I chose the title for my 2021 Hardman Lecture as it summed up the challenge technology presents to the tax profession: some potential threats, potential opportunities and new questions about how far technology should intrude on our lives. I wanted to pick up where Jane McCormick ended her Hardman Lecture earlier that year: Tax Professional 3.0.

The label McCormick used was inspired by the December 2020 Organisation for Economic Co-operation and Development report, Tax Administration 3.0: The Digital Transformation of Tax Administration. The report’s themes ran through her lecture: that we currently have a ‘burning platform’ that requires rebuilding; that we need to move beyond the digitalisation of existing forms and systems and to fully harness the power of technology; that we need to move closer to real-time transaction recording; and that tax compliance should increasingly be built into taxpayers’ natural systems.

Tax technology tools

In my article for the August 2021 issue of TAXline, I covered the main tools in the tax technology toolbox: optical character recognition (OCR), robotic process automation (RPA), artificial intelligence (AI), data analytics, data visualisation and the cloud. These technologies are already a part of tax practice and compliance across the business spectrum, from nano-businesses to multinational entities. Some are packaged into mobile phone apps and software; some are incorporated into complex, bespoke solutions. Either way, they are already a core part of the tax professional’s armoury.

Technologies such as blockchain and open banking also have the power to transform tax compliance, from improving transparency to increasing automation. A number of tax authorities internationally are looking at blockchain; HMRC has taken an interest in open banking. Cryptocurrencies are also making an impact and few practitioners will have escaped being asked about them by at least one client (HMRC even has a Cryptoassets Manual).

Threat or opportunity?

Threat and opportunity. Inevitably, technology changes – by automating, speeding up or rendering redundant – some tasks. AI holds the potential to have an impact on advisory work (it is already happening: H&R Block employed AI in the form of IBM Watson several years ago to guide clients through their tax situation, and AI is being used to analyse legal documents and predict the likely outcomes of tax cases). We need to embrace technology where it will enhance what we can do.

There are also both opportunities and threats inherent in the way tax authorities use technology. Most now use AI and data analytics to identify potential non-compliance, to gain insights and to target interventions. That process will only accelerate.

The ambition in Tax administration 3.0 to integrate tax compliance more into taxpayer systems needs thought: some in-built compliance would be uncontroversial; some could be highly controversial. How far should tax authorities go in pre-populating information in returns (and in acquiring that information)? Where does responsibility for accuracy sit? How far should they go in risk assessing taxpayers by, for example, comparing lifestyle with declared income? Where is the balance to be struck between personalisation and intrusion?   

The future tax professional

The future tax professional may not need to be an expert at programming or a tech wizard, but they will have to have an appreciation of technology, be experienced in its use and be aware of the ethical and other issues it creates. Human skills such as judgement and empathy will be even more important.

That is why the Tax Faculty is currently considering the skills the future tax professional will need. If you have views, we would very much like to hear them.

About the author

Paul Aplin is a member of the Tax Faculty Board and was ICAEW President 2018/19. You can access a recording of his Hardman Lecture