Commissioner outlines challenges with digitising the tax system

Rob Heferen, Commissioner of Taxation for the ATO, has shared some of the challenges it is encountering as the ATO continues to expand its digital transformation.

In an address to Melbourne Law School in September, Heferen said it was his view that one of the biggest challenges tax administrators faced in driving digital transformation was ensuring that “everyone” followed.

Heferen said other challenges the digitisation of the tax system included ethical decision making, taxpayers expecting administrators to be connected, a seamless digital experience across government and for data to be shared effectively and securely.

“This also requires us to turn our minds to the ethical and integrity challenges of using new technologies, and mitigating cyber security risks and data breaches to maintain trust and confidence in our system,” he said.

“We must put ethical decision-making at the top of the tree.”

The Commissioner warned based on taxpayers’ need for security, it was hard to find a balance in using AI and automation within the proposed and agreed guardrails.

Heferen said good, ethical and balanced decision making was a large part in the digitisation process, which could be challenging when deciding on the right thing to do.

“Putting aside for one moment the law and what it requires, would using data and digital capability in this instance be appropriate?” he said.

“Would substituting AI for human judgements make for better decisions? There continues this fascinating debate in psychology and economics about what makes ‘good’ or ‘rational’ decisions.”

Heferen shared in his address the conflicting challenge between finding a balance between moving ahead with digitisation of the tax system and listening to human judgment.

“What an automated system can do is enable us to do the process work so much faster. It can process in a flash, bring data together to pre-fill and estimate tax returns for the majority of taxpayers,” he said.

“What it won’t be able to do is be a substitute for human judgment – determining what constitutes fairness and reasonableness in those taxpayer circumstances where compassion and empathy are vital to making decisions with the taxpayer.”

In addition to this and in line with his goal to create a “fair and equitable tax system”, he said he often questioned whether digitisation enhanced the system’s fairness.

“I don’t think automation and human intervention are mutually exclusive in the tax world. Call me an optimist, but I think the system will settle on a happy medium.”