As the world embraced a technological transformation, accountants and taxpayers explored new avenues for making taxation more user-friendly for everyone. By going digital, we are not just saving the planet of reams of paper otherwise used up for tax submissions, but we are also saving taxpayers and governments’ time and resources.

Australia was one of the early adopters of digital tax submissions. Today, as many other economies continue to build an infrastructure that supports digital transformation for taxation, Australia already has a sound and resilient system in place.

The current pandemic has brought to light the necessity of using technology as an enabler in many industries and economic sectors. With a digital tax system, Australia was able to avoid any gaps in tax submissions reducing the compliance burden that would otherwise impact people.

With technology transforming the way we interact with businesses, governments, and professionals, the digitalization of tax is only a small – but crucial – a cog in the well-oiled administrative machinery of our economy.

Challenges of a digital tax system

• Confidentiality of data

Taxation involves highly confidential data being passed on from the taxpayer to the government. This transportation, storage, maintenance, and management of sensitive data requires extensive security protocols. Even the smallest loophole in one of the systems can prove fatal and lead to the leakage of volumes of data. Over the years, Australia has continuously built on a highly robust digital architecture that minimizes risks of the data breach.

A possible data breach was reported in 2015 when the Federal Police were looking for a gang of thieves who had been hacking nearly the tax file numbers of nearly 500 Australians each day. But the ATO confirmed that the breach was external, meaning if any identities were being hacked then it was on the side of the clients. The ATO systems had not suffered any breach.

• Maintaining a strong IT infrastructure

When the COVID-19 pandemic led to a global recession, countries grappled under a crumbling economy trying to stay afloat and ensure the safety of their citizens. During this period, governments with a sound IT infrastructure found themselves in a better position to build a revenue strategy. With tax submissions and tax returns being handled online, governments had to make sure that their systems were capable of managing the volumes of data that would flow in.

• Higher chances of scrutiny by authorities

For taxpayers, one of the biggest areas of concern has been the amount of scrutiny they may come under once tax authorities have access to more data and information. This is especially important for corporations and enterprises who may undergo e-audits and higher assessments based on the amount of information accessible with the tax authorities.

From the government’s perspective, there is a possibility that digital transformation can finally bring in the amount of transparency that the taxation systems were in great need of. It makes the collection and assessment of data easier with the use of AI-based data capture and data management. Eventually, this can reduce the problems of tax evasion and may prove to offer tax authorities a clear view of operations and profitability for a business.

Opportunities for companies of leveraging digital transformation in taxation

The digitalization of taxation is not just on the government front but within each industry too. Companies can finally use AI-based tools to easily go through the cost, revenue, and operational data relating to taxation. They now have an opportunity to optimize their business models for tax efficiency using technology. It also enables them to improve compliance and make way for better tax planning.

As financial service providers to a large number of small to medium-sized business firms, Ascendum Business Services has found this digital transformation of taxation to be crucial as we undergo the 4th industrial revolution. Our accountants help clients in online tax submissions and tax planning through online meetings.

Reach out to us now to discuss how we can help your business remain compliant in a digital taxation system.