation of the national tax administration. There are no complete solutions to digitization, but there are a number of unavoidable strategically important steps on the way to the digitization of tax administration. Tax administrations in Southeast European countries have already begun the process of digitization.

The digital transformation of tax administration is one of the biggest challenges in the tax profession. Tax authorities essentially have the same set of the most important tax goals: to collect more taxes and to charge them more efficiently. In a digital context, this implies the necessary tax reform. The paper teaches us that the reform should go in two parallel directions: first, digitization of the national tax administration and tax procedures, and second, reform of tax policy and tax rates. Digitization of tax administration and tax procedures should create the basis for further tax system reforms. Without building a strong organization of tax administration, information system and professionalization of employees, the tax reform will not be possible.

We learn that based on the world-wide experience from the past few years, the digital profiles of national tax administrations can be grouped in the following five levels: e-file, e-accounting, e-match, e-audit, and e-assess. Digitization of tax administration entails five elements: technologies, people, managing of tax risks, financial resources, and communication.

Although technology seems to be a primary element, one should not ignore the fact that the human factor is very significant in the digitized administration. It is necessary to change the present formally repressive attitude towards taxpayers in the treatment of all three key elements of effective tax administration: providing assistance to taxpayers in fulfilling their obligations (the taxpayer is a client, not the enemy), timely control over fulfillment of obligations, and efficient collection of obligations.

Ms. Vuković concludes that tax authorities in many countries find that digitization can make them stronger, faster and better. Digital tools enable tax administrations to be more organized and efficient, both in combating abuse and improving the quality of tax reporting and tax collection.

Learn more in the paper here.