Technology from a tax perspective

Data analytics and AI/ML have equipped tax authorities and businesses with unprecedented capabilities to analyse vast datasets, uncover patterns and discern potential risks. Data visualisation tools such as PowerBI and Tableau and predictive and prescriptive analytics help in proactive tax planning, decision making and risk mitigation. The swift identification of anomalies and insights from the output of tax analytics streamlines tax processes and helps in enhancing accuracy and efficiency.

Blockchain technology’s hallmark lies in providing immutable and transparent transaction records. Through a decentralised ledger system, it significantly reduces the potential of fraud, enhances audit trails and fosters trust in tax systems. For instance, if tax authorities utilise blockchain for transactions, it will help in recording transactions securely, permanently and ensure records are not tampered with or altered – this would be of significant use in the context of transactional taxes such as Goods and Services Tax and Tax Deducted at Source. It not only lightens the compliance load but also safeguards the integrity of crucial tax-related data, thereby enhancing the overall efficiency and reliability of the tax ecosystem.

The integration of cloud computing with tax systems brings scalability, accessibility and cost-efficiency. For instance, if an organisation decides to migrate its processes to a cloud-based platform – this move will consolidate all tax-related data, making it accessible from anywhere and at any time. It will enable real-time collaboration among different departments and help in seamless integration with complementary technologies such as AI or data analytics. It is also pertinent to note that tax software/solutions offered by tax technology specialists are also on the cloud. As a result, tax systems become more agile and adaptable, and they can be scaled up easily to accommodate increased demands in future without large investments in hardware.

RPA has transformed tax processes by automating repetitive tasks such as data extraction, data entry and form processing. RPA uses bots to mimic human actions, minimising errors and maximising operational efficiency. It enables tax professionals to focus on more important tasks such as strategic initiatives and analytics, while the bots handle routine tax functions, leading to significant efficiency.

The integration of Natural Language Processing (NLP) and chatbots will allow facilitating more user-friendly interactions between taxpayers and tax authorities in an automated manner. Chatbots can help provide instantaneous responses to queries, guide taxpayers through processes and assist in real-time issue resolution, thereby enhancing accessibility and reducing processing times. The more recent phenomenon of Generative AI is taking the world by storm, and it is likely to play a significant role in tax – for both, tax administrators and taxpayers.

An important global development in the tax space is the Pillar 2/GloBE rules, pursuant to which large organisations will be required to pay minimum tax of 15% in each jurisdiction in which they operate. The introduction of these rules is on the cards in India, and technology will play a very significant role in compliance with the new rules, as they are complex and require significant amount of data collation and processing.

A development that is likely to revolutionise tax compliance in the coming years is SAF-T, which is a global OECD standard. SAF-T involves preparation of a standardised file of business transactions for submission by taxpayers and evaluation by tax administration in an automated manner. This would make the entire tax compliance process efficient.

As the government sets the stage for a digitally empowered taxation ecosystem, there is the need for taxpayers to embrace these rapid technological innovations.

This article is authored by Pritin Kumar, partner, and Roma Kothari, manager, Deloitte Touche Tohmatsu India LLP.