Tax, a temporary aberration has proven itself particularly permanent. Of itself, this is neither good, nor bad but we should surely be using every tool at our disposal to make sure our tax system works for the common good.
Last week I was pleased to participate in a debate in the House of Lords considering the issue of tax for the common good.
The Covid crisis has brought into sharper focus the need for the financial relationship between state and citizen (corporate or individual) to be flexible and dynamic. HMRC has become an effective means of distributing financial support when needed through the schemes the Chancellor has put in place.
That provides us with the opportunity to use technology and decisions already made by Ministers (such as extending open banking data to third parties) to build on that crisis-dynamism and to establish tax as something more intuitive real time; embedded in our day to day interactions rather than something separate, mysterious and distant, the threat of the crown-embossed envelope always there hanging over the citizen.
Many of us are used to app-based, real time and responsive interactions with our banks and grocers, why not with the state and the tax man ?
In saying this I am in no way whatsoever unaware of the pernicious and persistent presence of both digital and financial exclusion across the UK. Also, the current crisis around access to cash. Inclusion is vital, in every aspect and a transformed relationship between citizen and State, when it comes to tax, can only be founded on such inclusion, not least digital and financial.
Imagine for a moment though, the post-Covid trader whose business has been saved by an investment by the taxpayer through the Chancellor’s schemes. Their capacity to trade their way out of the crisis could be crushed if the state, through HMRC, switches the dial from support to debt enforcer without seriously considered communications and transition. What should a trader do if faced with the choice of paying her VAT bill , her Bounce Back Loan repayment or her electricity bill? The prospect of such a choice, as in any creditor/debtor relationship should be the start of an app-based conversation with understanding and flexibility on both sides. Financial relationships, no longer transactions, relationships.
All the capability to engender this is available in the UK’s payments and banking systems and, to repeat, thanks to enlightened decisions taken by Treasury Ministers, can be made available to third parties such as HMRC so that decisions on tax can be taken in real-time, transparently and based on more reliable data.
Looking further forward, the Chancellor has recently flagged his interested in stablecoins and, more significantly a Central Bank Digital Currency (CBDC). A CBDC , designed right, could carry with it its taxed status and indeed could do much of the work done by HMRC. Or indeed, through such exploration, we may secure other innovative solutions. Coupled with smart contract and Distributed Ledger Technology (DLT) the UK could lead the world with its effortless domestic and cross-border tax systems. The state could in effect be a real time and dynamic participator in the economy that its actions and policies facilitates and could share directly in the profits and gains made by it.
Participatory, real time, respectful, tech-enabled, positively tech-augmented relationships.
It is clear that, when it comes to transforming tax for the common good, if we have the political will, we have the technology.