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October 09, 2017
The uncharted: How revenue agencies can navigate digital disruption
By: John Baxter

Things used to be simple for businesses and governments; customers who bought your goods or services knew who they were dealing with and you knew your customers. With the evolution of the digital world, this simple operating model has become far more complicated. As new ecosystems of businesses and other organisations form and disruption occurs, we’re finding the normal rules do not apply. Instead, we’re seeing unexpected consequences that stem from these disruptive business models, many of which are leading to backlashes from customers and other stakeholders. 

Airbnb, for example, has proved a tempting revenue stream, and many people have bought properties in prime city-centre locations to cash in on the service. As a result, some cities have seen rents and property prices increase, which makes it too expensive for citizens to live there. Other unintended consequences of digital disruption include cases of racial discrimination by some Airbnb property owners, and demonstrations targeted at Uber’s treatment of its drivers.

How does our society deal with these developments and when do governments need to intervene? Digital disruption is raising numerous questions that have no clear answer, and in some instances, it’s not even clear who is able to answer these questions. Such is reality of operating in ‘The Uncharted’.

The proliferation of Application Programming Interfaces (APIs) across organisations, including governments, is a powerful tool; it liberates data and supports the delivery of enhanced digital services to citizens. How should governments use this capability? Take social media: a vast repository of data that is actively published by users into the public domain – does that fact mean this data is publicly available and can be exploited by revenue agencies? While the information would help revenue agencies deliver more targeted services to citizens, it could also be used for fraud and compliance purposes.

Sharing data across other government departments is another example of the capabilities digital enables, and its lies at the heart of Digital Trust. But where are the rules around this emerging capability defined, who is responsible for defining them? For me, the answer must lie in constructive dialogue between all stakeholders; and in a recognition that rules will need to evolve over time and be based on the transparent and appropriate use of data.

As revenue agencies enable greater external access to data, new business models will become possible. Banks, for example, will be able to support you with your tax affairs. Further in the future, as AI adoption grows, it will even be possible to have all your tax affairs processed by AI engines provided by the technology giants such as AWS, Google or Microsoft.

However, once these organisations have this information about you, how can we ensure this data is protected and that it is being used appropriately? Moreover, how will agencies respond if the logic applied by an AI engine is incorrect? For example, what will happen if an AI engine misrepresents a person’s tax liability and their benefits are reduced as a result?

Governments are seen by many as trusted organisations. That trust has been built up over many years, but it can be eroded rapidly. In this exciting world, driven by disruption, citizens will continue to look to government to play a leading role in defining the rules and regulations required for the new digital industries. But this cannot be done in isolation, it needs to be done in collaboration with industry, regulators, standards bodies and citizens.

Importantly, it also needs to be done at pace, as the world of disruption will not slow down. Defining these new rules will therefore need to be done in an agile manner, so we can respond immediately to unintended consequences as we learn more about emerging business models. The fact is that we don’t know where disruption will occur next. What is clear, however, is that revenue agencies have a disrupter role to play, and taking a lead in this discussion now is vital.

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