Taxation is a slow, ex-post process. Whether by having the taxpayer file a declaration or by collecting information from a variety of sources and prefiling it, taxes are collected only long after the event that generated the tax obligation. This ex-post process becomes particularly burdensome and prone to tax avoidance in the case of complex, cross-border transactions, such as ecommerce.
Goals and Objectives
Technology makes it increasingly possible for tax agencies to collect information about taxable transactions, income, or assets; automatically calculate obligations; and bill or accrue a credit in real time (e.g., through open banking applications).
Taxpayers’ convenience would be enhanced because they do not need to do anything to file or pay for taxes. For the tax agency, this new paradigm would improve efficiency, reduce mistakes and rework of tax processing, and enhance liquidity.
Challenges to be addressed include taxpayer data needs exchanged across a broad ecosystem that requires new policies and processes to protect data and counter fraud
Policy questions need to be addressed, such as what happens with taxpayers — particularly SMEs and the self-employed — that implicitly use the lag time between taxable transaction and tax obligation calculation and collection as a precious source of liquidity
Software: The paradigm of making tax just happen would require re-architecting core tax systems to calculate obligations and credits based on the ability to process transactions and microtransactions in real time at scale, instead of collecting information ex-post and then processing it.
Also, risk analytics should be embedded into the real-time event processing tools.
Use Case Summary
Making tax just happen is a change of paradigm for tax agencies and taxpayers that could make tax processing completely invisible and efficient.