Tax Disruption Report 2021/2022

Helping tax functions align with today’s changing environment by providing valuable insights into how the tax authorities are digitally transforming

Why this report?

Technological advances at tax administrations, and the corresponding legal frameworks, have become more prominent as decisive factors in defining the relationship between the tax function and the tax authority. How does this translate in defining the tax function of the future? It means that the tax function of the future will have rely heavily on external factors in order for it successfully achieve digital transformation.

In this report, we want want to shed light on how the tax authorities are upgrading and support you by providing insights into how the tax authorities are changing in the digital age.

Download the report

What's in it?

The report is divided into three parts. In the first part, we check in with four of the twelve predictions we made in 2019 in our book “What happens when the taxman gets superpowers? – A guide to the digital world of tax”. We want to reassess how those predictions stand today; which ones are still valid, and which ones may need adjustment.

In the second part, we analyse the major developments relating to tax administrations’ digital journey in 2021/22.

And in the third part, we have a closer look at the specific use of digital technologies by 27 tax administrations worldwide.

What are the key takeaways?

Re-visiting four predictions we made in 2019

Tax authorities will be the first civil government bodies to embrace digitalisation on a large scale.
Still valid? Yes, if the COVID-19 pandemic is pushed further out of the limelight and soaring public debt – as a consequence of extensive COVID aid payments, rising military spending and the significant costs of dealing with the climate crisis and demographic change – comes to the fore (again).
Digitally transforming tax authorities means that they will significantly expand the volume of data they collect, as well as the depth, breadth, and velocity of their analysis capabilities. They will increasingly exchange data and derive information from third party data sources.
Still valid? Yes, if the tax authorities overcome the shortage of skills and organisational flaws.
We are about to enter an ‘upward information spiral’: more digital data leads to more transparency, which in turn leads to even more data generation and more transparency and so on (resulting in increasing control possibilities for tax authorities).
Still valid? Probably yes, but the final outcome isn't clear.
All tax authorities around the world will be affected sooner or later, yet they progress in different ways at different speeds.
Still valid? Yes, but we cannot observe any regularities in the process yet. Nor does a best practice approach seem to be crystallising.

Major developments relating to tax administrations’ digital journey in 2021/22

In the last two years, the gap between the various tax authorities has grown. To a certain extent, this gap may be explained by the price tax administrations are able and willing to pay for their digital transformation. Some tax administrations started to spend more than a quarter of their operating budget on digital technologies and processes.

While currently regular data analysis tools are particularly popular, many tax administrations, see the future in the advanced use of cloud computing, artificial intelligence and digital ledger technology. In addition, efforts to exchange information and data at the global, regional and national level have intensified.

Use of digital technologies by 27 tax administrations

Latin America has really pushed the use of e-invoicing, while tax administrations in Hungary, Italy and Spain are leading the way in the implementation of (real-time) invoicing systems in Europe.

Mexico, already acting in a hybrid cloud environment, and Australia are state of the art in data analytics. Especially Australia is employing sophisticated network analysis to examine huge databases compiled from a myriad of sources.

Meanwhile, the Netherlands are pushing the boundaries of natural language processing. They are cutting edge in terms in terms of automating a tax authority’s task.

Whereas China and Russia are rolling out huge and comprehensive data collecting efforts. China also uses its digital technologies to connect with other tax administrations along the Belt and Road Initiative.