Digital Innovation in Tax and Customs

with Mick Connolly

Mick Connolly is the Head of IT Innovation for HM Revenue and Customs in the UK. He chats with guest host Steve Barr about using technology to reach your goals and the importance of innovation in tax and customs operations.

Episode 40: Digital Innovation in Tax and Customs

Public Sector Future

Episode summary

Mick Connolly is the Head of IT Innovation for HM Revenue and Customs in the UK. He chats with guest host Steve Barr about using technology to reach your goals and the importance of innovation in tax and customs operations.

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Innovation in the world of tax, revenue, and customs

Mick Connolly is the Head of IT Innovation for HM Revenue and Customs in the UK. He chats with guest host Steve Barr about using technology to reach your goals and the importance of innovation in tax and customs operations.

Using future technologies to reach strategic goals

Mick Connolly is the Head of IT Innovation for His Majesty’s Revenue and Customs, the UK tax and customs department, otherwise known as HMRC. HMRC serves around 50 million customers, and last year was responsible for collecting around £716GBP in revenue.

“What we’re looking to do is to see how we best exploit future technologies to enable HMRC to reach its strategic goals. So, look at its aims, look at the objectives, and see what we can do to support that. Some of those goals are making tech simple. Some of those are about stopping people from bending the rules. A lot of them are about supporting the vulnerable, and making it a mission, I suppose, to be the trusted modern tax and customs department. That’s what we’re actually trying to achieve.”

Connolly’s team is about 40 people, which is relatively small in an organization of 60,000. Within his three scrum teams they follow a three-step approach for assessing uses of new technologies:

1. Proof of concept. This stage looks at “the art of the possible with technology”. Connolly explains that “we’re quite company agnostic at that particular point in time. We don’t mind who we work with. We just want to understand, based on business problems, what is it that we can actually achieve and what can technology do to support.”
2. Proof of value. “That’s very much along the lines of, we know technically we can probably do what we want to do, but actually, with the budget, with the direction, with the things that we want to do, is this the best way to spend taxpayers money, are we going to receive the benefits that we actually think that we are going to get.”
3. Iterative, agile delivery. “And then the final part from that is once you’ve run that proof of value and you’re comfortable with the answer, you would probably move into an iterative agile-type delivery, where we would move to defining a delivery team where we’d have an MVP and we’d have a clear target of what it is that we’re delivering towards, and then incremental growth thereafter of the solution that we’re after.”

Why focus on innovation now?

Connolly explains, “I think that we’ve never seen such a shift in technologies as we have over the last 10-15 years, and that shift in technology has created a vast amount of opportunity. And that opportunity is not just for the consumers of services and the public within the UK, but also opportunities for us to simplify tax, to make it harder for people that want to bend the rules, to support the vulnerable, because more and more people are finding themselves in that position there.”

And when it comes to government innovation, standing still is not an option.

“As we’re all living in ever, sort of, like curious times, I suppose, in some sense, with the likes of COVID, you know, with activities going on across Europe, I think it’s important that we use technology to support the things that we want to do. And the only way that you’re really going to appreciate what you can do is by innovating, by looking at what you do today, by trying things in different ways, by assessing the opportunity that these technologies bring. Otherwise, I think, you know, we’re in a kind of standstill kind of place, and standstill is a non-option for any country, I think.”

Lessons learned in the innovation space

“I think probably the biggest lesson we learn in – or I personally have learned in IT innovation, is you could probably do anything that you want to do if you set your mind to do it.”

Connolly continues, “I think that that’s probably the biggest lesson for me, there’s very little that we can’t do with technology in relation to the scope of things that we want to achieve. I think it’s quite a challenge for people to shift away from the kind of as-is position. Often, you know, they are the architects of that world. They’re the ones that, for all the right reasons, at the right time, have created what they think is the right solution. But the world’s moved on, and we can do things slicker, faster, better, quicker, more cost effectively.”

