The digitalization of the Tax Administrations and the future of Teleworking

Alfredo CollosaAlfredo Collosa    23 June 2020
The digitalization of the Tax Administrations and the future of Teleworking

In light of isolation measures adopted by many countries vis-à - vis the world coronavirus pandemic, we now see both the public and the private sector attempting to digitize themselves quickly.We face a reckless contest to digitize all their processes as a matter of urgency and therefore be able to continue to offer services or sell goods.

There is a needfor digitalization of tax administration (TAs), which is currently facing a major challenge but also an excellent opportunity to make sure that all of the processes are digitized.

This digital transformation will be seen as an integral part of the concept of digital governance in the delivery of services.

The digital government is characterized by digitization of public services, the extensive use of public and personal data, introducing process automation algorithms, and supporting the development of artificial intelligence applications to automate the functions and activities of the public sector.

The digitization of governments, as has been described, is a challenge. These features were also shared by others who had already adjusted to the Internet. The most important thing is to build small, multidisciplinary digital devices, to position them at the centre of public service and to allow freedom to operate in new ways. Such tools were developed to provide solutions that meet the needs of users.

Presently, TAs are trying to digitize and to enter what is referred to as electronic administration, which involves numerous organized elements: technology, rules, and models of management.

"To use ICT within public administration and to combine organizational and new skills to enhance public and democratic processes in order to promote support for public policies" implies the idea of E-Government, which is described by the European Commission.

But all this has significant impacts, as one of the most important advantages of electronic administration can be listed as possible:

  • Greater transparency
  • Lower costs and greater revenues
  • Increased efficiency and effectiveness
  • Struggle against corruption
  • Electronic cooperation with other Tax Administrations
  • Interoperation (capacity for exchanging information and using it)
  • One-stop shop

The main benefits of betting on TAs digitization is to promote accountability, which is crucial to combating corruption.

The OECD, along with many other organizations and countries, are working on the issue of electronic government, and have issued a Recommendation(1) with the purpose of supporting the development and implementation of digital government strategies to enable governments to be closer to the public and business.

In this respect, it is recognized that modern technology is not just a strategic promoter of public sector efficiency, they also can help policy effectiveness and build more open, efficient, innovative, participatory, and effective governments.

Some of the advantages in digitizing the structures and functions of TAs are:

  • Operating with digital files, electronic signatures, and electronic notifications, instead of paper files which one should tend toward their reduction
  • Permitting the teleworking or home office
  • Considering the new forms of information and assistance provided to taxpayers (attention through the TAS website or mobile applications) where there is a tendency to reduce physical contact with taxpayers
  • Using the plethora of information available in the TAs, not only internally but also externally, as a result of the increasing forms of cooperation /collaboration resulting, among other things, from exchanges of information and everything related to the BEPS Action Plan of the OECD
  • Implement frameworks such as compliance risk management (CRM) wherever possible, aim to interfere in earlier stages, and not after the filing of tax returns with significant controls over intense ones
  • Offering pre-filled tax returns
  • Promoting collaboration and integration between different public bodies and TAs of the same state, as well as between different countries through such processes as one-stop-shop
  • Counting on information systems rendering more efficient control, since there is no doubt that the work of the TAs is currently to manage information, and for this reason,we can see how important it is to rely on information systems to carry out massive and intensive controls
  • Improving the quality of information, because, it is not only a matter of collecting a great deal of information, but it is necessary to work strongly on its quality and to evaluate and use it effectively

On these issues, it should be noted that recently, the governments of the world as a result of the coronavirus have authorized temporary organizational measures for state employees, one of them being teleworking.

Teleworking has multiple perks for both workforce and TAs. They include greater autonomy, flexibility, and mobility, reconciling work with family life, reducing stress, reducing travel with the resulting reduction in pollution in large cities, and savings in office costs, among others.

Teleworking is a job performed remotely using ICT to sell goods or offer services to the world. The ICTs needed for these tasks include, but are not limited to, PCs, the Internet, cell phones, telephones, and digital cameras. This mainly includes web browsing and e-mail within the Internet. And on a case, blogs, websites, translation software, instant messaging (chat), and IP telephony (voIP).

Let’s look into the difficulties that TAs are currently experiencing as a result of coronavirus and the urgent implementation without due planning for teleworking.

In this regard, he is persuaded that the more advanced the method of digitizing the TA, the less the inconveniences that need to be encountered.

A common issue in many countries is the digitization and coaching of taxpayers and TA officials in the use of new ICTs, especially in generations not yet familiar with digitization.

It is not a simple task, and much less so when it has had to be accelerated, as in the given circumstances.

