Pen marks on PC screens and other e-tax return dilemmas
This week's column returns to the subject of the internet and e-business. The last column provoked more response than I have seen for a long time in fact, I haven't had so much response since the column on paying yourself from Cyprus as a tax dodge but I suppose that serves me right for choosing some hot topics to talk about.
Having re-read the last column to make sure that I wasn't repeating myself, saying the same thing twice, or otherwise going over something that I've already covered before, it seems that I have in fact exhausted my knowledge of the tax aspects of doing business on the net. So this time I'd like to get personal and talk about what this means for my business, and in particular do some out-of-the-box thinking on how you will be filing your tax return in years to come.
Completing an individual tax return (and for the purposes of this article I'm really talking about a resident tax return and not an expatriate return) is basically a document exercise that involves making sure you have all the necessary information, and putting it in the correct boxes on the return. You send the return to the tax office, and then either follow up with your money or wait for a refund.
If you're on an expatriate arrangement where the company may be paying more benefits in kind such as housing and schooling, or where you may have to take into account (or ignore!!) amounts paid from abroad, then this is not so simple, particularly if there is some kind of tax-equalization arrangement.
We worry sometimes that if technology continues to evolve as it has done over the past year or two, you may be able to access some basic tax return software on the internet, and fill out your return without need for human intervention from your tax adviser. Interestingly, I believe that our biggest competition in the future will not come from banks or financial advisers as some people think, but from the tax authorities themselves. If you can obtain software now that produces a pro-forma tax return for printing out and sending, then it's not so much more difficult to add a function that will e-mail the completed return directly to the tax office, without the need for printing, signing and posting.
I think it's unlikely that there will be much in the way of tax advice with the software on whether you are making the most of your allowances and deductions, but most tax authorities would probably think it good business to add a section for FAQ's on deductions and reliefs, so as to encourage people to trust the system.
If you've only got salary, a few benefits, a bit of bank interest and nothing much else, then this is achievable now. I will stick my neck out and say that by next year it will be possible in some countries to file your 2000 tax return over the net. (Some clever clogs will probably write in, or e-mail me, to say that somewhere you can do this already. I know somewhere accepts electronic filing, but I think you still need to get a disk with the return though surely not for long).
Taking into account that tax authorities in many countries often have the necessary information from employers, banks and brokerages, it should be possible for them to send you a draft return with the key numbers in, and have you confirm that it is correct although this does take away the control mechanism of them checking a number you give them to one they already have to make sure you're telling the truth.
You could also access your account with the tax office, and check the status of your payments and refunds, to see if they've sent you the money back, and if not why not.
Practically though, I think it's unlikely that returns or data entry screens will be available in multiple foreign languages, so unless you fancy having a go at this on a Polish-language website linked direct to your local urzad skarbowy, I would recommend that for a year or two more at least you still trust your tax adviser. This applies particularly if you'd like a bit of thought put into what goes into the return, and for someone to speak up and suggest a few changes to save you some money if it is appropriate.
Also, the availability of massive amounts of free information on the web at such sites as taxresearch.pol.pl makes it, alas for us, ever more difficult to be able to bill someone just for telling them what the tax rate is. Then the issue becomes the same as for everyone else obtaining information through the web: the easier it becomes to obtain information, the more information you have available, but the more difficult it becomes to determine what is right or wrong, or what is useful and what is general, and not specific to your situation.
Overall, I think it's still pretty dangerous to leave something as convoluted as expatriate tax returns to a computer, especially if your return is complicated, but it is only a matter of time before the systems get more sophisticated and can cope with the special circumstances of expatriate returns.
That only leaves one major technical problem how do you get an original signature on the return without leaving pen marks on the screen?
Peter Ferrigno is a tax manager in the Warsaw office of Arthur Andersen.
