The event was produced in association with CoVi, the Department for International Development, OECD, and supported by KPMG International. It focused on the role technology can play in capacity building and improving transparency and accountability, as well as the measures needed to implement digital transformation effectively.

There were about 50 people in attendance, mainly from revenue authorities - particularly from developing countries - as well as some academics, advisers and representatives of NGOs and the media. The meeting was held under the Chatham House Rule. Wilton Park will produce a summary of the discussion and at a later stage CoVi and KPMG will produce a follow up document. So here I am setting out my impressions and some key themes.

Two anecdotes

First, in an opening address one delegate pointed out that more people in Africa have access to a mobile phones than to proper sanitation. That’s a shocking statement about the lack of basic living standards. But it’s also an optimistic note about the potential of technology to improve people’s lives.

Secondly, the conference consisted of presentations, panels and questions. But a striking moment was when one commissioner from country which is just embarking on the process of digital transformation simply asked if there was anyone else in the room who had faced a particular issue. There was; and an answer was quickly provided. It was a great example of revenue authorities sharing knowledge.

The human factor

While the conference was focused on technology a key theme which emerged is that it is not a panacea. First of all there needs to be a clear strategy and above all strong leadership and a political will to make changes. Implementing technology requires change management and a change of culture. The need to build trust between citizens and the tax authority or government was a recurrent theme. One delegate also noted that often new tools can be introduced but are not fully utilised due to inadequate training. Therefore the key issue remains people, not technology.

The scope and benefits of technology

There was a wide ranging discussion about the uses and benefits of technology – ranging through e.registration, e.filing, e.invoicing, to e.auditing. Some of the countries present were at the start of the digital journey while others were well advanced. There were interesting presentations from Chile, Mexico, and the Ukraine on the benefits of e.invoicing. In Chile this was something actually asked for by the larger taxpayers to deal with the complex tax system and then it filtered down to all levels of taxpayers, first on a voluntary basis and then on a mandatory basis. In Mexico it was introduced on a top-down basis and met with far more resistance from taxpayers. In the Ukraine, e.invoicing was introduced first for VAT to stop evasion and avoidance. However one of the benefits which multinationals found is that the system became far more efficient and re-payments were made much quicker.

Technology is scalable. We heard how blockchain and smart contracts have the potential to give full transparency over transactions to tax authorities and to automate, say, payments of VAT. We also heard from Kenya where mobile technology and simplified tax rules are being used to assist the smallest businesses and also to bring taxpayers out of the informal economy.

One delegate pointed out that technology can be used to change the way we do things (eg make reporting quicker, cheaper, more accurate), to change relationships (eg increase transparency) and to change actual tax policy (eg rethinking the source versus residence divide).

There were also discussions about how technology could be used to enable governments to analyse information in country by country reports and to facilitate beneficial ownership reporting.

Implementing technology

There was a debate about the merits of developing technology in-house as opposed to buying off-the-shelf products. It was noted that sometimes tax authorities buy tools based on the minimum requirements which are sold without thinking about the future requirements. As the amount of data processed increases or the scope with which the tools are used expands there can be significant modification costs.

Another point that was made is that development agencies often only assist with the initial stages of choosing the right technology, while developing country tax authorities would be helped by having an ongoing commitment during implementation.

Practicalities

As well as the human factor there was some good practical points about introducing a digital strategy. The right enabling systems need to be in place. Does the local law allow for digitisation - for example does it recognise e.signatures and are there adequate rules dealing with data use and protection? What is the rest of government doing in the digital sphere? Is it possible to piggyback on other initiatives and obtain cost savings through scale?

Also it is necessary to bring taxpayers into the process, both to help create the solutions but also to consider what training and information they will need in order to be able to use and benefit from the systems.

So can developing countries leap-frog developed ones when it comes to technology?

This question was hotly debated and in the end the “leap-frog” word was branded unhelpful. Clearly some developing countries, such a Mexico and Ukraine, are a long way ahead of most developed countries in terms of say e.invoicing. But it was clear there is not a simple one size fits all strategy. Before a digital strategy is developed the essential building blocks need to be in place – people, leadership, culture, policies. Then a decision about what tools are needed can be taken – some will be essential and some will be nice to haves.

Nevertheless technology is a fundamental part of building a tax authority; it is not a back office function. Even for countries at the start of the journey there are discreet areas and quick wins – such as data analytics.

Key proposals coming out of the meeting were that we need a framework to help tax authorities build a digital strategy, a checklist of what options are available and a pilot study in a country which is looking to digitalise its tax system. It was clear there were plenty of organisation in the room ready to help and many countries with relevant knowledge. Hopefully the next steps will be to make this a reality.