From the perspective of TA workers, one may list, among others, the following problems arising from the coronavirus outbreak and the need for teleworking:

  • Difficulty for all staff to count remote accesses from their homes in the TA offices
  • Not counting on the documents in their offices to carry out their duties at home
  • Not having easy access to bibliography and written research content accessible in the offices at their home office
  • Not having the necessary computers or computerized resources for teleworking in their homes
  • Not being able to record all activities carried out from their homes for management control purposes
  • Not being able to sign administrative acts in digital form from their homes

From the point of view of taxpayers, in addition to the matter of significant financial and economic difficulties in fulfilling their tax obligations, if we find the relationship with the TAs, the following difficulties arise, among others:

  • Presentation of procedures in a digital manner, not many of them are provided for in the Regulations
  • Responding to requests made on paper in a digital manner
  • Communicate with the offices if they are closed down. That is, which alternative means of communication are available
  • Inability to file appeals or reviews on a digital basis unless provided for in the Regulations
  • Making payments for specific obligations for which electronic mode of payment is yet to be set up
  • Electronic contact with TAs remains a significant problem for particular groups, which is why TAs will set up assistance networks so as not to cause such groups (generally the most disadvantaged) to incur extra costs by having to turn to private practitioners

But what happens to telework in the Tax Administrations (TAs) after the end of the COVID-19 restrictions. That is, to evaluate its potential.

The following factors, among others, should be considered when evaluating the potential continuation of telework:

1. Legal regulation of Telework: rights and obligations of the parties.

Undoubtedly, this is also a key issue; this requires an overview of the laws in force in each country with respect to teleworking.

According to a recent IDB document[2] in Latin America and the Caribbean, some nations, such as Colombia[3], have more advanced legislation. Telework is regulated as "distance work" in some countries, such as Chile. In other countries, such as Mexico, it is governed as a modality of "home-based work," defined by the use of ICT, while in Colombia and Peru, the legislation makes clear reference to the term telework.

As far as Europe is concerned, the European Framework Agreement on Telework was signed in Brussels in July 2002 and different countries have made progress in their legislation.

The IDB document referred to sets out some of the requirements that must be considered when regulating telework, such as:

A written contract which includes the rights and obligations

Fair treatment as teleworkers must have the same rights and benefits as face-to-face workers, such as social security and fair rights.

Wilfulness and reversibility or, that is, the face-to-face staff who are teleworkers have the right to reverse the condition and to return to face-to-face service.

Equipment and associated costs should be provided by the employers, although the parties may agree that the teleworker will use their own equipment to compensate for the costs.

Security and health of the teleworkers is the responsibility of the employer.

Work shifts may be subject to different approaches, such as excluding telework from the limitation of work shifts to the organization of work schedules within certain limits.

Telework modalities can be permanent when telework is conducted during the shift, or in part when telework is combined with face-to-face work.

Classification as subordinate work or autonomous work.

2. Productivity and telework.

Specifically, this is concerned with determining whether to carry out the task via telework implies greater or less productivity for the TA in question.

Any research made during the current time of confinement must be distinguished from various considerations which should not be considered after the end of the pandemic, as, for example, research with children and the whole family is carried out at home.

Some views say that command is not the way to maximize the efficiency of individuals, and this is illustrated in everyday practice. It is also said that more hours are worked than when the job is done in the face-to-face[4] mode.

Hyper-connectivity and its negative impact on the harmonization of family and working life is a growing concern for teleworkers. Several European countries have already proposed legislation on this issue[5], but little progress has been made in Latin America and the Caribbean in this regard.

Several surveys, among them that of the ILO – Eurofund[6], highlight the rise in productivity as a benefit for employees and companiesand point out studies carried out in different countries.

There is a great deal to be studied in this respect and would most definitely entail very detailed studies specific to TAs, with regard not only to efficiencybut also to the management control of any function or method to be carried out by telework.

3. Level of digitalization of the TA and the country in general. Human and Material Resources.

This means an analysis of the human and material resources available for teleworking.

The level of digital technology of the functions, processes, and tasks of the TA, as well as of the country concerned, must be verified.

It will be necessary to analyse whether, for example, procedures or tasks can be presented in digital form and processed through digital files, digital signatures, and notified through electronic tax domiciles.

Another key issue is the diagnosis of TA 's human resources, in particular the determination of whether staff is not familiar with digitization, in which case appropriate training and development actions will be needed.

Leading remote teams is a complex task, totally different from face-to-face. It is therefore important to determine whether there are profiles of teleworkers capable of adapting themselves, with full awareness of the modality and the opportunities it generates.

