Nationwide lockdowns. Deferred filing and payment deadlines. Urgent stimulus payments. New regulations and policies. Revenue agencies worldwide find themselves at the center of these realities of pandemic response and face unprecedented operational challenges.
COVID-19 has compressed years’ worth of change into weeks and months, dramatically highlighting that digital transformation and revenue agency modernization is as much about resilience as it is about chasing efficiencies or improving the taxpaying experience. Solid digital infrastructures, contemporary digital services, and strong working relationships with partners in government and across the tax ecosystem position revenue agencies to absorb the shock and adjust to the new situation.
Revenue agency leaders must now decide how best to seize this historic moment to accelerate change. Choosing transformation will not only allow revenue agencies to thrive and deliver more value to taxpayers and society – but also enable them to be better prepared when the next crisis inevitably hits.
In January, Deloitte published Building the Revenue Agency of the Future: Seven Keys to Digital Transformation. Recognizing revenue agencies’ position as the energy source of government, the report highlighted the imperative to keep pace with the technology transformations taking place globally. The change imperative, the seven keys, the recommendations all remain the same. But the crisis has raised the stakes and urgency.
As Deloitte continues to work with revenue agencies around the world to implement changes brought by COVID-19, we have identified three specific opportunities that stand to drive change within revenue agency operations.
COVID-19 has put a spotlight on the organization and workforce of revenue agencies. As employees transitioned to virtual work, some revenue agencies revealed themselves to be digital front-runners while others have faced the same challenges as many businesses accustomed to operating in an “in-person” first environment.
Leaders need to reimagine the workforce. From reconsidering employee benefit structures to sourcing candidates from the gig economy and the expansion of digital labor, leaders need to redefine norms and expectations. Revenue agencies are grappling with the concept of Connected Work, employing digital tools that facilitate collaboration, drive productivity, and enable continuity of operations. At Her Majesty’s Revenue and Customs (HMRC) in the UK, that looks like more than 50 robotic process automations that not only allow for the redeployment of employees to higher value tasks, but also creates a more remote-friendly operation that supports continuity of operations—even in a pandemic. This is a great example of the agility provided by early digital leadership.
While most revenue agencies have adopted some level of digital taxpayer interactions, pockets of paper and manual processes persists in most revenue agencies and some have been constrained by sizable populations with limited access to technology or even the banking system. Enter a pandemic. The intersection of millions of paper interactions and a suddenly remote workforce left some revenue agencies with no one to open the mail or handle the cheques. This has prompted revenue agencies like the US IRS to rethink the dependency on paper-based filing and payment processes – seizing the opportunity presented by the pandemic to make sustainable moves towards end-to-end digital processes.
As government institutions worldwide abruptly shut down major in-person facilities and operations, the IRS has been forced live on both sides of the digital spectrum: grappling with a mounting backlog of paper documents, while also driving cutting edge technology automation and digital solutions. To rapidly implement COVID-19 response legislation, the US IRS created and launched the Get My Payment application – in barely three weeks - to improve transparency and accelerate the distribution of economic relief payments.
At the same time, faced with looming legislative deadlines and a largely sidelined in-person workforce, the IRS has had to creatively rethink paper, focusing on short-term fixes to enable backlog reductions while simultaneously planning for integration of these solutions into more sustainable, digital approaches.
The pandemic has brought about challenges in every corner of the tax ecosystem creating both an unprecedented need and a unique opportunity for deeper collaboration across government and the wider tax ecosystem. Revenue agencies have a long history of working with other government agencies and key partners like tax agents, the accountancy profession, and industry organizations. Solving for the “next normal” may require not only deepening these partnerships but bringing in new stakeholders – notably providers of software and other technologies underpinning natural processes. For instance, in Finland, the revenue agency has partnered with industry to implement new blockchain innovations aimed at creating data transparency within the real estate market.
Collaboration has been a critical tool for revenue agencies in their pandemic response. This has included cross agency coordination of activities; sharing of data, infrastructure, and insights; and close collaboration on designing and implementing government policies and solutions. The urgency of the situation and the importance of delivering on government priorities has focused attention on shared goals and kept a check on some of the mechanisms (including risk aversion and bureaucracy) that can hinder effective collaboration. The next challenge will be to retain and deepen these partnerships beyond the exceptional times of the pandemic to become part of the next normal.
Revenue agencies have responded swiftly and successfully to implement COVID-19 relief measures to support citizens, businesses, and economies around the world, and their governments and taxpayers are noticing – many have received justified praise for their speedy response.
The initial response to the pandemic is now behind us and structures are being built that will help manage the next. Now is not the time to return to “business as usual”– not only because this crisis continues, but because it will not be the last. The pandemic has accelerated change, proving digital transformation is no longer simply about keeping pace with taxpayer expectations and industry, but a matter of survival. The stakes have been raised and revenue agencies need to continually adapt.
Together, the levers described above can enable revenue agencies to accelerate their journey to digital transformation and thrive in the wake of COVID-19 induced change. As the Deloitte Center for Fiscal Systems expands upon the three key opportunities shared here, and continues to drive the conversation around digital transformation, we hope to help revenue agencies to thrive in the face of the pandemic.