The Extended Tax Authority

Tax authorities around the globe are investing in taking services online and in modernizing core tax systems. These changes, though necessary, are not sufficient. They do not enable tax authorities to address fully some of the most problematic issues that they face, such as avoidance and evasion by large taxpayers and providing more seamless citizen-centric services across government.

HP believes that three areas of technology in particular have the potential to impact these problematic issues:

• Edge technologies, especially Radio Frequency ID (RFID), can be used to shorten the information supply chain by embedding tax and information collection in normal business activities.
• Innovations in the Internet, such as XBRL, Web 2.0 and the Semantic Web, can provide very different mechanisms to gather, synthesize and analyze information.
• Tax authorities can employ business and IT shared service concepts to reduce costs and provide more joined-up citizen-centric services.

If a tax authority were to embrace these innovations fully, it would extend its scope on each dimension that defines an organization (who, where, what, how and when). This extended tax authority would be a much more open system where many parties collaborate in an eco-system. This would bring more innovation and flexibility but inevitably new risks too, since tax authorities will be more dependent on third parties to supply data, IT and business services. As a result, tax authorities will require more stringent approaches to risk management.

In this viewpoint paper, David Rimmer, leader for Revenue and Tax in HP's Global Government Industry, writes about how those new technologies can enable greater innovation and flexibility for tax authorities.