A report by The World Bank Group and PwC has discovered that the use of technology and innovation can help simplify the burden of tax compliance on businesses.
The report, ‘Paying Taxes 2018', found that with technology the amount of time and number of payments required to comply have continued to fall. The time needed to comply with labour and profit taxes fell by 2 hours, compared to last year, with labour taxes showing the greatest reduction over the life of the study. This shows that electronic filing and payment, improved tax and accounting software and pre-populated returns are amongst the key drivers.
Additionally real-time data enables tax authorities to scrutinise transactions on an up-to-date basis, rather than rely on reviews of annual tax returns. The report revealed that real-time systems may add to compliance times when first implemented, but have the potential to lead to fewer audits or faster VAT refunds.
Jeanine Daou, partner and Middle East Leader for Indirect Taxes and Fiscal Policy, said: "It is both a challenging and exciting time for the region - VAT implementation presents a number of opportunities that will strengthen the economy. Technology and innovation should be high on governments' agendas in order to make this process as effective and transparent as possible."
She added: "The introduction of new taxes in any society involves a period of adjustment for taxpayers and the public at large; there will inevitably be a period of transition. Post 1 January 2018, the use of knowledgeable teams and efficient processes and technology will be critical in ensuring a workable transition."
Andrew Packman, leader for Tax Transparency and Total Tax Contribution at PwC, commented: "Technology's impact on reducing the administrative and cost burden of tax is almost universal this year in our findings. In particular it is now embedded in driving simplification and time-saving for business. The increasing use of real, or near real time data is changing how tax authorities can use data, and analyse returns. This does however raise questions about data integrity and security and about how businesses can meet the increasing data obligations placed upon them."