The intensive use of ICT for tax purposes is one of the most relevant strategies with effective results that can be undertaken by Tax Administrations (hereinafter TAs). The case of the Chilean Internal Revenue Service (hereinafter SII) is an interesting example to analyze in the Latin American context, as it is a pioneer in the implementation of various technological solutions to facilitate tax compliance, as well as to control the correct application of the tax system and ensure full compliance with tax obligations of taxpayers.

The path taken towards a modern Tax Administration began when the SII opted, early on, for the strategic option of prioritizing the Internet as the privileged channel to connect with taxpayers. This has been evident since the creation of the SII website in 1995. From then on, the institution has gradually incorporated information and communication technologies (ICT) as a strategic ally in the development of ICT solutions to facilitate tax compliance and maximize voluntary compliance.

This has been endorsed, among other things, through international recognition, such as in 2003 when the United Nations (UN) awarded the SII a prize for technological innovation in the delivery of public services^[1]. What was specifically awarded was the website www.sii.cl in the category “innovations in public service” to which the SII applied with the pre-filled income tax return proposal^[2]. For its part, the international media The Economist highlighted the SII as a world pioneer in the use of the Internet^[3].

But beyond the awards received and international recognition, let us see the technological evolution of the SII over time. For this, the following timeline is presented:

Compiled by authors

From the previous illustration, we can observe the evolution of the Chilean Tax Administration in terms of making various technological solutions available, both for the due tax control and to assist and facilitate proper compliance with tax regulations. These important advances have allowed the SII to have a world-class, world-standard computing platform, allowing to cross a large amount of data accurately and quickly. Due to the extensiveness of the subject, we cannot stop to analyze each one of them, however, some of the most relevant modernizing milestones are highlighted below:

• Purchase and Sales Registration and VAT Declaration proposal

  A milestone that deserves to be highlighted is the creation in 2017 of the Purchase and Sales Registry (In Spanish: RCV)^[4] that serves as the basis for the pre-filled VAT declaration proposal^[5], both pioneering innovations worldwide^[6]. The RCV is automatically constructed by the SII from the electronic tax documents issued and received by the taxpayer and received by the SII. It should be noted that Chile began the process of making electronic invoicing mandatory in November 2014 with large companies, to conclude with smaller companies in rural sectors in February 2018^[7].

  Both innovations offer the advantages of simplifying the VAT declaration and payment process; exempt taxpayers from keeping the book of purchases and sales (which is replaced by the RCV); avoid inconsistencies between the information contained in the RCV and that declared by the taxpayer in the VAT form; facilitate control by the Tax Administration and provide it with a huge information database, among others.

  A recent innovation in this area (2021) is the current VAT rectification proposal^[8], a powerful tool to facilitate tax compliance for those taxpayers who declare erroneously or with inconsistencies in their VAT return, and which is based on the RCV and the VAT return proposal mentioned above.

• The Mobile Applications family (Apps)^[9]

  Between 2017 and 2018, and in accordance with current times, where there is a massification in the use of smartphones, the SII launched a family of Apps that cover a wide range of products and services whose purpose is to simplify the tax obligations of taxpayers and facilitate compliance. The mobile applications range from the proposal and submission of the income tax return for individuals, to the issuance of fee tickets, electronic invoices and electronic sales and services tickets, among others.

• Electronic sales and service ticket^[10]

  Until before the publication of the Tax Modernization Law in Chile (2020), the previous regulations required taxpayers subject to VAT to issue sales and service tickets for the operations they carried out (typically sale or service to the final consumer), which until then consisted of a paper document, which required stamping before the SII (procedure in which the taxpayer had to go in person to the SII offices with a book of receipts, which were stamped with a dry stamp by an authorized official.). With the current legislation, it became mandatory for all taxpayers, as from March 1, 2021, to issue the so-called electronic voucher, which replaces the previous paper voucher. With this, almost all the documents that are currently issued and received by taxpayers are electronic (exceptions are some customs documents used by taxpayers under the free zone regimes).

  As can be seen, the mandatory nature of the electronic invoice and the electronic voucher allows the SII to have a very robust information database regarding taxpayers’ purchases and sales. This led to the creation of the RCV and this in turn led to the pre-filled VAT declaration proposal and the VAT return amendment proposal. Not only that, but it also allows making available to taxpayers all the information available on their purchases and sales, and with it, provide another innovation: pre-filled income declaration proposals for SMEs^[11].

