Robotic process automation in Tax Administrations

This article aims to analyze the some concrete Robotic process automation (RPA) technology applications in tax administrations globally.

Tax Administration 2022 published on June 23, 2022, by the OECD Forum on Tax Administration (FTA)[1] said that technology is helping tax administrations respond to budgetary challenges, and an emerging trend that is showing remarkable results, is the growing use of RPA, where machines are used to complete repetitive tasks.

Technology is also providing new opportunities to analyse existing processes to look for efficiencies, including throught the use of artificial intelligence and machine learning to automate some of the core tasks within a tax administration.

Chapter 6 of Tax Administration 2022 highlights the rapid growth in the use of technology with for example, more than 50% of TAs reporting that they now using or planning to use RPA. This is helping TAs respond to budgetary and workforce pressures as it is freeing up resource for staff to be focussed on more complex tasks.

ROBOTIC PROCESS AUTOMATION (RPA)

RPA[2] is a form of business process automation technology based on metaphorical software robots (bots) or on artificial intelligence (AI) / digital workers. It is sometimes referred to as software robotics (not to be confused with robot software).

In traditional workflow automation tools, a software developer produces a list of actions to automate a task and interface to the back end system using internal application programming interfaces (APIs) or dedicated scripting language.

In contrast, RPA systems develop the action list by watching the user perform that task in the application’s graphical user interface (GUI), and then perform the automation by repeating those tasks directly in the GUI. This can lower the barrier to the use of automation in products that might not otherwise feature APIs for this purpose.

RPA tools have strong technical similarities to graphical user interface testing tools. These tools also automate interactions with the GUI, and often do so by repeating a set of demonstration actions performed by a user. RPA tools differ from such systems in that they allow data to be handled in and between multiple applications, for instance, receiving email containing an invoice, extracting the data, and then typing that into a bookkeeping system.

RPA is a feature of intelligent process automation that describes logic driven robots executing pre-programmed rules on mostly structured data. RPA takes productivity optimisation to the next level by redefining work and reassigning employees to execute higher-value activities. Process bots are capable of independently performing simple human-like functions such as interpreting, deciding, acting, and learning.[3]

RPA for tax is delivered through software that can be configured to complete rules-based tasks such as: copy and paste, open email and attachments, move files and folders, connect to system APIs, extract structured data from documents, log-in to web or enterprise applications, make calculations, collect social media statistics, scrape data from the web, fill in forms, read and write to databases, of follow “if/then” rules.[4]

RPA for tax can be easily deployed and managed from a central controller to interact with a wide range of business applications.

EXAMPLES OF RPA IN TAX ADMINISTRATIONS

In Sweden the Swedish Tax Agency’s risk-evaluation service for business registration applications was launched in May 2021. This AI-based service categorises applications based on a set of established risk factors, and applications are then processed in different ways, depending on the category assigned[5].

Further developments took place during 2021, including the introduction of risk-evaluation support for paper-based applications for business registration. In early 2022, RPA was introduced for low-risk applications. So far, about 450 applications per week – a total of 1 300 – have been processed using RPA, further contributing to the benefits.

The Inland Revenue Authority of Singapore (IRAS) continues to harness technology and innovation to build greater organisational agility and a smarter digital workplace[6].

IRAS has automated the traditional on-boarding process for new recruits that leverages data to initiate robotic process automation (RPA) tasks for mass auto-creation of staff accounts. There are resultant efficiencies in relation to notifying and providing relevant information to the parties involved to perform their tasks, benefitting both new recruits and the HR team.

In Australia, the Australian Taxation Office (ATO uses robotic process automation (RPA) in conjunction with process optimisation techniques to remove unnecessary steps from the audit process and to automate repetitive manual processing steps. This enables auditors to increase the time which they spend applying judgement to the facts of audit cases[7].

This has so far reduced time spent on manual actions by 5%, and has allowed staff to understand the needs of taxpayers more easily and ensure appropriate empathy upon engagement as they can focus on what matters most in every interaction with taxpayers.

The Canada Revenue Agency (CRA) vision of the future of work is meaningful work that is engaging and rewarding for employees on a daily basis. RPA has a significant role in this as it can take the repetitive processes out of the work, and improve the day-to-day tasks of CRA employees by automating high volume, highly repetitive administrative tasks, that are prone to human error. To date, the CRA has automated 8 processes, saving more than 34000 staff hours, the equivalent of approximately 25 additional full-time CRA employees.[8]

For the purpose of testing and operating RPA, the Israel Tax Authority (ITA) was looking for a suitable work process and identified a unit that inspects taxpayers working in two or more workplaces who did not adjust their tax liability to account for multiple employers[9].

