Thanks to access to new technologies, the world is developing faster today than ever before. The trend towards digitalisation is noticeable all over the world. The covid-19 pandemic not only did not halt, but actually accelerated the processes of robotisation and digitisation. Advanced technologies have also been used more regularly recently by government administrations, which are implementing standards and systems that allow for more efficient billing and collection of taxes. In accordance with OECD raport “ Inventory of Tax Technology Initiatives” 75% of administrations have prepared a digital transformation strategy. In the digital transformation of tax authorities two trends can be observed: engaging with taxpayers and compliance management. For example, during pandemic in-person visits dropped by 55% in 2020, whereas there was a 30% increase in digital contacts. For compliance purposes, solutions being implemented, most of which are computer-based, can allow authorities to scrutinise taxpayers’ transactions on an unprecedented scale. Therefore, the traditional system of reporting historical data based on tax returns is slowly becoming a thing of the past. A world in which tax authorities will analyse taxpayers’ transactions in real time, using systems that verify their accuracy, seems less and less of an abstraction. Around 90% of tax administrations admit using data science and analytical tools. Therefore, it is time to reflect on the impact of digitisation in its broadest sense on our work and possible ways to prepare for such changes. It is also a good time to start working on implementing solutions that will allow us to get ahead of the offices and benefit from digitisation now.
Difficult beginnings for SAF-T
Back in 2005, the OECD published the first guidelines for the implementation of a standardised format for financial data reported in XML, i.e. the Standard Audit File for Tax (SAF-T), aimed at improving the efficiency of tax audits. Based on these guidelines, a number of countries, including Portugal, France, Austria, Lithuania and Slovenia, have developed their own mechanisms for electronic reporting of financial data. Poland has also made it mandatory to report data to the tax authorities in the form of the so-called Jednolity Plik Kontrolny (JPK), which is the Polish equivalent of the Standard Audit File (SAF). Although the JPK refers to the SAF-T concept, it essentially covers a wider range of data and imposes more obligations on taxpayers than the original OECD guidelines. The obligation to generate and send JPK structures posed a real challenge both for taxpayers, who often had to adapt their financial systems to the new requirements, and for the tax authorities, who are only just learning how to make effective use of the data received from taxpayers. Currently, all entrepreneurs in Poland submit JPK_VAT files to the tax authorities on a monthly basis. From last quarter of 2018, Polish entrepreneurs submit financial statements prepared in accordance with Polish GAAP to the National Court Register (KRS) electronically (i.e. in the form of JPK). Moreover, entrepreneurs are obliged to present on the request of tax authorities, mainly during the tax inspection JPK files covering bank statements transactions, inventory movement, details of issues invoices as well as full accounting records. Furthermore, as many other countries have also decided to implement XML reporting based on the SAF-T concept, the possibility of comparing tax information between administrations of different countries cannot be ruled out in the future, which will lead to a significant improvement in the supervision of international transactions. Receiving data in a standardised format creates a number of new opportunities for tax authorities and could lead to a change in the way tax settlements have been carried out to date. As a result, tax authorities are already able to audit taxpayers’ accounts on an unprecedented scale and identify any irregularities much more easily and quickly than ever before. Moreover, many of the tax administration’s current planned activities suggest that JPK is only the first step towards implementing real-time tax settlements. This is evidenced, for example, by the mandatory electronic invoicing system, which will come into force in Poland on 1 January 2024.
Not only SAF-T
The digital revolution in the Polish tax system is not only about JPK. The tax digitalisation trend continues with a number of other changes that have already been implemented or are planned.
From 1 January 2022, taxpayers are able to issue structured invoices (e-invoices) using the National e-Invoice System (KSeF). Issuing structured invoices in KSeF is voluntary, available on a par with the existing forms of invoicing – electronic and paper. Mandatory KSeF will come into force in Poland on 1 January 2024.
