46 VIEWPOINT The digital future of tax BY LIZ ARMBRUESTER: AVALARA Mounting tax fraud and rapid technological advancements across our society are putting pressure on governments to digitise their tax policies – and to do so quickly Technology has changed the way we all live, work and play. This impact is particularly evident in commerce and compliance. Just think about the purchases you’ve made today – maybe you had food delivered after buying it via a mobile app, purchased a new pair of shoes online, and picked up coffee via a mobile order. Several systems had to work in sync to make each of these transactions possible, including those for payment collection, tax calculations, order management, shipping, and more. At the same time, several different tax determinations had to be made as each purchase may come with a different set of taxes, various tax rates and other nuanced rules. The scenario described above illustrates how technology and access to commerce has changed how business operates today, and why governments have adapted their tax policies to keep pace. But there are several other factors contributing to the digital future of tax, including challenges around tax fraud and a growing desire by tax authorities for increased and accelerated access to data. Let’s look at some examples of how authorities are digitising tax compliance globally. In the USA, there have been efforts by certain states to take sales tax requirements to another level by bringing tax reporting closer to the time of the transaction. This year, legislators in Rhode Island introduced a bill that would require credit card companies to provide the dollar amount of the tax collected on transactions to the state within 48 hours of processing. In recent years, Massachusetts has introduced legislation that would require payment processors to report tax data and remit tax collected to the state daily. While none of these legislative efforts have been enacted to date, the growing interest in bringing tax collections closer to the time of a transaction may give us a glimpse into the future of sales tax compliance. Globally, e-invoicing and live reporting mandates are defining the future of digitally driven continuous compliance. More than 60 countries around the globe have announced – or already require – e-invoicing for tax reporting. While models vary, e-invoicing provides tax authorities increased visibility into the tax owed on transactions. Brazil’s Nota Fiscal Eletrônica gives us the best glimpse into the future of digital tax compliance as it requires businesses to clear invoices by the tax authority before they can send them to the buyer. As more governments follow Brazil’s lead, we’ll inch closer to a future where managing compliance is a continuous process that is facilitated by technology for both parties – business and government. At Avalara, we’re providing solutions for tax today and creating the world’s largest platform Photo: iStock/Drazen_
RkJQdWJsaXNoZXIy NzQ1NTk=