We can all agree that our tax system is complicated. One of the biggest problems with this, is that many taxpayers are paying the wrong amount of tax just because they don’t fully understand the rules as they apply to them. Do you? Are you claiming a tax rebate for your work expenses? Did you even know that work expenses tax relief isn’t just for self employed people? Do you check your tax code every year?
The onus is already on you to make sure you are paying the right amount of tax and the government wants this personal responsibility to be extended.
Tax Banana’s main aim is to really make information about tax truly accessible. So it’s very interesting to see what has been proposed as potential technology solutions.
Who is asking these questions?
The Office of Tax Simplification (OTS) is an independent body that researches how to simplify our tax system and provide possible solutions to the government. In their recent Technology Review they looked at the potential of Fin Tech (financial technology) to support their aims in the future.
Chapter One of this report is entitled ‘A Vision for Tax Simplicity’ and states:
“1.1 The current tax system is seen as bewilderingly complex, not just by the average person on the street, but also by businesses and professional advisors. The level of complexity is best demonstrated perhaps by the number of accounting, legal and tax professionals advising individuals and businesses on how to navigate it.
1.2 Technology has the potential to overhaul what has been taken for granted in the past; that forms are necessary, that taxpayers may have to spend hours rifling through receipts when looking to submit a tax return, the need for person to person engagement and interaction with HMRC as the tax authority, or the way in which HMRC proactively engages and interacts with taxpayers.”
Rather than focusing on changing the system itself, in this report the OTS has looked at how taxpayers’ interactions with the tax system can be simplified using technology.
What technological solutions did they discover?
Three of their most interesting suggestions are:
- Using blockchain technology for direct communications between taxpayers and HMRC
- Artificial intelligence to make more advanced chat bots
- Automatically designated personalised tax accounts
Blockchain technology has been developed as a way to sell bitcoin and its key feature is that it doesn’t require any third party involvement. Instead of making currency chains, this technology can be used to create information chains. You send your information to HMRC in blocks, which are added to your personal chain and are completely sealed.
A block cannot have any information deleted from it or added to it and is only accessible with the correct security keys. It may even be possible to link up your information from different government departments into one chain of information. The capacity and security aspects of this have not yet been tested. But the theory is viable.
HMRC do have a pilot ‘Ask Ruth’ chat bot at the moment. But it can only answer the simplest of questions and signpost users to online information. As innovations in artificial intelligence grow, there is the possibility that future chat bots could provide ‘one click to an answer’. The amount of information that AI programmes can process is huge and the speed improves with each new development. The potential is that the AI systems become capable of scouring the vast tax documentation to provide quick answers to increasingly detailed questions.
Automatic Personal Tax Accounts
In order to facilitate a sense of being in control of your own tax affairs, the OTS propose and automatic personal tax account that you get, with your National Insurance number, when you are 16. This means that right from the start of your employed life, you can track what you earn and how much tax you have to pay. There is the potential to completely connect this with your employment history in order to tailor relevant advice to your personal situation. Another benefit may be that it will lead to an increased understanding of the tax system as a whole and lead to less mistakes on official forms, most of which come with a financial penalty.
The OTS Tax Director, Paul Morton, said: “Technology has transformed much of our day to day lives, in some areas almost beyond recognition. Although many tax-related activities have benefited from a digital approach we are still at the early stages of the potential transformation. This paper explores some of the more difficult questions that new technology presents. It is important that some of these areas are addressed sooner rather than later and we hope our paper will encourage this.”
Tax Banana already harnesses some of the currently available technology with its handy Tax Refund Calculators. We remain committed to providing current tax information in clear language and doing our part to improve accessibility to our tax system.