KSeF marks a change in the process of issuing and receiving invoices. Structured invoices are drawn up according to an invoice template developed by the Ministry of Finance (MF) in the local financial and accounting software of businesses. Once issued, the invoice is sent from the financial and accounting system via an interface (API) to the central MF database (KSeF), after which it is available in this system and can be downloaded by the contractor to her/his financial and accounting system.
In addition to issuing, sending and receiving structured invoices, the KSeF also has the functions of storing them, marking them with an identifying number assigned by the system and verifying compliance with the model of such an invoice specified and made available by the minister responsible for public finance. In addition, the system is to be used for the analysis and control of data from structured invoices and the sending of messages regarding the issue, rejection or impossibility of issuing a structured invoice.
Another key solution in this respect is the STIR system (Clearing House Information and Communication System; in Polish: Clearing House Information and Communication System). STIR is used to provide information on the accounts of authorised entities (i.e. generally other than accounts of individuals used for private purposes) held by banks and cooperative savings and credit unions (SKOKs). The system analyses transactions made on these accounts in order to analyse the risk of tax fraud. This data is transmitted so quickly that the Head of the National Tax Administration (KAS) can prevent VAT fraud practically immediately. The risk analysis system used within the STIR is mainly based on software and automated algorithms. Human intervention occurs first at the decision-making stage, when the Head of KAS decides whether an extortion has actually occurred and whether the account indicated by the algorithm should be blocked. This example shows that properly programmed algorithms are already able to identify risks and possible irregularities in tax settlements. Therefore, the number of tax audits in Poland is decreasing from year to year, however, their effectiveness is increasing.
Optimising business processes
Robotic process automation (RPA) is another digitisation trend in the business world that can be used to streamline tax returns. It is believed to be one of the most important drivers of competitive advantage for businesses in the near future. By optimising business processes, it can bring huge savings and efficiency improvements across many industries. It can also streamline finance and tax departments in the automotive industry. Not surprisingly, managers of most global corporations list automation as one of their priorities. Robotics makes it possible to automate business processes by using software that mimics human labour. The work of robots can be constantly monitored, which significantly reduces or even eliminates the risk of human error. Therefore, properly implemented process automation offers a number of tangible benefits, mainly financial. According to various studies, RPA is estimated to reduce process costs by up to 80%, so the money invested in its implementation can pay for itself in a very short time. Automation of processes can also prove beneficial in terms of a more efficient use of a company’s human capital, eliminating the need to perform the most tedious and repetitive work, so employees can be involved in value-adding processes.
Robotic process automation can be implemented in almost any area of financial activity. However, it has the greatest potential in areas that involve many time-consuming, repetitive activities that, by their nature, are relatively easy to describe in a computer-readable format. It should be noted that not all processes can be completely automated, and certainly their automation is not in every case cost-effective or desirable. Therefore, properly defining all processes and identifying those that will benefit most from automation should be the first step towards process robotisation. Due to the ongoing trend of digitalisation of tax, resulting in more structured data and greater standardisation of tax processes, this area seems to be an ideal candidate in the search for processes with automation potential. Thanks to the rapid development of machine learning and artificial intelligence technologies, algorithms can replace humans in performing increasingly complex processes. They are also able to learn to react to unpredictable actions. The appropriate use of bots to prepare tax statements can increase control over a company’s tax processes and minimise the risk of human error, which in the world of real-time tax reporting can be crucial. This is because the automated algorithms used by tax authorities will identify any irregularities and interpretations in the tax returns received.
The future is now
The vision of tax authorities using algorithms to track transactions in real time is becoming increasingly real. How should we prepare for the coming changes? Among the more obvious measures is a change in the approach to the implementation of business processes, especially those that may be fully automated in the near future. IT solutions will certainly change the working methods and responsibilities of employees in finance, accounting and tax departments. Already, many processes related to making settlements or analysing regulations are supported by specialised software. Some simple, repetitive tasks are performed entirely by algorithms. In the future, computers will also be able to replace humans in performing more complex tasks, such as analysing regulations, drawing conclusions based on data or making predictions based on predictive analysis.
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