Conventionally, tax regulations have rendered little or no importance to the modern economy. The tax regulatory bodies across countries are struggling to cope up with the changes in regulatory, social, political, and technologies conditions.
In recent years, many organizations have employed various tax evasion arrangements which have deprived governments of revenue. A report from the European Commission states that the total VAT Gap for 26 EU countries amounted to around €193 billion in 2011, and it blamed the VAT Gap on factors like tax evasion, fraud and intentional misrepresentation of tax obligations through deliberate omission or falsification of income and revenue. However, many countries are employing several measures to regain revenue back.
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The governments have increased the level of scrutiny to keep a tight leash on the fraud, avoidance, and non-collection of tax, forcing companies to enhance the transparency in their tax arrangements. The tax authorities have started implementing digital tools to interpret taxpayer trends and ensure companies are able to achieve better compliance with local legislation. Additionally, the digital solutions are helping the tax authorities to prevent and detect crime, improve revenue collections and boost operational efficiency.
There is a massive demand for transparency in the business environments because of several factors like the global financial crisis, the Panama Papers, and other taxation scandals. The tax authorities have been improving the compliance regulations to improve their efficiency in beneficial ownership, profit shifting, transfer pricing, and other taxation issues. Many measures like the Organization for Economic Co-operation and Development’s (OECD’s), and Base Erosion and Profit Shifting (BEPS) have had a positive impact on the tax regulatory.
Many countries have also started leveraging data analytics tools to enhance compliance and limit fraud. Technology solutions can have a significant impact on a country’s tax policy by offering best practices to tax authorities. The tax technology involves the use of various intelligent technologies like Big Data, analytics, artificial intelligence (AI), machine learning, the Internet of Things (IoT), mobility and cloud computing. These tools can provide adequate measures to strengthen tax authorities.