10 May 2023
Greater digitalisation will play an important part in building a modern tax administration system and there may be significant benefits in the government’s planned increased automation. However, greater digitalisation also brings with it a number of concerns for taxpayers.
In particular, data security and personal privacy need to be considered carefully. There is a real concern that taxpayers could suffer significant harm through poor data security and an invasion of privacy as a result. Such risks need to be carefully managed and appropriate safeguards put in place in order to deliver a secure system that taxpayers can trust.
Worryingly, there is existing experience of HMRC having misapplied data for one individual to another with similar credentials. Whilst HMRC appears to view these as unfortunate isolated incidents, the likelihood of further examples would surely be increased if proposals for the gathering and use of substantial additional amounts of data in pre-populating self-assessment returns go ahead. The misinterpretation or misuse of data provided by one government department to another is also a concern for taxpayers and their advisers, though HMRC may not share the same view.
And whilst many taxpayers are comfortable with accessing their online tax accounts, there remains a not insignificant number who are not. These digitally excluded taxpayers are unlikely to have the reassurance of being able to check their online accounts and correct any obvious errors such as those noted above in a timely and efficient manner.
There is a significant need to update the tax administration framework and increased digitalisation is almost certainly the way forward to supporting a modern system, but HMRC and taxpayers alike must be alert to the potential issues such progress may bring.