New technology has the potential to completely change the face of tax law and accounting: that was the take-away from a recent installment of a tax and tech series organized by Professor Jeffrey Owens and Julia de Jong of Vienna University’s Digital Economy Taxation Network. The roundtable on Governance Implications of Disruptive Technology assembled experts from Microsoft, PWC, think tanks, and the academy.
The session began with a staggering prediction that large companies will sack up to 40% of their tax compliance employees in coming years. Why? Experts anticipate that technological progress in data collection and algorithmic reporting will allow audit functions to be built directly into data collection and management. This integration will allow governments to coordinate seamlessly with taxpayers by assuming the role of tax preparers whose reliance on algorithms largely eliminates the need for auditors. Similarly, data technology will eventually obsolete VAT returns, an administrative headache for most of the globe and a major source of work for the accounting industry. Eelco van der Enden, a partner with PWC Netherlands, went so far as to predict the breakup of Big Four accounting within ten years as technology grabs the tax prep reins and renders auditing obsolete.
Disruptive technologies that leverage data also have the potential to revolutionize how we address the tax gap. As van der Enden noted, “[d]ays are gone when you could create a bunch of bullshit” in a tax return to force regulators into a negotiation. The ready availability of data from sources as disparate as taxpayer reporting, social media accounts, and even satellite pictures of the planet are poised to revolutionize business and tax transparency. In addition, advances like quantum computing, when combined with what has been called a tsunami of data, will allow tax systems to handle an exponentially increasing amount of complexity. Transfer pricing, for instance, will be a whole new ballgame with the advent of close-to-omniscient tech. When (not if, but when) complexity no longer results in a loss of efficiency on the human side, tax administrations could see large gains from re-regulation in some cases.
As Harald Leitenmuller of Microsoft concluded about tax experts going forward, “[t]he future of your profession is to be a good data scientist who can leverage the knowledge hidden in the existing data.” Congress and IRS, take note.
(Written with thanks to Fulbright Austria for supporting my work.)