Digital Tax – How The UK Taxation System will be made digital by 2020.
Digital Tax – Globally, technology is being used to simplify most processes that involve large amount of data files. Once the data is in digital format all the multi-sector transactions involving the data becomes very easy. We are all headed to a paperless economy and nobody wants to be left behind. Not even the government in its governance operations. One of the major goals for the UK government is to make digital the tax system.
This will eliminate the bureaucratic tedious process of filling assessment tax return forms, eliminate time wastage and ensure that the tax payers have unique personal web portals or accounts through which they can perform all their tax obligations online. Digital technology, which is the backbone of online banking, ticket booking, online shopping, making payments, and making GP appointments among others has brought so much efficiency and vast economic benefits. The tax system is also a nationwide obligation hence the need to make it fully an online digital platform.
The UK government will make fundamental transformations in the HMRC and the manner in which it handles tax related transactions. Tax payers, after having opened personal accounts with the HMRC will fully be able to know and track their tax obligations and liabilities as far as monthly or yearly tax returns are concerned. This guide elaborates on how this fundamental bold transformation will take place. The government unveiled this digital system near the end of March 2015 and by the time tax return period was coming to an end, a lot had been achieved. More than two million SMEs are using their digital accounts and the accounts have been introduced for individual tax payers during the year. The digital technology will allow the HMRC to interact with other institutions that have the digital platform in place such as banks. Our main vision is to ensure that by 2020 all the taxpayers and the businesses are able to make applications to the HMRC, file tax returns and get online updates on their tax records 24/7.
Digital tax – this process will be implemented in the following phases:
- Simplification of the Tax system: After the tax payers will have personal unique accounts, they will be saved the burden of submitting hard copy files to HMRC. The taxpayers will check their online statements and figures to ensure that details are correct and that there are no errors. Once this is achieved the HMRC will always use that information to third parties but with full observance of the rule of law. This way the tax payers will be saved the burden of submitting the required information from time to time. The different institutions will share tax payers’ information for correct record track and making necessarily adjustments. For example the banks, governmental departments, pension schemes among other public institutions will have the Tax payers information shared partially or fully depending on the purpose and the laws governing the operations. This implies that tax payers will be able to make payments without the need to file tax returns. HMRC will use their digital system to identify law breakers and bring them to justice.
- Making the business sector digital: Millions of digital tax accounts have already been opened by businesses and are on use. 98%-99% of VAT returns and corporate tax returns are being submitted online. The main goal of the UK government is to have all the 5 million SMEs registered by the HMRC. It will be a requirement for self employed persons and landlord to make online tax returns by 2020. By April 2018 all SMEs should follow suit. By 2020 the whole economy should be fully operating on a digital platform. Applications, tablets, smart phones and different software will be used to update tax returns online as individual and businesses will be on their daily routine activities. The HMRC will upgrade their system to prevent malicious software, intruders or hackers.
- Implementing a digital tax system for individuals: At this point over 86% of individuals have acquired the digital accounts and can file their individual assessment tax returns. The bigger picture is for the HMRC to interact with all individuals and inform them through messaging or social media of the pending benefits such as Child benefit services among others. Incidences of over payments are found out and HMRC tries to cope with the challenge and making the right allocations for personal allowances. The capital gains tax starts to be associated with income tax in 2015. This is to be achieved by April 2019 where all payments are to be aligned correctly.
- Making all the tax components a single unit: At this moment all the subsidiary institutions of HMRC have a different role to play as far as finances are concerned. At this point a single individual may be paying several taxes and even paying student loan repayments while enjoying the child benefits. The digital system should be able to give your financial position after considering all the other affiliated institutions. Allocation of personal allowances and other financial liabilities become a challenge at this moment. The HMRC has to invest in acquiring an advanced system. It works with other stakeholders to ensure that there is a continued quality online tax service.
Digital tax – when all innovations are introduced, the tax payers will be more equipped on tracking their financial details and updating the HMRC. This can also be shared in other online platforms. This way, the digital platform unites a religion, a country and the whole globe. HMRC would be probably the most advanced and comprehensive tax authority in the world.