Digitisation of taxes: The need of the hour

The world is adapting to digitisation at lightspeed and it would be difficult to think of any area that has not been realised the benefits of technology. The financial sector is definitely one of the sectors that has been witnessing revolutionary growth due to the evolution of digitisation. An imperative reason behind this is that it has been adept in resolving an individual’s financial issues swiftly. For instance, individuals can now procure a loan within a few taps, transact funds within a few seconds and so forth. We are presently standing at a point where we cannot imagine a world without technology and digital evolution. Such has been the power of digitisation in recent years.

Well, while looking at digitisation and its impact on the financial sector, it is also necessary to delve a bit deeper and have a closer view of another important aspect of it and that would be the taxation arena. Just like any other aspect of the financial world, taxation too needs to be entirely digitised as quickly as possible. Although the world is sprinting towards digitisation, the government sector has unfortunately been lagging in this race.

This has been significantly detrimental to the revenue ecosystem. The conspicuous technological gap has helped the poor become poorer and rich become richer. Let's put this clearly, the present taxation system is very ambiguous. Not only that, but the entire process is also complicated and sluggish. This has been a persistent shortcoming that has made it almost impracticable for the government to enforce an equivalent revenue system for all and sundry. The government has initiated measures to go digital on this front, but the efforts need to be further stepped up in order to harness the benefits of digitisation completely.

A complete digitisation of taxation is the need of the hour. It will bring about more transparency to a process that is not only dated but also has some drawbacks. Adapting to digitisation of taxation will reincarnate the entire distorted system and will also help the government to have a check on that segment which discreetly evades taxes every year by tricking the government authorities.

The current process has put the government’s credibility in question in the eyes of the public who have been diligently paying their taxes on time year after year. Having digitised the entire system will not only help the government to ensure that every citizen pays their taxes on time but will also help individuals regain their faith in the bureaucracy.

Integrating a digitised taxation system will also help in the timely ease offiling tax returns and tax benefits. Which otherwise usually get delayed and adds up to the already existing tax complications that the common people have to undergo. Under the current system, individuals have to fill too many forms for filing taxes and wait for months to come for the reimbursement processes. When the entire process gets digitalised the compliance burdens of the government authorities will be eased which will automatically make the entire process seamless and swift.

The question of ‘how to achieve complete digitisation definitely arises here. At the fore, the government needs to incorporate cloud computing. This will be highly beneficial in terms of cost reduction, ramping up the entire revenue system, deftly managing the humongous data generated from the internet and so on. Besides that, the use of multi-factor identification, AI, in tandem with IoT, CRM and advanced analytics will help to build a stronger and secured infrastructure, resolve existing operational issues and assist in developing and maintaining a more pristine relationship with the public by and large.

Countries such as the U.K., Azerbaijan, Australia, China, Estonia, Italy, Lithuania, Spain, Mexico, Zimbabwe and New Zealand have been already successful in implementing a full-fledged digitised tax system which is saving their time and effort in managing the entire revenue system at a more scalable level.

India too should not be left behind and quickly pick up on this advancement. Moreover, owing to the fact that the private sector is more technologically up-to-date, it can significantly contribute to the digitisation of taxes. Its state-of-the-art software and technologies can definitely help government agencies in the process of tax registration, calculation, collection, generating e-Invoices, filing and reporting of taxes, and so on. The government must and should seek a helping hand from the private sectors to bring about a phenomenal change in the currently disrupted revenue system.

By Raj N, Serial Entrepreneur, Angel Investor and Founder of Zaggle&ZikZuk