We explore the consultation document, and what it could mean for taxpayers, external parties and intermediaries (including tax advisors) and Inland Revenue. 

The future (digital) state

  • A fully digital ecosystem in which businesses are connected to their suppliers and customers digitally.
  • The tax system is integrated into:
    • broader economic systems, with a common digital identity for participants to access services across Government; and
    • normal business systems.
  • Processes occur, and data flows, in real time. 

What this could mean for the tax system

  • Tax will increasingly occur in a business’s “natural systems” – that is, tax obligations will become a by-product of non-tax processes, rather than a separate process. 
  • There will be an expanded role for external parties/intermediaries, including tax advisors, in the tax system, with an enhanced regulatory framework to reflect this, including
    • An obligation on parties to uphold the integrity of the tax system;
    • Meet technical and security standards to interact with Inland Revenue’s systems and when storing, amending and sharing data and information; and
    • Where a provider’s systems calculate and tell taxpayers “how much tax to pay”, Inland Revenue may look to test those systems.
  • Re-thinking Inland Revenue’s approach to data collection and sharing.   
  • The need to foster digital inclusion, to bridge barriers to accessing digital services.  
  • Opportunities for further tax system simplification as a result of digital tools and automation of tax obligations.   

Takeaways

In an increasingly digitally disrupted world, it is unsurprising that the tax administration is having to keep pace with technological developments. Inland Revenue’s Business Transformation is the enabler, having created the platform for development of a digital tax system. Business Transformation, to date, has focused on moving business and other tax types (such as GST and PAYE) online. The challenge is looking beyond the immediate horizon.

The consultation document’s focus is largely about setting the scene and a roadmap for a possible digital future, rather than offering specific proposals. However, some of the discussion around how Inland Revenue intends to engage with external parties, collect/share data, and its expectations of taxpayers and others in the system, will guide future developments, including in tax policy. For that reason alone, it is worth a read. Feedback is being sought by 31 March.