By Special to THE NATION
While digital transformation is key to enhancing the Revenue Department’s efficiency in tax collection, it also throws up a number of new challenges for taxpayers.
In the first eight months of the 2019 budget year (October 2018 to May 2019), the Revenue Department has collected Bt1.22 trillion in taxes, which exceeds its target by 2.4 per cent for the first time in a decade. This upturn in collections has been aided by the adoption of emerging technologies in tax collection and data analytics.
These technologies are designed to reduce paperwork and cut through red tape, which improves tax collection, taxpayer compliance and counters tax fraud. This will make the whole process of tax payment faster, and let the Revenue Department easily collect and access important tax information.
Data analytics will be used to forecast taxpayers’ income, scrutinise tax filings, conduct tax investigations, and identify tax risk areas. Data analytics will be used by the Revenue Department to cross-reference and analyse data from external sources, such as banks and companies, enabling it to identify abnormalities among taxpayers. While this will create a tremendous volume of data, it can be easily processed with the new technology. Furthermore, tax investigations will be initiated using different criteria based on the so-called Risk Based Audit System, which considers different factors depending on the nature of the business.
Besides digital transformation, a new accounting standard is expected to be released in FY2020: ‘TFRIC 23 - Uncertainty over Income Tax Treatments’. Although the details of the standard haven’t yet been published, TFRIC23 will explain how to recognise and measure deferred and current income tax assets and liabilities where there are uncertainties over the tax treatment. A taxpayer must assume that a tax authority with the right to examine its various tax treatments has full knowledge of all the relevant information in assessing any proposed tax treatment, without needing to consider whether or not the Revenue Department will detect them. Companies with any kind of tax uncertainty that the Revenue Department is unlikely to accept will need to record a tax provision.
The Revenue Department can also more easily use information from financial statements to detect any suspicious figures and identify tax errors. Along with data collected from internal and/or external sources, this will give the Revenue Department a far greater ability to identify areas of tax non-compliance. While this may seem challenging for companies, it could also be considered as an opportunity. This may be the right time for a company to rethink its own processes, improve them, and make them more efficient.
It’s crucial for a company to know its own risks. The first step is to assess its current tax exposures. Then, look at how to manage this and determine what action should be taken. A company that improves its tax processes using new technologies will reduce errors and save costs. But this will all depend on how well the company responds to these challenges.
So how about your company? Are you ready for these new challenges and ready to turn this to your advantage?
Niphan Srisukhumbowornchai, Tax Partner
Sirisuk Manmettakul, Director
PwC Tax & Legal Thailand