What will the future of tax operations look like?

Jeff Saviano is the Global Tax Innovation Leader for EY. In the first episode of our Public Finance mini-series, Jeff tells Olivia about the intersection of tax and innovation and shares what he sees in the future of public finance.

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The intersection of tax and innovation

The words “tax” and “innovation” are not usually connected in people’s minds, but Jeff and his team are hoping to change that.

“A lot of what we do is supporting our commercial clients, but we do some work for governments, as well. And we think that innovation, especially for such an important area as taxation, I think it’s important for governments, and I think it’s important for commercial taxpayers, and frankly, for all of us citizens as well,” Saviano said.

Global challenges affecting tax operations

The challenges that Saviano sees through his work are mainly around combatting fraud and building the social contract. He explained:

“We think in terms of the social contract, and if you think about all of us as citizens, and I think this applies to organizations, as well, but the social contract of this interaction between all of us as citizens in government, we believe taxes play an important role in that, and as a major driver of the social contract.”

“Just imagine your own contacts with the governments, and I think for most people, the tax component of that is a significant piece. And so, you know, from an innovation standpoint, opportunities to introduce efficiencies, and of course, when we think of innovation, we think of innovative technology, new technology systems that allow both governments and commercial taxpayers and individual taxpayers to be more efficient in how taxes are computed and reported to governments.”

Saviano added, “We think that there’s an opportunity for greater fairness. And if technologies can reduce fraud and corruption, that’s good for everyone. It’s good for government, and it’s good for honest taxpayers, as well.”

“So those are a few different vantage points, we could apply here, how do we do it more efficiently? And how do we also do it more fairly? And how do we take a bite out of fraud. Fraud is a $3 trillion a year problem in the world, tax fraud, $3 trillion. And we believe that technology can reduce that, never eliminate it, but we think that these new technologies can actually cut it quite a bit.”

More efficiency, more fairness, more trust

Saviano is always looking for an opportunity to introduce more efficiency, more fairness, and more trust.

“It’s an important word to use, trust. That is critical, and the more that individuals, taxpayers, corporate taxpayers, individual taxpayers, the more that they trust the governments that taxes will be imposed and collected fairly, and that governments are actually doing what they can in order to cut corruption, the more that they can cut fraud and corruption, then tax rates can be lower, and they can be more manageable.”

Saviano added, “I think it’s about confidence and in some ways that the trust and the confidence that we have, as taxpayers, actually, the more confident we are and the more trust that we have, the research shows that we’re actually more prone to pay our taxes if we trust that the collector of those taxes will use it in a way that’s fair and equitable.”

How to make the right thing to do, the easy thing to do

Part of the connection between innovation and tax is embracing new digital approaches to try and reduce some of the burdens on taxpayers. But how exactly do you do that?

“It’s automation, it’s new – just imagine new digital portals. Imagine other areas of your life. Imagine your banking relationships, imagine the experience that you may have now getting a loan and the introduction of new digital platforms. And imagine how easy it is, right?”

Saviano continued, “In the old days, we used to try to hail a cab, and now how easy is it using new app-based systems in order to provide services much more efficiently. And I think what we’re finding is that, even in the world of tax and finance, those digital efficiencies can actually be quite important. And they can help with compliance, and they can achieve certain benefits that would derive to both governments and commercial taxpayers.”

According to Saviano, the pandemic seems to have accelerated digital adoption in his field, as well as others.

“We’re seeing more governments that are earmarking money to improve their digital systems. We’re seeing adoption of digital public infrastructure, digital public goods by governments in order to help citizens and to serve them better. This is so exciting for us to think about, there are even governments that are looking at the metaverse and looking at what the metaverse means today, and how can they offer services through these new digital computer-generated environments to help taxpayers. And I think all of those changes, in that 2030-ish horizon, I think we’re going to see tremendous progress made.”

How do governments use new technologies in an ethical manner?

“I think that the pandemic has opened eyes within government… that the digital systems perhaps weren’t as ready as they needed to be. And we’re seeing that there has been an oversize response from many governments to fix that.”

Saviano continued, “And whether it’s for pandemic readiness and preparedness for the next one, but I think it’s even extended beyond health and human services to areas like taxation and public finance to ensure that they’re constantly innovating and they’re taking care of today while planting seeds for tomorrow. And I think that’s an obligation, frankly, I believe, for any organization, public or private.”

“Every organization has customers. Government customers are you and I. How do you ensure that your customers are being cared for today, while looking around the corner and preparing for tomorrow? And I think that we all have experience from the pandemic that we need that preparedness, we need to ensure that we’re ready for the next crisis, and that we’re innovating in order to put ourselves in the best position in the future.”

Looking at trends for inspiration

What does Saviano see on the horizon for tax and public finance? More innovation, and he’s excited about it.

“It’s really exciting to see governments embracing innovation. And it’s not as though you can look across every government and their public finance and finance ministries and see defined innovation teams, but I think the ones that do really get it, they’re preparing for the future.”

Saviano explained, “It’s a discipline, and there’s a science, of course, behind innovation. And there are best practices in how to look around the corner for new ideas and experiment and pilot and then build something at scale.”

“We’re seeing as I think one of the most prominent trends around the world are governments embracing the opportunity to improve their own decision making. In many cases, it’s to improve the decision making from policymakers, and using the trove of data that – of course, governments have this, just a treasure trove of data at their disposal. How can they access that data responsibly, ethically and securely to improve their own decision making and impose better policies for the benefit of society?”

“And we’re seeing that in many countries, it’s still early days on having – it could be an artificial intelligence-based prediction system that leverages the vast amount of data that government has. I think we’ve just grown to the surface. I think it’s a tremendous area of growth. And, again, back to this notion of how can governments serve citizens better? And I think this is one of them, leverage their data, do it in an ethical and responsible way and simply make better decisions that way,” Saviano concluded.

To find out more:

Learn more about how Microsoft supports Public Finance organizations

Find the EY podcast ‘Better Innovation’ hosted by Jeff

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