I was frustrated and irritated to read about steps being taken in Britain by that country's tax authorities to monitor virtually every electronic data point about taxpayers, so that they know what tax is due long before the taxpayer has to report it. The Telegraph reports:
Accountants, privacy experts, politicians and charities are voicing growing concerns about HMRC’s ambitions to “fully digitise” the tax return system.
They claim that vulnerable groups will be penalised for not wanting to use the internet, that the quantity of data sought by HMRC will hugely increase administrative costs, and that the trend to push everything online will result in far more tax investigations without necessarily raising extra revenue.
They also predict that – whatever it says to the contrary – HMRC’s ultimate intention is to obtain highly detailed data “equivalent to the individual entries on a bank statement”. This is likely to result in more frequent and earlier demands for payment.
There are two prongs to HMRC’s push to “create the most digitally advanced tax system in the world”. One is the introduction of “personal tax accounts” for all individuals, aimed at the majority of people whose tax affairs are relatively simple and who don’t have accountants.
Here, individuals’ online tax accounts will be updated automatically by HMRC with information it has obtained from other sources. You would log on, for instance, and see entries relating to your wages or pension, any taxable benefits you receive, such as the state pension, and any interest earned on your savings in bank or building society accounts.
The second digital drive relates to small businesses, landlords and the self-employed: these groups will have to report information to HMRC quarterly.
This has already caused a storm of controversy, with 110,000 small business owners petitioning against the change. They argue that quarterly reporting would cost time and money.
. . .
The concerns were reflected by Anthony Thomas, an accountant from Coventry with 30 years’ experience. He chairs the Low Incomes Tax Reform Group, which lobbies for a simpler tax system.
He said: “Digitisation is good and fine – but my concern is making it mandatory. There will be significant burdens and costs for many. HMRC says it will be as easy as ‘pressing send’, but that’s naive. It won’t be.”
. . .
“Say a builder goes to a supplier and buys breeze blocks. He uses an application on his smart phone to record the transaction, and it is immediately reported to the taxman electronically. HMRC has talked about making such apps and software available to the public, and that is perhaps what it envisages: the reporting of transactions in real time.
“It is an absolutely enormous shift. The Government is saying ‘if we’ve got the technology, why not use it?’ ”
There's more at the link.
The implications for privacy are obvious. It seems that the Big Brother state is now demanding to know about every penny you receive or spend, long before you need to report your income and claim expenses for tax purposes. Effectively, if taken to its logical conclusion, this could completely replace the process of submitting an income tax return. You'd find your bank account debited with tax owed without you even knowing how it was calculated - and if any transactions were mistakenly attributed to you instead of the proper person, you might benefit or be penalized accordingly, with all sorts of subsequent complications as you try to sort out the errors. Does this sound like an Orwellian nightmare, or what?
Does anyone know what the IRS in the USA is planning in this regard? If Britain's this far down the road, I can't believe that the IRS isn't at least interested in following suit. If you know, please tell us in Comments.