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OTS considers the implications of using tech to simplify tax

22nd Feb 2019
Taxation Collection Glitch Effect
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The Office of Tax Simplification (OTS) has asked whether tax simplification will still be needed as technology advances. Wendy Bradley believes the answer must lie in simplifying the tax law first.

The OTS discussion paper identifies the questions it thinks the government should be asking itself before it rushes to embrace technological solutions. It identifies five issues which the government should consider and an additional point to monitor.

Losing sight of tax obligations

The OTS report expresses a generalised anxiety about what the future may hold and a curious panic that making tax administration too easy could lead taxpayers to "lose sight of their obligations".

It urges the government to consider mitigating the risk that taxpayers will lose sight of their obligations through the use of technology.

I find this a confusing proposition. Should the taxpayer be using technology to mitigate the risks or are the risks created by the use of technology?

If tax collection technology ever becomes so seamlessly integrated into our lives so that we don't notice that we've paid the tax, would that be such a bad thing?

Better taxpayer experience

The OTS proposes the government should "continue to monitor private sector technological innovation to enhance the experience of the taxpayer in managing their tax affairs".

I’m disappointed that the OTS does not suggest the government should use savings from technological innovation to do this, but the report makes it clear that, while they don't have the remit to make spending decisions, it's a decision they would make if they could.

ID number

The next section of the report looks at blockchain technology and considers the potential for introducing a scheme for applying it to national insurance records, in effect revisiting the idea of a national identity number.

The OTS suggests monitoring "the impact of the General Data Protection Regulation on taxpayer choices regarding security, privacy and convenience".

There are real issues to consider here but the balance between the convenience offered by technology and the loss of privacy entailed in realising these benefits stretches much further than tax administration.

Auto enrolment

A more practical proposal is that the government should "consider enhancing HMRC’s current personal tax account to deliver better targeted guidance and information while also looking at automatic enrolment into this service for all taxpayers".  

The idea that sixteen year olds should be enrolled automatically into a personal tax account when they receive their national insurance number seems good to me: these are digital natives who will conduct their affairs via technology. I have my doubts about the "targeted guidance and information" but then I hate being nagged by my devices.

Cashless society

Finally, the OTS suggests "active monitoring of the impact of moves towards a cashless society and risks of digital exclusion", and this is where I take issue with their analysis. A cashless society is not something which accretes naturally like a coral reef: if it happens it will be the result of policy decisions, many of them taken by the government.

The "risk of digital exclusion" isn't a "risk" on the same level as a hurricane. It is the result of policy decisions taken over the years. The Carter report in 2006 included a vision of an electronic future for tax collection where people who chose not to have computers would drop in at their local post office or library to be helped by friendly staff to stay connected.

Reality bites

What happened to that future? Policy decisions. The OTS report might be a way for the government to think about them, but it is not the only one.

While it is the OTS' mission to reduce the administrative burden of tax legislation by promoting simplicity, it seems to me it would be foolish to rely on technological solutions rather than legislative changes to achieve this.

Replies (9)

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By SteLacca
22nd Feb 2019 20:34

Before Government think about wholesale technological solutions, Government should learn about technology. At the moment, HMRC's own technology (and in fact pretty much all of .gov.uk) is horrendous.

Let's examine the facts:

RTI is still effectively a beta product, full of bugs, with a lousy UI.
Linked is PAYE online, which provides so little useful information as to be officially useless.
MTDfVAT has had to be postponed for complex business, and has had to introduce varied exceptions to the core rule of "no manual changes", because it doesn't work

I could go on. This Government and technology do NOT make good bedfellows.

And they are proposing technical solutions to the Irish border, which don't exist in Government!!!

Meanwhile, changes to IR35 have driven those that could do it away from the public sector.

You honestly couldn't make this up.

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By mgbacchus
23rd Feb 2019 15:07

I'm with the idea that the complexity of the legislation needs to be dealt with if significant improvements are to be made in the medium term. In the long term AI might/will be able to deal with the complexities but it is a way off. Just think of the complexities (to take a few minor examples from my business life) in VAT partial exemption, in deciding on the difference between capital and revenue spend (movable partitions anyone?), in deciding whether someone is an employee (three different definitions at least), a worker or self-employed (IR35 or not). And tax isn't my day job!

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Chris M
By mr. mischief
23rd Feb 2019 17:55

OTS

Orifice of Tax Stupidity

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By johnjenkins
25th Feb 2019 10:15

Great article Wendy. This highlights what I have been saying for a few years now, that the difference between high techies and low techies is increasing. At least the Carter report took that into consideration. As for doing away with cash, it won't happen. Well the government might ban it but it will be replaced by a form of barter system.

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By Duggimon
25th Feb 2019 10:19

This year we have sent dozens of tax returns in on paper because HMRC's technology does not correctly calculate the tax due and rejects our correct tax returns.

Tax simplification is needed to help HMRC program their own tax software because at the moment the commercial software companies can do it, but HMRC can't.

It's ludicrous to say as technology improves we don't need a simpler tax system, it's already too complex for the government to keep up.

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By David Gordon FCCA
25th Feb 2019 10:31

Quite so!
The question exemplifies where HMRC have lost the plot.

When I bought my first computer in 1979, the instruction book gave two clear first rules.
1)
If it does not appear to be working, check it is properly plugged in and turned on.
2)
Garbage in = Garbage out.
Despite the intervening forty years those two rules remain numbers one and two.

Over this period UK tax rules have descended into an expensive morass, a confusion generating cats cradle of rule standing on rule. The biblical tower of Babel springs to mind.
Sadly the IT worshipping proles at HMRC have used the benefits of the digital revolution not for simplification but for gratification of their desire to control.
The latest example of malodorous (Expensive) bullsh*t being MTD.
Office of Tax Simplification please, please, do what you were intended to do.

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Dave Chaplin
By Dave Chaplin
25th Feb 2019 10:40

Tax legislation over the past 20 years has been designed to be more vague, and more subjective to (a) widen the net for enquiries, and (b) prevent hard lines that open the door for creative tax planning. Introducing subjectivity is juxtaposed to the necessary objectivity required when moving to automation.

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By vstrad
25th Feb 2019 14:35

The problem will not be technology leading people to lose sight of their obligations, it will be technology extracting tax from people automatically, silently and without transparency.
The OTS has plenty to do in attempting to get the tax code simplified, without it digressing into areas it clearly doesn't understand.

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By johnjenkins
26th Feb 2019 08:53

I can see the OTS being replaced by the OBS.

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