CFE Tax Advisers Europe brings together 33 national organisations from 26 European countries, representing more than 200,000 tax advisers. ICAEW’s Tax Faculty has been a member since 1 January 2002. The Chartered Institute of Taxation (CIOT) is the other UK member.

CFE exists to safeguard the professional interests of tax advisers and to provide a forum for the exchange of information about tax laws, administration and practice. It maintains relationships with tax authorities and key institutions at national and international levels.

Its current president, Ian Hayes, is a former Chair of the Tax Faculty Committee. He is keen to focus on the role that technology is playing – and will increasingly play – in tax administration. Given that tax authorities share knowledge through the OECD Forum on Tax Administration and elsewhere, it is vital that we too share experience of digitalisation and its impact on tax compliance and advisory work. Having this insight and knowledge helps to inform the faculty’s approach to developments in the UK.

I took part in two major sessions at the conference: first, one on the implications of the OECD’s paper Tax Administration 3.0; and second a meeting of the CFE Tax Technology Committee. I also joined a panel to reflect on the key issues that had emerged.

Evolution or revolution?

The first day was given over to the CFE Professional Affairs conference, titled Tax Adviser 2030: Evolution or revolution for tax practice, policy and administration.

The morning session considered the impact of EU/OECD developments on fiscal systems and tax policy. The afternoon session, which I moderated on behalf of ICAEW, looked at two fundamental aspects of digitalisation of tax: first, the implications of the OECD paper Tax Administration 3.0; second, the likely impact of generative AI.

Tax Administration 3.0 sets out a vision for tax administration in a digital world. Tax Administration 1.0 was effectively a world in which paper predominated. Tax Administration 2.0 saw the digitalisation of forms and processes. Tax Administration 3.0 envisages systems and processes built around data rather than forms; a focus on real time data rather than historical, periodic data; of advantage being taken of compliance by design, where tax compliance rules are built into taxpayers’ natural systems and where digital tax administration is designed through a process of co-creation between tax authorities and stakeholders. 

Against this background, Sami Koskinen, Director of Stakeholder Relations at the Finnish tax authority, described the main features of Finland’s Real-Time Economy Project. The project extends beyond the tax authority to include other government departments. The project steering group gives life to the idea of co-creation, drawing its membership from the Ministry of Economic Affairs and Employment, the Finance Ministry and other government agencies, as well as from Confederation of Finnish Industries, Finance Finland, Finnish Commerce Federation, Association of Finnish Municipalities, Federation of Finnish Enterprises, Association of Finnish Accounting Firms, and Technology Industries of Finland. 

This approach ensures that the needs of companies and entrepreneurs are factored into design. Data standardisation will ensure that there is a 'single source of truth' while standardisation of application programming interfaces (APIs) will allow for a seamless flow of real-time high-quality data between partners in the financial ecosystem. Better quality data should reduce the number of corrections needed. E-invoicing and e-receipts will form the basis for transactional VAT reporting and potentially a real-time split payment approach to VAT; they will also underpin financial reporting and corporate income tax compliance. 

A key element of the Real-Time Economy Project is a reliable digital identity (ID). This issue was picked up by the second speaker on the panel, Petra Pospisilova, President of the Czech Chamber of Tax Advisers.

Digital ID is an issue that every tax authority has to get to grips with in the move to Tax Administration 3.0. Only when financial data can be associated with the correct taxpayer with a very high degree of certainty is it possible to accurately prepopulate tax returns. But should an entirely new ID be created or is there an existing one that could be used? The Czech Republic has elected to use an existing bank ID that is secure, entity/person-specific and which incorporates multi-factor authentication. This single digital bank ID can now be used for accessing land registry data, medical prescription services, tax filings and certificates, communications with the social security authorities and signing of e-documents. 

Virpi Pasanen, a tax partner with Deloitte in Helsinki, reiterated the importance of data quality. She also stressed the need to consider the cost of compliance and the need to ensure that taxpayers see real benefits from digitalisation. Two other points Pasanen made really resonated with me. First, the fact that one size doesn’t fit all (what works for a multinational enterprise does not necessarily work for an SME) and second, the real-time economy requires simpler taxation: the move to real-time data opens up new opportunities to tax transactions in completely different ways.

The final speaker was Piergiorgio Valente, Chair of the CFE Tax Technology Committee. Valente gave a short but thought-provoking presentation on the issues that AI presents to tax professionals – a topic that was explored further the next morning when the Tax Technology Committee met. 

Tax Technology Committee

I have been a member of the CFE Tax Technology Committee since the beginning of 2020. Over that time it has considered many developments, from the taxation of crypto assets to cyber security in a tax context; from the use of data analytics by tax authorities across CFE member nations to the implications of Tax Administration 3.0. Over recent months, however, a significant area of focus has been on the potential impact of generative AI on tax administration and on tax advice.

Several members of the committee have been actively using generative AI; some to test the boundaries of its potential and others in daily practice. One delegate was using generative AI to review complex M&A documentation and rated the quality of the results as excellent. Another used it not only to answer questions but for coding. Some, however, remained cautious.

Some clear themes emerged. One was that clients will inevitably use generative AI to ask tax questions and to check their agent’s advice: that is something we have to anticipate and plan for. Answers from generative AI were generally rated as very readable and good at a general level, but sometimes less accurate when highly technical questions were asked. Challenging an answer sometimes prompted a changed response. The use of generative AI by people who do not have sufficient tax knowledge to be able to assess the accuracy of the output or to exercise professional judgement was also seen as a significant emerging issue.

Sharing ideas

The conference covered a huge amount of ground. Sharing experience of the challenges and opportunities perceived by practitioners across multiple jurisdictions is invaluable. So many of the problems we face are similar (or identical), but the solutions that have been attempted or successfully delivered are often different. Tax authorities share their experience; it is critical that we as practitioners share them, too. CFE provides an excellent forum in which to do that.

Paul Aplin, member of the Tax Faculty Board