Can tax authorities show their softer side with intelligent tech?
Will people ever feel as good about paying taxes as they do when buying a new pair of shoes? The idea might not be as far-fetched as you think. In our latest podcast, I spoke with colleagues from around the world who are working with governments to make tax systems more efficient and easier to use. And it’s all thanks to emerging technology.
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Putting the citizen first
In industries like retail, banking, and telecommunications, organizations have doubled down on providing exceptional customer experience as a differentiator for their services. Governments simply haven’t had to do that with tax collection. Citizens have to pay, and that’s that. But by making the whole process smoother for the public, governments could be doing themselves a favor at the same time.
As we’ve covered in a previous episode, there is an opportunity to improve public interactions with government by making them more natural and mutually rewarding. One way to do this is to reflect the excellent customer experience people get when using certain apps on their phones.
Omar Rashid, who works with governments across the Americas, says that the digital interfaces for tax payments must be user-friendly. More often than not, filing a tax return feels like it’s more about the tax authority and less about the citizen. Customer-centered design approaches from the commercial sector flip that approach on its head.
Transparency and trust
Omar told me that one of the deepest relationships between government and its citizens should be through the tax collection process, “because fundamentally, the taxes are being collected for the purpose of improving that citizen’s experience within that region, that area, that country.”
However, governments are rarely held to account for how they spend that money, which doesn’t do anything to build the trust they need. If they could show citizens exactly how much of their contributions—as either a percentage or an absolute figure—goes to which services, perhaps collecting the money in the first place would be easier.
The nicer side of taxation
Encouraging people to file taxes correctly through improved interfaces is one way to ensure that governments are bringing in the revenue they need to fund public services. But tax compliance could get a boost from two technologies that are just taking hold in government: AI and blockchain.
Valentina Ion works with governments across Europe, the Middle East, and Africa. She told me that governments can use AI to look at a person’s or company’s context and spot signs that they might be struggling with tax payments. Here’s where it gets really interesting. Because AI improves our ability to make accurate predictions, governments could model future payment schedules that take into account a person’s ability to pay. This model sounds a million miles away from the current image that tax-collecting bodies have around the world. It could be the start of “empathetic” tax collection.
Blockchain to the rescue?
Most people are familiar with blockchain in the context of cryptocurrencies like bitcoin. But blockchain has many more potential use cases. What does it have to do with tax? Well, first think of blockchain as exactly what it sounds like: discrete blocks of data linked together in a chain. As each new block is added, it becomes “locked” into the chain. Everyone who has access can see the chain, but nobody can change any of the data. It becomes a shared record of transactions.
Digital tax expert Steve Upton came onto the podcast to explain how this would work in a tax scenario. The first block in your chain would contain basic information about you as a taxpayer—how much money you paid last year, your income, your debts, and your assets. Any changes to that data or information about payments or rebates get added as new blocks. The historical data remains in place further back along the chain so everyone with access can see it.
This immutable, mutually agreed-upon data can then be used to work out trends over time. And Steve thinks that AI has a role to play here, too. Instead of the current situation, where you need an encyclopedic knowledge of your nation’s tax laws or a good (and expensive) accountant to work out how to avoid overpaying, AI could help you arrange your finances in the simplest, most effective way for you. Doesn’t that sound like a kinder, more citizen-centered model?
Listen to the full podcast
Listen to the full podcast to hear more from Omar, Valentina, Steve, and me. Along with the topics I mention in this blog, we also cover how authorities can use AI and blockchain to tackle tax fraud.
