Pandemic Responses Could Boost Tax Efficiency in the Long Run
A quick glance at the OECD’s 70-page roundup of tax administration responses to the COVID-19 pandemic underscores the agility with which tax authorities are reacting to the global crisis. As several countries remain under lockdown, the name of the game is self-service tax. Administrations are quickly enhancing their digital and phone capabilities so that taxpayers can submit returns, file disputes, or search for more complex queries without personal contact.
In some ways, these temporary responses follow a general movement toward taxpayer autonomy. The latest findings from the OECD show that tax authorities are increasingly promoting self-service options to give taxpayers more control. After all, happy taxpayers are more likely to be compliant taxpayers.
In that light, could some of these coronavirus-related administrative measures become permanent? When the pandemic subsides and life returns to normal, tax authorities should not be so quick to entirely dismantle the emergency measures they’ve put in place to assist taxpayers, especially those that promote efficiency and compliance.
Self-Service Tax Trends
In 2019 the OECD highlighted in its latest tax administration report how tax authorities are trying to make taxpayer interactions as smooth as possible. In a survey of tax administration priorities, three trends emerged at the top:
greater taxpayer independence — self-service features are becoming more popular;
giving taxpayers more say — tax authorities are consulting taxpayers for feedback when they design new services; and
more collaboration among different government divisions.
Of course, technology features prominently in this process, particularly artificial-intelligence-powered virtual and digital assistants. For example, Australian taxpayers can shoot off 84,000 different questions to the Australian Tax Office’s virtual assistant Alex. Across the board, authorities are steering taxpayers toward online chats, and auto-fill options on returns are gaining more traction.
Updated Online Options
Singapore’s Inland Revenue Authority has long maintained a strong online presence, and its e-filing services were among the first in Asia, according to the OECD. As a result of the pandemic, the authority has closed all its taxpayer offices and is encouraging taxpayers to file returns and make tax payments online. It is also expanding the scope of tax issues that can be handled virtually. It is directing taxpayers with more complex issues (for example, those seeking penalty waivers, objecting to tax assessments, or appealing late payments) to its online portal.
Similarly, New Zealand taxpayers are being asked to exclusively use the Inland Revenue’s digital tools, and in Serbia, taxpayers are being asked to email questions to expedite assistance and take pressure off the country’s mostly closed tax offices. Austrian taxpayers can send tax relief applications to a specially created email address or access an online portal.
Some governments are building digital tools to respond to increased demand. Brazilian authorities are generating a chatbot to answer personal income tax questions. In Chile, there is a new authorization for electronic invoices — depending on the taxpayer’s circumstances and default risk — that allows taxpayers to avoid travel and maintain business continuity, according to the OECD.
In Hungary, the government is telling taxpayers that it can handle most tax issues electronically and is readjusting accordingly, including offering a new online portal to address emergencies, according to the OECD.
Faster Response and Better Communication
In the United Kingdom, HM Revenue & Customs has worked on its customer service standards since receiving low marks in a 2016 National Audit Office report that criticized its wait times and responsiveness to taxpayer queries. The department has since increased its call center staff and expanded self-service options via webchat and an online tax account function.
At the beginning of 2020, HMRC unveiled more self-service options and began allowing self-assessment taxpayers with deferred tax payments to create an independent pay schedule online if they owe less than £10,000. That policy is doubly advantageous because taxpayers need not consult HMRC before making their arrangements online.
HMRC’s response to the pandemic has continued those trends, with increased webchat, phone, and email capabilities. All of those were tested in late April when the government’s Coronavirus Job Retention Scheme went live. As part of its coronavirus stimulus package, the government is paying furloughed workers 80 percent of their wages up to £2,500 per month. HMRC — which has suffered several IT gaffes — received particularly high marks for its response to the wage subsidy request applications. On the day the application site went live, HMRC processed claims for 1 million workers, according to the Financial Times.
Similarly, the ATO has received some critical reviews over the years over its attentiveness and communication to taxpayers. In a 2018 fairness survey commissioned by the office, 44 percent of businesses and individual taxpayers said they did not believe the ATO handles tax disputes fairly or professionally, according to the Australian Broadcasting Corp., which obtained the results under freedom of information laws. Overall satisfaction with the office also declined, mostly because of feedback from small and medium-size enterprises. Their satisfaction levels dropped by 10 percentage points compared with the previous year. Overall, survey participants were dissatisfied with the length of time it took to resolve their cases, and with their ability to access information during the process.
For the pandemic crisis, the ATO is doubling down on personalized service. It established a special clearinghouse within the Treasury to address business taxpayer concerns and individually contact various business groups. As part of the government’s stimulus package, the ATO will create a temporary shop front manned by staff to assist small businesses in the Cairns region, a popular coastal destination that is reeling from a sharp decline in tourism.
The overall result is that the ATO is responding to taxpayers much faster than usual — for example, wait times for its emergency support line have been shaved down to less than 10 seconds, according to the OECD.
In Brazil, the government has hired more tax staff and has increased its chat services both in availability and in substance. According to the OECD, chat topics include the regularization of debts, debt recovery, registration, installments, tax credit imputation, social security guidance, guidance for SMEs, and employment taxation guidance.
Addressing Compliance Concerns
Some coronavirus-related measures are also bringing attention to tax compliance issues. In Ghana, typically less than half of eligible taxpayers file their returns. In early 2018, the government sought to address the issue by implementing a generous nine-month tax amnesty for registered taxpayers that entirely waived interest and penalties for all tax years through 2017. All taxpayers needed to do was file their delinquent returns and pay their outstanding taxes, provided they were not under audit, investigation, or an enforcement action. Unregistered taxpayers could participate as well, but their amnesty covered a shorter number of tax years.
The amnesty wasn’t as successful as the government had hoped — the Ghana Revenue Authority (GRA) had forecast GHS 300 million to 500 million (about $52 million to $86 million) in receipts, but secured only GHS 287 million. Those compliance concerns have been compounded in the wake of the coronavirus, and the GRA fears that even those taxpayers who can still pay, won’t do so. It has therefore set up tools so taxpayers can more easily file electronically from home, and electronically deposit their tax payment into an official GRA bank account. It is also creating a digital platform on which taxpayers can obtain their tax identification number and arrange their affairs electronically, according to the country’s news agency.
In Jamaica, where tax collections have generally exceeded expectations in recent years, the government is trying to continue that trend by making its payment process more efficient. The tax authority is steering taxpayers toward its online portal and asking them to handle much of their tax payments online. Some tax offices are open, but the government is asking taxpayers to pay their property tax, motor vehicle fitness fee, and traffic ticket, and apply for a tax compliance certificate online to avoid visiting them. Business taxpayers are being asked to file their tax returns and make all tax and statutory payments online. Since 2013, the Jamaican government has encouraged taxpayers to pay their property tax online and look up information in the online system, and it is continuing to push that service as well.