"One can imagine a computer considering the optimal tax structure for an investment in the future," KPMG's Grant Wardell-Johnson says.
When 800 executives were surveyed for a World Economic Forum report published in September 2015, three-quarters said company audits would be performed by artificial intelligence by 2021.
A similar proportion reckoned the world would have witnessed the first tax collected via blockchain within that time frame, while 45 per cent said robots would be occupying places at the board room table.
Clearly, the tax profession is ripe for digital disruption.
In a new briefing paper, KPMG envisages a world where much tax compliance work is done by machines, leaving humans to pick up the more complex tasks.
While computers will do the heavy lifting on the number crunching front, tasks requiring "judgement" will still be the domain of flesh-and-blood advisers, according to a report authored by Grant Wardell-Johnson, the leader of KPMG's Australian Tax Centre.
"Compliance has been streamlined and continues to become more efficient," it says."
This will form a sound foundation for even greater specialisation through the use of clever algorithms to calculate tax liabilities.
"Some of this may be mechanistic, such as a thin capitalisation calculation."
But as exemplified by IBM's Watson computer system, robots will also be able to learnfrom data to perform more complex tasks.
Machines can now be programmed to consider millions of images of horses and cows and thus draw their own delineation for what makes a horse different to a cow.
"This is profound and is one of the factors that will lead to the Fourth Industrial Revolution," the report says.
"In the tax world computers could 'learn' to distinguish between an expense which constitutes a deductible repair and one that is non-deductible improvement."
Legal research is another area of work that will be heavily affected.
"Indeed one can imagine a computer considering the optimal tax structure for aninvestment in the future," the report says.
The report judiciously avoids any mention of the potential for mass job losses such asthose have hit the media. Rather, the role of accountants and tax professionals will evolve, it says.
"There is still a significant role for judgement. That role has been enhanced given the complexity of dealing with a greater number of stakeholders and the reputational risk involved in tax moving into the domain of corporate social responsibility."
On an optimistic note, job creation might even result.
"If there has been a trend in tax for offshoring, that trend may be reversed with 'reshoring'.
"In a technological environment, generally involving low marginal costs, the cost of employment becomes a diminished factor in determining where activities are carried out."
At the same time, tax professionals will become more like free agents, possibly assisting companies on an as-needs basis rather than being bound to one employer.
The report, Tax Technology: Embracing 'the now' and thinking 'the future', was launched at an event in Sydney called Catalyst.
"They may become part of the 'human cloud'. Will this give rise to greater freedomand greater stress? Possibly. Work-life integration, as opposed to work-life balance,may change from this perspective. We may feel differently about what it is to be anindividual and what we feel is purposeful. As technical experience will be drawn uponin a different way, many tax professionals may experience a broader set of workopportunities within a specific business. Professionals may rotate through the taxdepartment in a different way from the past as complex thinking becomes moreimportant and technical knowledge less so. Boundaries between functions will startto break down. Corporate services will become less siloed. This will be the case notonly within corporates, but for advisors, where advice is not functionally based, butmulti-functional. The focus will be on the broader problem, rather than the siloedexpertise. This will also lead to a changing sense of what constitutes the taxcommunity. The future may see less rigidity between the revenue administration,treasury policy officials, business and advisors. This will be exacerbated byglobalisation and break-down in functional strictures."
'"When your lawn mower measures the height of your grass, lets itself out of thegarage and mows your lawn while you're at work, has the lawn mower manufacturershifted into the realm of a providing a garden service? Similarly, when your fridgemonitors its own contents, logs onto supermarket online shopping and orders nextweek's groceries for home delivery, the line between product and service becomesblurred. The classification of revenue can alter its tax treatment, both across borders,and across tax types. Businesses would be foolish to ignore such future taximplications that may have a serious effect on the bottom line. The tax position needs to be evaluated up front, before the technological and business structures arecemented in place."
"The potential of blockchain technology is real-time, immutable, decentralised,trusted and transparent transactions – exactly the sort of characteristics that arebecoming ever more important in the global tax system. The international push fortax transparency and inclusive action against tax avoidance has created uncertaintyaround international tax positions, and resulted in major compliance burdens onbigger businesses. Blockchain has the potential to simplify and acceleratetransparency compliance, tax audits, and decision making. It may also be the key tofacilitating collaboration between business, tax authorities, and professionaladvisors."
This article was published in the Australian Financial review on May 2, 2017.
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