The cross-border trade and tax landscape globally has been undergoing exponential changes. With dynamic geopolitical situation, ever evolving regulations and introduction of new compliance requirements, increasing levels of enforcement is needed to achieve the multiple objectives of legitimate revenue collection, ease of doing business, trade facilitation, while ensuring hassle-free compliances. And technology is playing an enabling role to move from a more control-based tax and trade regime to a trust-based future.
Stewart Brand [i]once said – “Once a new technology rolls over you, if you’re not part of the steamroller, you are part of the road”. Hence, government authorities are proactively embracing advanced analytical technologies such as big data, data analytics, artificial intelligence, and machine learning as they see clear benefits with regard to increased transparency, risk management, fraud detection, trade facilitation, mutual co-operation and greater compliance. These trends are expected to increase as countries around the world continue to implement the Organization for Economic Co-operation and Development (OECD)’s Action Plan on Base Erosion and Profit Shifting (BEPS) [ii]and its requirements for more transparency in corporate tax reporting. Further, there is an increased collaboration between various multilateral agencies/ governments across the globe in exchanging of information via IT equipped databases, automated tools, etc.
In India, the technology led regulatory reforms have played a positive role in the field of both direct and indirect taxes, including customs, as well as policy making. Implementation of the landmark Goods and Service Tax (GST) in 2017 is one of the biggest examples of such reform. The direct tax arena has also seen an early adoption of technology. Additionally, introduction of faceless assessments of import and export entries under customs, integration of courier and cargo systems under one national customs portal ICEGATE[iii] and may other such initiatives in the pipeline clearly demonstrate government’s efforts and push towards digitization.
Even post the roll-out of GST, several forward-looking measures such as e-returns, e-registrations, e-way bills, e-invoicing, and QR codes, have been implemented by the government, which mark important milestones in India’s digitalization journey. As an outcome, India has witnessed an all-time high GST revenue collection from October 2020 onwards. In the recently released collection figures, the Finance Ministry revealed that the provisional net indirect tax collections [iv]for financial year FY2020–21 recorded a growth of 12.3%; 108.2% of revised estimates of indirect taxes for FY2020–21 has been achieved. This is a big win and testimony to the fact on how embracing technical tools can help achieve more legal compliance and revenue targets.
Another notable tech-based initiative by India Finance Ministry as part of its strategic commitment to improve global trade has been the conducting of national Time Release Study (TRS) [v]started in Aug 2019 and institutionalized on an annual basis. It helps to diagnose existing and potential bottlenecks which act as barriers to the free flow of trade and take remedial actions for reducing the cargo release time at various Indian ports (sea ports, air cargo completes, inland container depots, etc.).
There is no doubt that technology and law have a complicated interrelationship. As a matter of fact, advancement in technology is almost always expected to outpace law making as seen recently with introduction of crypto currencies, electric vehicles, digital payment platforms, social media platforms, wherein the regulators worldwide are still struggling to define legal boundaries. But on the other hand, technology is helping in better implementation of law by giving more feedback to legislature. In addition, technology is redefining the legal field. Online research databases have replaced law books, digital contracts have replaced physical copies, and numerous other advancements are helping to simplify complex legal world. New technologies hold significant potential to support policymakers in law making, legal analysis and enforcement. As Andy Grove [vi]once said “Technology will always win. You can delay technology by legal interference, but technology will flow around legal barriers”.
And as government authorities embrace digitalization, it’s never been more important for individuals and companies to understand every detail of their online stories, both personal and professional (including those on Instagram too) 😊.
[i] Stewart Brand is an American writer, best known as editor of the Whole Earth Catalog.
[ii] Base erosion and profit shifting (BEPS) refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying taxes
[iii] Indian Customs EDI Gateway
[iv] Source: Published by Ministry of Finance April 2021
[v] The TRS is an internationally recognized tool advocated by World Customs Organization (WCO) to measure the efficiency and effectiveness of international trade flows. Read the latest at https://www.cbic.gov.in/resources/htdocs-cbec/implmntin-trade-facilitation/national-time-release-study-2022.pdf
[vi] Andrew Stephen Grove was a Hungarian-American businessman, engineer, and CEO of Intel Corporation.