FINC-1 - Business Taxation

Product Use Case Summary

This use case profiles the digital transformation of tax administration (e-taxation) in the business sector. The meaning of business taxation refers to the taxes that businesses must pay as a normal part of business operations. Tax administrations across the globe are examining the potential benefits of digitalization to broaden the tax base and improve the quality of taxpayer services - tax reporting and collection. Digital tools are seen as potential means that can make tax systems more accessible, efficient, and seamless for both taxpayers and tax administration.

Moreover, digitalizing the tax collection process is now seen as a key mean to combat tax evasion and reduce the room for non-compliance. Thus, more countries are focused on moving away from a paper-based tax administration to primarily computer-based interaction between taxpayer and administration. This process can also help tackle problems of businesses operating in the hidden and informal economy.

Stakeholders

  • Ministry responsible for administering and enforcing all laws relating to tax revenue.

  • Chamber of Commerce facilitating all business registration and/or certification in a country.

  • Institution or agency in charge of business registry - typically under Ministry of Trade and Industry.

  • Revenue Authority and/or taxation authorities/ agency in charge of the collection and receipt of all business-related tax revenue in a country.

  • Corporate/business entities in the country - public and private companies.

  • Tax agents, auditors, and compliance officers reviewing submitted tax related files.

Sustainable Development Goals (SDGs)

  • SDG 17: Partnerships for the Goals

Building Blocks

Source Documents

Steps

1 - Coordination

Success in digitalizing the tax administration process requires a high level of commitment and buy-in from all levels of government authorities involved – from policy makers to tax officers and auditors. Thus, developing a fully articulated implementation plan (road map) with a communication strategy that prioritizes internal change management of all staff is key. In this step, the government body in charge of tax administration (i.e., Tax and Customs Administration, Revenue Authority) trains all staff about the core benefits of standardizing/automating the business tax filing and payment process via a digital platform. Close collaboration with the Chamber of Commerce and their staff may be required. In certain countries, once a business formally registers with the Chamber of Commerce, their information is automatically forwarded to the Tax Administration Authority.

Workflows

  • Content Management for the staff to acquire technical and nontechnical guidelines on how to use platform

  • Coordination to have an agreed form of coordination, communication and collaboration between the Chambers of Commerce and Tax Administration - facilitating information sharing on businesses operating in the country

  • Education for educating and training all relevant government staff on new process and platform/solution being utilized. Emphasis on objective, process, guidelines, and benefits - time saving and easy usability

Building Blocks

Scheduler

Workflow

2 - Outreach Communications

For communication with the target business entity taxpayers - the tax administration implements a robust awareness raising campaign via telephone, email (i.e., Chambers of Commerce registered business entities contact database), SMS, newspapers, and social media. The purpose is to inform this target group about the new and mandatory digitized tax reporting process with clear guidelines and initial support on how to file taxes electronically using the platform in place. All information on the tax reporting platform should already be easily accessible and disseminated on all government run websites including in the Chambers of Commerce website, - timeframe to register, tax submission steps and requirements, deadlines, pre-filled standard form to declare revenue, expenses etc. Certain countries have a grace period of 1-3 years by which all businesses are required to transition to electronic invoicing (instead of cash-based transactions) to streamline and automate tax filing and reporting process.

Workflows

  • Client Communication to facilitate awareness of the tax platform for target audience and mandatory registration and enrollment process

  • Client Education for educating target users/audience on the objective(s), benefit(s), process, guideline etc

  • Content Management for the staff to generate relevant educational and promotional content

Building Blocks

Consent

Digital Registries

Messaging

Scheduler

3 - Registration

Registration is the process of collecting information of all eligible tax paying businesses that have formally registered their business entity in a country. Registration on the tax administration platform can take place via computer, mobile device etc. Information required could include business name, contact information (phone, email etc.) address, legal structure/type of business, date of establishment, taxpayer segment and corporate relationships., bank account details, business identification number or certificate received from the Chamber of Commerce etc. In certain countries, the Tax Administration allocates a unique taxpayer identification number and/or value added tax number (VAT) to each business, once they have fully completed the registration process. Personalized log in credentials can also be provided for each entity to be able to login to file taxes.

Workflows

  • Client Case Management for creating business entity user records

  • Data Collection and Reporting for capturing data of business entities

  • Identification and Registration for each registered business to be provided with unique identification number and/or personalized login details to the tax administration platform in order to submit all required forms and tax related documents

Building Blocks

Consent

Digital Registries

E-Signature

GIS

Identity

Information Mediator

4 - Data Verification and Validation

Data verification and validation should be coordinated with all relevant government authorities and regulatory bodies. For the e-tax system, in certain countries, the registration data that is submitted for tax purposes, is checked against other government databases (e.g. chamber of commerce business registry, etc.) to fill in any missing gaps, verify and validate collected information, including authentication of all records.

Workflows

  • Client Case Management for storing and reviewing identification, registration, and business registration records for tax purposes

  • Data Analysis and Business Intelligence for cross-referencing and verifying records across multiple registry sources, and reconciling gaps / overlaps

Building Blocks

Consent

Digital Registries

E-Signature

Identity

Information Mediator

Scheduler

5 - Registration Fee

To complete the registration, a fee can be charged to cover administration cost of registering a company in the Business Tax Register for the first time. This can be a one-time non-reoccurring fee. The payment can be done online or in person at the Tax Administration office as part of the final step of registration - this will depend on the country's tax regulations. This fee can directly be paid via debit or with credit card. Once the registration information and payment have been processed, a payment confirmation receipt and notification can be sent to the user information registration completion and approval.