• Use of artificial intelligence

  The first experience in the use of this technology by the SII was in 2007, in order to validate a model of taxpayer behavior, as well as to assess the risk of tax evasion^[12]. In 2009 the first experiment was developed to detect potential users of false or apocryphal invoices and thereby combat VAT evasion^[13]. This is due to the fact that, although electronic invoicing revolutionized the way companies manage business, it also opened spaces for potential fraud due to the irregular use of tax credits by certain taxpayers, and this is especially important in countries such as Chile where VAT is the most relevant tax in the country, which obviously has an impact on the tax collection.

  In 2020, and through the application of various technological tools such as Big Data, advanced analytics techniques, machine learning, clustering and visualization, among others, the SII was able to raise more than 24 million dollars in the control of the use of false invoices^[14].

  The use of artificial intelligence has also been applied in the field of tax compliance facilitation, with the creation in 2021 of the chatbot called Sofía, whose objective is to answer taxpayer inquiries regarding the tax regimes implemented by the recent Modernization Law. Tax (2020), and also regarding access to the tax code^[15] to conduct procedures and access the personal site of taxpayers on the SII website.

Conclusions

The facilitation of tax compliance reduces the compliance costs incurred by taxpayers to comply with their tax obligations, which results in greater acceptance of the tax system, positively impacting taxpayers, tax administrations and the society in general.

The necessary conciliation between the facilitation of compliance and the due control that the TAs must exercise in order to correctly apply the tax system must be kept in mind. Electronic invoicing, for example, brings innumerable benefits for taxpayers and the Tax Administrations, but it also brings important challenges, such as combating false or apocryphal invoices.

New digital technologies are a wonderful opportunity and an ally in making the services offered by the Tax Administrations available to taxpayers, but they are also a huge challenge. Technological systems are not infallible, i.e., they can fail. That is why it is important to have good interdisciplinary teams and highly trained people. It is also recommended that the Tax Administration meet with the actors involved in the use and application of these innovative technologies, so that they can collect concerns and improve the services offered.

Finally, the current trends in technology require for their implementation to overcome numerous barriers, such as organizational culture; the level of digital literacy of the population; the established rules; institutional inertia and aversion to risk; aspects that can only be solved with leadership, vision of the future and the development of new capacities.

[1]News, “UN awarded the SII for technological innovation in service provision” https://www.sii.cl/pagina/actualizada/noticias/2003/240603noti01aa.htm
[2]News, “SII Website wins the United Nations Public Service Award” https://www.sii.cl/pagina/actualizada/noticias/2003/270503noti01jo.htm
[3] News, “The Chilean SII is highlighted as a World Pioneer in Internet Use” https://www.sii.cl/pagina/actualizada/noticias/0724not10001.htm
[4]News item, “New part of the Automatic Purchase and Sales Registry that will benefit more than 600 thousand taxpayers”
https://www.sii.cl/noticias/2017/010817noti01er.htm
[5]News, “New VAT Proposal is now available at sii.cl”
https://www.sii.cl/noticias/2017/310817noti01srm.htm
[6]See news https://www.sii.cl/noticias/2018/040718noti01aav.htm
[7]News, “As of today all companies in the country must invoice electronically”
https://www.sii.cl/noticias/2018/010218noti01er.htm
[8]News, “Nearly 400 thousand VAT rectifications that the SII receives per year have as of today a proposal prepared by the Service”
https://www.sii.cl/noticias/2021/130921noti01aav.htm
[9]See https://www.sii.cl/ayudas/apps/
[10] See SII Electronic Ticket portal https://www.sii.cl/portales/boleta_electronica/
[11]See the 2021 Company Income Operation portal https://www.sii.cl/destacados/renta/2021/index_empresas.html
[12]News, “PUCV researchers opened a discussion on the use of artificial intelligence in tax examination processes”
https://www.pucv.cl/uuaa/vriea/investigadores-pucv-abrieron-discusion-sobre-uso-de-inteligencia
[13] Castellón, Pamela (2012) “Caracterización y detección de contribuyentes que presentan facturas falsas al SII mediante técnicas de data mining”, Facultad de Ciencias Físicas y Matemáticas, Universidad de Chile, Santiago, Chile https://repositorio.uchile.cl/bitstream/handle/2250/111947/cf-castellon_pg.pdf?sequence=1&isAllowed=y
[14]News, “More than $ 20 billion has collected the SII in the control of the use of invoices to defraud the Treasury”
https://www.sii.cl/noticias/2020/091120noti01er.htm
[15]News, “DIA + T researchers are the creators of the new chatbot of the Internal Revenue Service”
https://www.pucv.cl/uuaa/derecho/noticias/investigadores-del-dia-t-son-los-creadores-del-nuevo-chatbot-del

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