The degree of digitalization in the country is very critical. That is how advanced the issue of electronic governance is, as well as the essential technical requirements, such as Internet connectivity, equipment, and ICTs available at home.

The ILO – Eurofund[7] report referred to above notes that the incidence of telework relates not only to technological advances in the different countries but also to current economic structures and working cultures.

Finally, it is vital to analyze how computerized and familiar taxpayers are with the digital world in order to communicate electronically with TAs, as well as to take into account the level of informality, in such a way as to make digitization processes evidently difficult.

4. Security and Confidentiality of the information.

Currently, TA involves the administration of information[8], and hence the protection and confidentiality of the information available in the TAs is an extremely key question, which is a fundamental pillar of the tax system, and for which reason there must be an assurance that such information will not be revealed in an undue manner.

This issue is being legislated in all countries. If TA officials disclose or disseminate information about any taxpayer they have acquired in the performance of their duties, they shall be classified as an offense[9].

Telework outside the tax administration office poses new and important challenges. It is therefore essential that the same procedures, processes, and controls are applied as in the case of face-to-face work and that the relevant changes are made to cover all risks as appropriate[10].

For example, it is important to review the policy on remote access, access registration, and control, authentication mechanisms, use of public networks, digital signatures, audits and controls to be carried out to ensure confidentiality and security of information[11].

An important aspect to consider is whether, in order to carry out the telework, officials are required to transfer to their homes the files or the paper documents in the offices, with subsequent risks involved, such as thefts, deterioration, or loss of documents.

As final ideas, digitalization is important today, more than ever in and through TAs, they should be better positioned to boost their efficiency and effectiveness in the fight against fraud, to provide better services to people, to reduce enforcement costs, to encourage accountability (against corruption) and always to respect the rights of taxpayers.

At present, we are at a historical moment in the digitization process of the public and private sectors. It was necessarily accelerated as a result of the coronavirus pandemic.

On the one hand, those TAs that are more digitized are able to execute their functions more easily and to fulfil their tasks more effectively.

On the other hand, those TAs who are not yet digitized, even though they seek to solve their difficulties on a daily basis, I understand that they will learn the lesson of how important it is to bet on digitization.

Whether telework will continue in the Tax Administrations, there is a simple answer, nor can it be standard for all TAs or all their tasks and processes and much less all their workers and/or taxpayer segments."

All seem to say that telework is here to live in our TAs, in many cases mixing it with face-to-face operations.

The future will surely find us all the more digitalized, and this is perhaps one of the positive lessons that we will have learned in the aftermath of the pandemic.

Source of Reference

[1] http://www.oecd.org/gov/digital-government/recommendation-on-digital-government-strategies.htm

[2] “The future of work in Latin America and the Caribbean: how to guarantee workers’ rights in the digital era? From IDB https://publications.iadb.org/es/el-futuro-del-trabajo-en-america-latina-y-el-caribe-como-garantizar-los-derechos-de-los-0

[3] For more information, see https://www.teletrabajo.gov.co/622/w3-channel.html

[4] Quarantine debunks a myth: teleworking showed that control does not increase productivity. https://www.iproup.com/innovacion/13210-teletrabajo-mostro-que-el-control-no-incrementa-la-productividad

[5] France and Spain were pioneers in creating legislation on digital disconnection (Law N° 2016-1088 and the 2018 Law on the Protection of Data and Guarantee of Digital Rights, respectively).

[6] OIT Eurofund – Working at any time and in any place: consequences in the working sphere. 2019. The report synthesizes the research carried out by the network of European correspondents of Eurofund in ten member States of the EU –Belgium, Finland, France, Germany, Hungary, Italy, Holland, Spain, Sweden and Great Britain– and ILO consultants Argentina, Brazil, India, Japan and the United States.

[7] Idem note 6

[8] The Tax Administrations and Information Systems for improving control. Some Iines on the subject. CIAT Blog 29/7/2019.

[9] For example, article 114 of the CIAT Model Tax Code provides that the confidentiality of the equity data of the individuals is guaranteed through provisions included in the Code which provides for secrecy of the information entering the TA and a penalties system for the officials and entities using it for purposes other than the collection ad examination of the taxes.

(10) To expand this topic, we recommend that you review the recent book: ICT as a Strategic Tool to Leapfrog the Efficiency of Tax Administrations/ 2020 which deals with various aspects of security of the information.

(11) By way of example, the telework legislation in Colombia provides different recommendations on cybersecurity. https://www.teletrabajo.gov.co/622/w3-article-126328.html

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax. 

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