Connolly thinks there’s a better connection between the IT side and the business side these days, which helps move things forward.

“Any organization that just basically parks their IT on the side and sees it as a service industry, I think is underestimating the power and the influence of what it can bring.”

Connolly adds, “As much as I say that people and culture are probably the biggest challenge around all of this, I also think the vast majority of change where you’re going to make your wholesale step change, will be through the use of technology.”

Digital evolution of Customs operations

Connolly highlights the role of Customs operations in highlighting the interdependencies of modern trade. Looking forward he sees “a natural progression to sharing of data, and actually more collaboration around the actual transaction itself.”

“I think the other area that you’ll probably see more shift towards is the need to address real-time transactions.”

Connolly considers the role of technology in facilitating the movement of goods between countries: “the use of Internet of Things, whether it be geo-trackers, or thermal controls, or, just general understanding of where goods are at any particular point in time, in a trusted fashion, I think will make that movement of goods from one country to another much, much smoother. 

Failing fast and succeeding quick

“Succeeding quick is just as important to me as failing fast. One of the things I’m quite interested in is that it’s important that you don’t look at innovation as your first iteration of delivery. And I think that’s one of the big things that we’re learning around this. You can’t just assume because you’re innovating, that the way that you’re innovating and the outcome that you’ve got, ends up being the final position as to where you end up.”

Connolly has found that the IT innovation in his organization actually changes the narrative about the art of the possible in conversations with senior stakeholders.

He explains, “So instead of talking about, we can’t possibly do that, because IT doesn’t enable us to, we’re able to close that aspect of the conversation down quite quickly… and then we start to talk about what’s the behavioral impact of change? How would we support this through the right legislation? What would be the impact to the end users? How would the end users want to see this?”

Areas for exploration

“I think we need to recognize that there often isn’t a one size fits all solution out there. We need to perhaps think about how we address the different communities of customers or service users that we’ve got out there and how we can offer rounded services that address all their specific needs, with a view to making it as simple as possible, not to put, you know, a burden on it.”

Connolly shares several areas of interest to his team:

• “We’ve mentioned international trade… we recently ran a full proof of concept model around the use of distributed ledger technologies, and the role that that can have, that there are scenarios where there’s probably, arguably an appropriate solution to be had. But there’s also a series of use cases out there where it doesn’t quite land as well as we would think.”
• “The use of application programs, interface APIs, I would argue that it’s not particularly innovative technology, because it’s been around for such a long time. Yet, for many, it’s new, and it’s an innovative change in their working models, in how things are going to happen.”
• “The use of open banking, the opportunities that presents is another area where we’re particularly interested in is, how do we make engagement as simple as possible through, the tax authority or to the banks, to the end users?”

How to use technology to replicate outcomes

When asked to give advice on how others might replicate what Connolly’s team is doing, this is what he had to say:

“The starting point is you need to understand what your business problem is.”

“It’s very easy to articulate a problem that is just so broad, that you try to address that, and actually, what you do is you have a number of senior stakeholders, and they all have completely different expectations as to what the solution or the outcome is likely to be…  So I think, if you can break that down into a sensible kind of way, you can then really start to address what it is that you’re trying to look at.”

Another point he wanted to make was how important it is to have business sponsorship.

“You know, it’s very easy for an innovation team to sit off in the corner on their own, innovating quite happily, and then ultimately creating shelfware where you just produce a product, and nobody is actually bought into it, or understands it, because they didn’t really buy into the problem or the thing that you were doing. So, I think there’s quite a lot of socializing.”

Connolly concluded, “The final thing I would say, a lesson around this, and this is more for the innovation people out there, is don’t be too precious about the thing that you’re doing, because not everyone will love it as much as you. Not everyone will see it the same way as you. And I think sometimes you just have to – you put your heart and soul into it when you’re doing it, but you have to very quickly let it go. If it’s not the thing that people are valuing as much as something else.”

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