HMRC Launches Pilot E-Tax Initiative
Government “e-tax” initiatives aren’t always the panacea they are made out to be. They are fine of course when they actually lead to reductions in the time it takes to file forms and pay taxes, and result in fewer or shorter interactions between taxpayers and tax authorities – in other words, make life easier for everyone involved. Such schemes are not very useful if digitization of the taxation process has the opposite effect, though.
But surely a government wouldn’t be so silly as to use information technology to increase the workload on taxpayers? Given the litany of botched public sector IT projects across the world, it would be foolhardy to underestimate governments’ ability to get these things wrong! And the UK Government might be about to commit another botch job if it doesn’t heed the warnings of tax practitioners and members of parliament not to rush into place the “Making Tax Digital” (MTD) project, which the Government launched the pilot of earlier this month.
The aim of MTD is to help small businesses and the self-employed to keep better track of their tax affairs. But in order to do so, taxpayers would have to update their new digital accounts at least quarterly, instead of annually as is usually the case with self-employment taxes at present. So, on the face of it, MTD will increase the number of interactions between taxpayers and the tax man, and could lead to them spending more time on compliance, not to mention more time worrying about compliance.
Recently, the House of Commons Treasury Committee said that if designed and implemented correctly, MTD could greatly improve tax administration. Tax records would presumably be more timely and accurate, and the required information more easily obtained. But, on the other hand, if rushed into place, the committee warned the Government that MTD could be a “disaster,” increasing costs and administrative burdens, and forcing more small firms into the shadow economy.
Making Tax Digital? Making tax difficult, more like!
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look