Workflows

  • Client Case Management for identifying, authenticating and monitoring/verifying that the registration information and fee have been fully processed and received

  • Financial Services for processing registration fee

Building Blocks

Digital Registries

Identity

Information Mediator

Messaging

Payments

6 - Tax Submission

To file and submit all requirements for tax submission purposes, users (business owners) can log in to the designated platform. They can then complete standardized electronic form(s) and submit other income data (e.g., payroll and financial). They can also submit accounting or other source data to support filings (e.g., invoices and trial balances) in a defined electronic format. In certain countries, there is an annual deadline of when to file taxes whereby all taxable income will be calculated according to the tax year. All income received or accrued during a single year would need to be submitted in the filling process, along with expenses paid or accrued. Depending on a country by country basis, there are generally three types of taxes that can be filed: (1) turnover taxes - value added tax (VAT) or goods and services tax (GST); (2) taxing profit of companies/ corporate income tax; (3) taxes from wages or salaries - these can be paid as you earn taxes or even directly taken monthly from wages.

Workflows

  • Client Case Management to track, review and process all submitted tax related documents. Also, to respond to any inquiries or support needs from business owners/accounting team

  • Data Analysis and Business Intelligence to analyze all submitted data and ensure they meet tax compliance obligations

Building Blocks

Digital Registries

Identity

Information Mediator

Messaging

Scheduler

7 - Tax Payment

The amount of taxes a business pays can depend on the type of business, the nature of the business activity, and the volume of transactions carried out within the tax assessment period. In some countries, businesses must adhere to several domestic and business taxes including corporate income tax, value-added taxes, withholding taxes, and capital gains taxes. Thus, business taxes are calculated per the specific norms of a country.

The tax platform used can automate the tax calculation process by taking into account the tax regime and rate in the country, and the business's profit, revenue, expenses, and other relevant tax filing information submitted. The business is then allocated a timeframe in which to make this tax payment. The tax payment can be paid in one lump sum or installments.

Workflows

  • Client Case Management to track, manage and calculate tax payment per business. Also, to respond to any inquiries or support needs

  • Data Analysis and Business Intelligence to analyze all submitted data and ensure tax payment requirements are met

  • Financial Services for processing tax payments

Building Blocks

Digital Registries

Identity

Information Mediator

Messaging

Payments

Scheduler

8 - Tax Payer Account

This step is where the tax paying business entity can keep track of all filed tax returns and turnover payments done. This step is also where outstanding tax liability/owed taxes not paid or underpaid can be tracked and used to calculate the interest of delayed or underpaid tax payments. Depending on a country's tax debt management and enforcement system, this step can faciliate payments enforcement.

Workflows

  • Client Case Management for identifying and recording business entity tax liability and payments. Also monitoring any underpayments or delay in fulfilment of the correct tax payment amount

  • Client Communication to notify tax delinquent entities on additional payment requirements. To facilitate the reconciliation process

  • Data Collection and Reporting for tracking all filed tax returns and turnover payments. Also tracking reconcilation payments

Building Blocks

Consent

Identity

Messaging

Scheduler

Workflow

9 - Audit

Tax audit is the processing of reviewing/examining a business' accounts and financial information to ensure all information is reported correctly according to the tax laws and to verify the reported amount of tax is correct. This can be done via random selection and computer screening, where submitted tax returns are selected based solely on a statistical formula. Selection can also be made when it involves issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.

An experienced auditor will then manually review the submitted tax information. If the auditor notes something questionable, they will identify the items noted and forward the return for assignment to an examination group. Should a business be selected for audit, they will be notified via mail and/or on the tax platform. Following completion of the audit, the business entity should be notified of the outcome - whether changes are required and/or if additional money is owed.

Workflows

  • Client Case Management for communicating with businesses selected for audit: providing them with updates, requesting additional information and/or meetings. Also responding to inquiries, capturing reported cases on grievances / appeals etc., and for determining risks / conditionality by reviewing individual audit cases in-depth

  • Data Analysis and Business Intelligence to analyze behavior of tax payers and select cases that have higher probability of tax non-compliance. Also to analyze and review all cases selected for audit

Building Blocks

Consent

Identity

Messaging

Scheduler

Workflow

10 - Ongoing Case Management

This step involves ensuring information of businesses are kept up to date - specifically relating to timely tax payments. Also ensuring that there is a process in place to address any complaints, grievances and appeals raised. This process should be led by the Tax Administration's compliance officers/team.

Workflows

  • Client Case Management for identifying and recording business entity interactions with local officers and capturing reported cases on grievances / appeals etc., and for determining risks / conditionality by reviewing individual client case

  • Data Collection and Reporting for capturing changes in business entity information

  • Work Planning and Coordination to potentially suggest and connect with Chambers of Commerce in data validation/vetting

Building Blocks

Consent

Identity

Messaging

Scheduler

Workflow

11 - Ongoing M&E

The primary agent should conduct M&E exercises to acquire feedback from all relevant stakeholders on ways to improve the platform and ensure tax submissions are as streamlined, effective and efficient as possible.

Workflows

  • Client Case Management for ongoing monitoring and tracking of platform performance, and integration to other registries for holistic view and reporting

  • Data Analysis and Business Intelligence / Decision Support / Data Collection and Reporting to analyze, update, and report output / performance information

Building Blocks

Consent

Identity

Scheduler

Workflow

Contributors

  • Wesley Brown, GovStack Product Owner, Digital Impact Alliance

  • Sarah Farooqi, The Exchange Product Owner, Digital Impact Alliance

  • Sainabou Jallow, Business Analyst, Digital Impact Alliance

  • Aare Laponin, GovStack, Estonia

  • Margus Mägi, GovStack Project Lead for Estonia

  • Dr. P. S. Ramkumar, GovStack, International Telecommunication Union (ITU)

  • Farina Owusu, Junior Advisor, Global Programme Digital Transformation at GIZ

  • Meelis Zujev, GovStack, Estonia

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