Technology can help businesses and governments measure and mitigate the impact of Covid-19. With further waves and recessions biting, technology offers an unparalleled opportunity for governments and business alike to gain a clearer picture of the current panorama. Digital tax returns and real-time or near-real time reporting offer up-to-date financial insight and many tax authorities are pressing ahead with digitisation plans.
Damage assessment and mitigation
The most powerful tool to harness amid economic strife and the most difficult to wield is clarity. Technology can offer this amidst Covid-19.
Technological developments and adoption of digitised processes offer an opportunity to measure tax lost at a macro level. Those nations already implementing continuous transaction controls (CTCs) are at an advantage having insight into lost revenue in the crisis. This year’s events highlighted the benefits of having a panoramic and timely digital view of a nation’s economic health, with economic recovery contingent on access to granular data.
Within Latin America, leading the way in terms of digitising compliance, highly detailed COVID-19 impact analysis reports have been published at key points during the crisis as a result of access to in-line invoice data for all transactions in their economies. The immediacy and quality of this data, and because it covers all or a very large proportion of a country’s economy, is a real game changer.
The trend towards CTCs was set before the pandemic, but the tendency has been catalysed faster than previously thought possible. Though the advantages of CTCs were evident before, with EY predicting that a full economic recovery isn’t achievable until 2024 at the earliest, they offer an unrivalled mechanism for businesses and governments to monitor the situation.
Ongoing health check
The benefits of digitalisation are more significant since ongoing and dynamic assessments are recognised as essential tools to inform government and business decision making. Firms submitting their actual invoice data from business transactions instead of summary returns directly to government platforms (B2G) in real or near-to-real-time, rather than periodically, can instantly view their outgoings; in turn, governments can gauge the macro picture based on overall VAT loss more accurately using digital means.
The advantages of a live dashboard that reveals the evolution of supply and demand are clear. In real-time tracks stock movements, imports/exports and price fluctuations. Having insight into these and many other data points allows a level of analysis into the minutiae of deep subcategories of goods and services offered and sold in an economy and provides clearer visibility for businesses and governments. This kind of data can dispel uncertainty, allowing companies and authorities alike to cut through risks and identify opportunities linked with policy and investment decisions.
Overall, if countries could see the loss in real-time, they can also track changing behaviours and market size, rather than relying on informed guesses without robust data to back up forecasts as currently. After all, to effectively plan for later scenarios, it’s key to understand what’s going on now.
The risk to financial ecosystems
Businesses both small and large are subject to the same rules on evidencing their fiscal activity and financial footprint, and so indirect tax measurement is the crucial indicator of the true damage of these troubling times.
Sophisticated, intricate supply and value chains are all implicated in a complex web, creating intense inter-dependency at all levels. Paramount to successfully surviving in this climate is the ability to monitor developments as they happen. For tax authorities, keeping a close eye on individual digital invoices and other key commercial data allows a forensic and accurate view of how many firms are still afloat. At a wider level, which economies are in serious hot water.
Major VAT discrepancies were already a concern before the crisis and are more so now as consumption tax rate reductions and other fiscal incentives linked with economic inactivity look set to have a devastating impact on both short and medium term revenue collection. Measuring and even reducing the VAT gap will be increasingly important.
Insights through data
Access to data will help unravel the spider’s web of complexities. It provides a better understanding of what the steps both through and out of the recession will be. For business and governments, investing in partnerships that operate across a global landscape will bolster knowledge needed to map out the road to economic recovery. For tax authorities, a clear priority is to understand markets and the impacts on them. This data analysis that keeps pace with developments as they happen is essential.
With whole economies already facing devastating deficit and profit loss from Covid-19, technology must continue to give us the clear vision we need to recover. At a macro level the insights technology can offer are unparalleled. However even on a micro level, individuals can harness data and keep an ongoing record of activity to guide strategic decisions and future investments. With the economic road ahead of many of the world’s economies looking rocky, technology and real-time data offers the potential for a clearer future.
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