For a country to thrive and be as stable as possible, a good tax collecting system is crucial. Since paying taxes probably goes as far back as humanity itself, modern countries base most of its economy on proper collection of taxes. The better the tax collecting system, the better the country. Naturally, this doesn’t go without properly monitoring and educating taxpayers on the importance of taxes.
Nevertheless, even in the best and richest countries of today, there are a lot of taxpayers who try to avoid paying taxes in every possible way. It was a shocking statement when a director of Swedish Tax Authority justified the introduction Swedish Cash Register Act 2010 to European Committee with findings that 75% of total turnover goes under-declared in small cash-based businesses. Certified Cash Register legislation was approved to protect serious business owners within cash trading from unfair competition and increase the legitimacy of the tax system by making it more difficult to withhold tax.
Although Sweden didn’t go across the board and monitored all registered taxpayers but mostly small cash-based businesses, the immediate effect corresponds to an increase in the reported revenues of 5 per cent, an additional half a billion AUD of new tax revenue.
A Canadian province of Quebec, another developed and wealthy jurisdiction, Revenue Quebec had even more success with their implementation of technology to better serve its citizens. An additional of 2.6 billion CAD was progressively collected from the hospitality sector alone. See The Resto Project video for more details.
Australia’s Tip-Off Program
Australia is by all means one of the most developed economies in the world, however, ATO’s tax collecting, and fiscal systems are not as modern as one would expect. The country loses a lot of money annually because of tax evaders and is continuously trying to get customers involved. Although a good plan with an honest intention to protect businesses from unfair competition, there is a high chance it doesn’t bring enough results.
Australian consumers can report by sending a tip-off form or calling a number if any of following circumstances occur:
- A customer is offered a discount for cash, a cash deal or a ‘cashy’, without a receipt or a discount for cash or mates’ rates
- A customer sees someone:
- not ringing up a sale on their till or keeping the till drawer open
- having two sets of books
- not declaring all of their income
- deleting transactions on the point of sale system
- failing to lodge returns or keep records
- a business owners claiming personal expenses on a business account so they can claim deductions
- a tax professionals encouraging you to claim incorrect or inflated deductions, or to hide or incorrectly change income that you should be reporting.
More about ATO’s making-a-tip-off
In 2020 alone, the Australian government has received over 60,000 tip-offs, and it reacted to most of them. Although using consumers to monitor taxpayers can help, it is often not the best, nor the fastest solution. The recent adoption of e-invoicing is not entirely addressing this issue as many can still go bellow the radar, without traceability, and continue to thrive in grey economy.
TaxCore® – Technology in Service of Customers and Tax Collection
A modern tax collecting system ensures that every taxpayer is connected to the tax authority in real-time, meaning every transaction a business issues is immediately sent to the tax authority. At the same time, as implemented in Fiji and Samoa, every receipt is instantly verifiable, providing assurance to customers that the right amount of tax is reported and ability to establish easy evidence based communication to Authority if any irregularity is spotted.
Every receipt a business issues and prints is also visible to the Tax Authority thanks to this system. Moreover, customers can scan these receipts, as they come with a QR code. This code will show them a digital version of their receipts right on their smartphones. This comes with an option to report a receipt in case anything is wrong with it – whether it is incorrect TAX rate, added items, or inflated prices. This is probably the fastest way to catch uncompliant businesses by using customers’ help.
Naturally, customers need to benefit from such a system as well – they should be rewarded for their effort and help to the Tax Authority. That is why we created the Customer Compliance Award program. For every receipt they report, or merely scan, customers get a chance to win prizes from vendors. It is a sort of customer’s lottery. Customer Compliance Award program ensures that customers are motivated to report any discrepancies they might notice.
The program helped to educate customers on the importance of asking for and receiving a receipt. This was exceptionally helpful in countries where asking for a receipt isn’t part of the culture. The mindset quickly changed once customers were awarded for their efforts.
So, in the end, although declaring war to tax fraudsters is definitely a step in the right direction for Australia, it can be elevated to a whole new level. By implementing a modern system, the country could track down tax evaders much easier and in real-time, all the while getting the general population involved and rewarded for their help. Countries that got TaxCore® had their annual tax return become significantly higher, which is only a further testimony to how IT sector can offer great help to tax-collecting and fiscalization systems.