The Role of Information Technology in Tax Administration

| Updated on February 14, 2024

The whole world lives pretty much on the cloud these days.

With tech on the rise and the acceptance of new tech everywhere, many countries are thinking about adding new and available resources to make their work more simple and efficient.

Tech is pretty good at handling a lot of the tasks that would take us hours to do back in the day.

Well, you can say the same about the field of tax administration too.

It can use tech to easily identify the tax base and keep track of any compliance issues.

It’s a great thing for the citizens too.

They can use it to get notified of the latest news on tax laws and also get notified of any new fresh start tax relief schemes.

DID YOU KNOW?
A basic tax IT system assists the tax administration, first, with the audit plan, by automatically quantifying the risk that each taxpayer poses to revenues and by automatically selecting high-risk taxpayers for audit.

But, What exactly is Tax Administration in IT?

It is basically the government entity responsible for all your tax-related things.

Like making sure that you pay the right amount of tax at the right time, and also giving the government the needed money to deliver all their goods and services.

Plus, they do all that and also make sure that the costs for these things are done with minimal waste so that your money is used wisely.

So, you might be thinking, what’s the role of IT in all of this?

Well, historically speaking, IT was used to manage the proper working of tax systems. 

This also includes all the admin tasks related to processing returns and payments as well as the collection of data related to it.

Today, aside from all this, IT also helps taxpayers by giving them more than one option to pay their taxes.

In 2024, it will be pretty easy for taxpayers to simply log into the tax administration portal and check all their tax dues and other compliance monitoring aspects.

Tax Base Identification

It is pretty much the core of the tax administration system. 

This means that IT works to figure out an accurate way to look at the tax for both individuals and businesses.

Tech has made it easy for the whole registration process to become digital and it also becomes a lot easier to manage Electronic Fiscal Devices (EFDs) to capture transactions and digital payments to determine the tax due. 

Plus the cost of these IoT devices can be pretty hefty too.

Monitoring Compliance

With new technology, we have also seen some pretty nifty tools that make it possible for tax admins to analyze taxpayer data to help them keep up with monitoring and enforcing compliance.

This can be easily done by cross-checking different data sources against self-reported tax information.

And all this can be done automatically with the help of the latest IT resources and tools.

Plus efficiency and transparency also potentially improve courtesy of the analysis of the third-party data. 

This makes it easier for the IRS to track those who aren’t remitting their taxes and take legal action against them. 

Compliance Facilitation

With the rise of e-payment and e-filing systems, it has made a pretty huge impact in the way of improving the tax-paying experience.

This also helps the government save a lot in reducing compliance costs, and the best part is that they can even improve on their communication with the taxpayers too.

This cuts down on the travel, queues, and errors that are caused by manually recording the information and data. 

There is also a potential reduction in corruption practices as technology has brought forth impersonal, computer-enabled interactions between taxpayers and the authorities.

The Drawbacks of Technology

Well, as much as IT can bring some pretty sweet benefits to the tax administration system, there are some drawbacks too.

Here are some of the negative aspects of IT in tax administration.

Human Factor

Human error, you might have heard about it at least somewhere.

It is one of the most common issues when introducing any new tech to basically any field out there.

Well, a lack of training and awareness can be a pretty huge headache for administration bodies when they add new tech into their workflows for both the tax officials and the taxpayers too.

Plus, you cannot just ignore all the adoption costs as well as the likelihood that taxpayers who are experts in the field can very easily find loopholes and try playing the system by avoiding the payment of tax altogether.

Some taxpayers are less into technology and might not trust the new systems. There needs to be an approach to sorting these issues out, enforcing them, being vigilant, and creating a trust-building solution to cover all the possible outcomes of this new endeavor. 

Regulatory Framework

Data sharing today brings about a lot of controversies between authorities, as it does not happen systematically between the private and public parties. 

This is because of confidentiality and privacy concerns. This calls for a centralized, automated platform that offers access for banks and government institutions to allow for cross-checking background information on taxpayers. 

There is also the need to put up regulatory frameworks to counter cybersecurity issues and preserve confidentiality and privacy to protect taxpayers from data leakages.  

Random tax facts

Conclusion

The more tech can evolve the more complicated the role of IT in tax administration will get.

As it creates more opportunities for simplifying their jobs and improving efficiency. 

But, even if the governments can adopt new systems into their tax admin processes, there is a need they not only train their staff on the new technology but also need to put in a framework that some third party is not able to manipulate the system.

FAQ

What is the role of technology in tax administration?

By simplifying communication with taxpayers and removing the need for travel, long lines, and error-prone manual data entry, technologies like EFDs, e-filing, and e-payment can enhance the taxpayer experience and lower compliance costs. 

What is the tax administration?

They are part of the government office that deals with and implements tax laws. 

Their main task is to deal with the taxpayers and they also make sure that the right amount of tax is collected.

What technology is used in the tax system?

It can include technological applications like enterprise systems, middleware, tax applications, and management reporting dashboards.





Adam Green

Adam believes it's pretty cool to be a software expert, but it's much cooler to share all the expertise he has gathered in all his years of experimenting and learning. He is contributing his knowledge and skills to Get Assist and also been featured as a contributor in many popular tech sites.

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