Digitalization of Tax: Epistemic Tax Policy

Abstract

Digitalization, automatization, and social media interaction do not only influence our everyday lives but also change the way we think (Naughton, J. The internet: Is it changing the way we think? The Guardian, 2010) and especially, how we solve complex tasks. People search and find answers to complex questions via Google, Apple Siri, Amazon Echo, and all different types of expert-platforms. The more complex the questions are, the more often online-based answers are searched, and it seems to work in a lot of cases: in 2011, “IBM’s Watson question-answering system won the TV gameshow Jeopardy” (Jurafsky and Martin 2017). This analysis is about a special sort of jeopardy. It is about one of the most dominant topics for entrepreneurs and self-employed people: the tax system. In the following, the complexity of tax regimes will be discussed within the frame of its digitization ability and with a modern interpretation of the concept of disruption, an economic concept by twentieth-century economist Josef A. Schumpeter (Pyka and Andersen 2013): What can be digitized will be digitized – sooner or later. By analyzing digital tax administration, this analysis is an academic contribution to the ongoing debate of digital facilitation versus digital disruption, how far digital applications should be used to make old systems just more efficient or can only be efficient, if used to design new disruptive digital systems. In near future, digital end-to-end tax systems might replace today’s complex preregistration tax regimes for entrepreneurs and self-employed people. Online tax accounts eliminate the problem of “unreported income” and can make the tax declaration of individuals (employees or self-employed) and of companies (particularly of small-sized and medium-sized enterprises) much easier and cheaper, because then public tax authorities also would provide new services and service qualities. In addition, there is a need for an Epistemic Tax Policy, which offers opportunities to see, whether the designed and applied tools in taxation meet the test of reality; this furthermore leads to routes of further improving tax systems.