In the last thirty days, Argentina announced new electronic VAT reporting rules, and Pakistan enacted a rule requiring service and retail businesses to report transactions to tax authorities in real time.
Without disrespecting either Argentine or Pakistani tax authorities, the ambition of these information gathering rules will meet with both technical problems and -- shall we say, ahem -- reluctant compliance by many affected businesses. On the other hand, it speaks well of each country for attempting to start down the road in using IT to improve tax compliance. There is no escaping the trend toward the use of IT to improve compliance.
While digitalization is proving disruptive to traditional tax rules, these two initiatives suggest that resource-starved agencies charged with regulating business can use IT to leapfrog to the front of the queue in terms of efficiency and compliance. Digital-based compliance systems also offer the possibility of reducing government corruption.
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