Taxation In The Time Of Technology

While tax systems must evolve to keep pace with the digital economy, maintaining a resilient tax base also involves ensuring that no company or individual is left behind, say panelists at the SMU-Tax Academy Center for Excellence in Taxation’s conference.

AsianScientist (Sep. 20, 2017) – By Sim Shuzhen – On top of death and taxes, there is perhaps a third certainty in life: the relentless march of technology.

Taxpayers, tax advisors and tax authorities may not always see eye to eye, but there is one thing they can agree on: The current tax system—designed for an era of trade in physical goods—needs to evolve to keep pace with the rise of digital technology and the new business models it has enabled.

“Digitalisation is now challenging conventional notions of taxation. Jurisdictions across the world, including Singapore, are grappling with how to deal with taxation of the digital economy and are studying this closely,” said Ms Indranee Rajah, Singapore’s Senior Minister of State for Law and Finance.

Ms Rajah was speaking on 17 August 2017 at ‘The Future of Taxes in Disruptive Times’, a conference organised by the Singapore Management University-Tax Academy Centre for Excellence in Taxation (SMU-TA CET), at which she was the guest of honour.

In addition to talks from tax experts, the conference also featured two panel discussions focusing on technological, economic and political shifts and their impact on taxation.


Dealing with disruption

“How can we design tax systems that encourage new technologies, and how can we adopt some of these technologies to transform our tax administrations? We need to adapt our tax systems for digital disruption and new forms of businesses, because that is where growth is going to come from,” said Professor Jeffrey Owens, chairman of the SMU-TA CET Technical Advisory Panel, who moderated the first panel on ‘Disruptive Trends in Taxation’.

Consider blockchain technology, for example. The distributed ledger system that underpins Bitcoin and other cryptocurrencies is theoretically tamper-proof and allows for the secure recording, sharing and verification of financial transactions.

For the tax world, this means improved transparency, security and fraud detection, as well as the ability to automate some of the manual processes associated with transfer pricing and transactional taxes. But it also means some degree of job loss for the tax industry.

“The environment is changing, and certain jobs are at risk. A key part of our roles as advisors and intermediaries is to collate information, digest it and present it to the authorities,” said panellist Mr Chris Woo, head of tax at PriceWaterhouseCoopers Singapore. “These roles will have to evolve or be revolutionised for the digital economy.”

Tax intermediaries will still play important roles in the future, but they will have to constantly update their knowledge and skills, said Professor Katarina Adam of HTW Berlin, another member of the panel. “Do not fear new technology. It can lead to a lot of opportunities, but you need to develop your skills and understand what it has to offer,” she told the audience.

In addition to digitalisation, the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project, which aims to reduce tax evasion by standardising international tax rules and improving disclosure around cross-border transactions, will also have a major impact on taxation and economic policy, agreed the panel.

A side effect of BEPS is that it will promote “fierce but fair” international competition for talent and businesses, said Professor Owens.

Singapore is working to offer businesses a skilled talent pool, robust infrastructure, good governance, and digital platforms that allow for connectivity to the region, said Ms Rajah, who also spoke on the panel.

“We need to build up a value proposition that gives businesses a reason to be here,” she said.

“If [competition] is based purely on corporate tax rates, then we will find ourselves in a race to the bottom,” said Ms Rajah. “Instead, we have to ask ourselves what would make businesses come here even if our tax rate is not exactly the lowest.”



Tax in the real world

The conference’s second panel discussion, entitled ‘The Tax World By 2020’, considered what the near future holds for companies, governments and societies in terms of tax policy.

BEPS will certainly affect multinational corporations (MNCs), which will need to invest more effort into staying on top of their global tax positions, rather than simply focusing on their home offices, said panellist Mr Jonathan Stuart-Smith, partner (international tax services) at Ernst & Young.

“Tax departments need to change their outlook from being reactive to being much more proactive,” he said.

This will help them anticipate and make decisions on potential tax disputes, which are expected to become more common with increased transparency and better cooperation among tax authorities, he added.

“All this requires a fundamental shift in the thinking of tax departments,” he added. “It probably also requires us to try and elevate the debate up to the C-suite, to make our executives aware that tax is now becoming a much more difficult issue to handle.”

Panel member Ms Doreen Tan, Chief Tax Policy Officer at Singapore’s Ministry of Finance, said that technological disruption will have broader implications for all sectors of society, including smaller businesses and lower-income earners.

The government is thus using various policy tools, including tax policy, to create a dynamic society where businesses and individuals can continue to work and upgrade their skills amidst technological change.

“Only when our society is strong and our economy is strong can we have a strong tax system,” said Ms Tan.



Asian Scientist Magazine is a media partner of the Singapore Management University Office of Research & Tech Transfer.

———

Copyright: SMU Office of Research & Tech Transfer. Read the original article here; Photo: Ministry of Finance Singapore.
Disclaimer: This article does not necessarily reflect the views of AsianScientist or its staff.

A premier university in Asia, the Singapore Management University is internationally recognized for its world-class research and distinguished teaching. Established in 2000, SMU’s mission is to generate leading-edge research with global impact and produce broad-based, creative and entrepreneurial leaders for the knowledge-based economy.

Related Stories from Asian Scientist

  • Bidding Adieu To SMU’s Taxation Center Bidding Adieu To SMU’s Taxation Center As the SMU-TA Center for Excellence in Taxation draws to a close, Centre Director Associate Professor Goh Beng Wee discusses how it has contributed to the international taxation community.
  • The Smart City—No Risk, No Reward The Smart City—No Risk, No Reward Smart city collaborations are complex initiatives that often fail; yet, valuable lessons can be taken from these failures.
  • The Promise And Limitation Of Blockchain The Promise And Limitation Of Blockchain Companies have been searching for ways to solve practical problems using blockchain technology, but there is not yet a one-size-fits-all solution, said a panel of experts at SMU.
  • Need Information? Just Ask The Auditors Need Information? Just Ask The Auditors With their extensive knowledge of firms’ inner workings, auditors can act as a conduit for the dissemination of tax savings strategies between companies, says SMU Associate Professor Lim Chee Yeow.
  • The Law Of The Land The Law Of The Land Understanding how different jurisdictions handle complex land title disputes can yield important lessons for the future development of property law, says SMU Assistant Professor Alvin See.
  • The Black Box Of Technology The Black Box Of Technology SMU Assistant Professor Juliana Yu Sun is using economic models to demystify the relationship between technology and economic growth.