After the programming was completed, tests were performed on the work results. A large number of cases were taken as a sample, and the comparison showed that RPA’s results were similar to the employee’s results. The test also identified that the average time per case saved is 97% and 99.6% saving in cost. As a result of the test the ITA is investing further in RPA.

The Netherlands Tax Administration (NTA) has many repetitive but essential tasks that do not make work attractive for employees. To address this, the NTA started investigating RPA, and identified invoice processing (paying suppliers) as a suitable start. The RPA-project was consciously kept small, aiming to solely robotise this first step, with the aim of eventually moving to full e-invoicing[10].

The aims of the project were to improve the quality of work for employees on one hand and on the other improving quality of the invoicing process by minimising errors and failures, so that legal requirements on payment terms could be met.

The outcomes surpassed expectations as employees experienced time savings of four hours per day which gave them space to deal with more productive tasks such as service quality improvements and knowledge development.

In the United States, the Internal Revenue Service is using software robots from UiPath (NYSE: PATH), a leading enterprise automation software company, to enhance the agency’s technology to better manage its finance and procurement functions[11].

In 2020, the procurement division was facing a tight deadline to modify its contract clauses to adhere to recent federal legislation. Using the power of robotic process automation (RPA), Webbers’ team executed nearly 1,500 contract modifications in 72 hours, a process that manually would have taken one year.

That automation project reduced administrative burden on contracting officers, eliminated data errors, emailed the modification to vendors and then uploaded documentation into the contract file repository.

FINAL THOUGHTS

Presented above are some examples of RPA application in tax administrations. They will surely continue to increase, because the potential of the technology is enormous.

Tax administration examples have highlighted that RPA is not only significantly increasing operational efficiency, but employee satisfaction is increasing as they can focus on the more interesting, challenging tasks.

There are a lot of business benefits of RPA: it streamlines workflows, which makes organizations more profitable, flexible, and responsive. Increases employee satisfaction, engagement, and productivity by removing mundane tasks from their workdays.

RPA is non-invasive and can be rapidly implemented to accelerate digital transformation. And it’s ideal for automating workflows that involve legacy systems that lack APIs, virtual desktop infrastructures (VDIs), or database access.

The journey to RPA innovation is not complex. It begins with the discovery of manual processes that are candidates for automation.

I believe RPA can apply in every area of Tax Administration function where manual, repeatable, and time-consuming processes are still in effect.

In any case, I want to warn you that not all the processes of the tax administrations can be carried out more efficiently with this technology or others.

It will be necessary to analyze in each particular case considering the context of each tax administration the possible application and its benefits and costs.

[1] https://www.oecd.org/tax/forum-on-tax-administration/publications-and-products/tax-administration-23077727.htm  OECD (2022) Tax Administration 2022: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://doi.org/10.1787/1e797131-en.
[2] https://en.wikipedia.org/wiki/Robotic_process_automation#References
[3] https://www.pwc.com/gx/en/tax/publications/assets/pwc-tax-function-of-the-future-focus-on-today-robotics-process-automation.pdf
[4] https://www2.deloitte.com/us/en/pages/tax/solutions/tax-robotic-process-automation.html
[5] https://www.oecd-ilibrary.org/sites/1e797131-en/1/3/3/index.html?itemId=/content/publication/1e797131-en&_csp_=38baa8bc2bc68a4be5b070db809f1650&itemIGO=oecd&itemContentType=book#boxsection-d1e2437
[6] https://www.oecd-ilibrary.org/sites/1e797131-en/1/3/9/index.html?itemId=/content/publication/1e797131-en&_csp_=38baa8bc2bc68a4be5b070db809f1650&itemIGO=oecd&itemContentType=book#boxsection-d1e11705
[7] https://www.oecd-ilibrary.org/sites/1e797131-en/1/3/9/index.html?itemId=/content/publication/1e797131-en&_csp_=38baa8bc2bc68a4be5b070db809f1650&itemIGO=oecd&itemContentType=book#boxsection-d1e11973
[8] https://www.oecd-ilibrary.org/sites/1e797131-en/1/3/9/index.html?itemId=/content/publication/1e797131-en&_csp_=38baa8bc2bc68a4be5b070db809f1650&itemIGO=oecd&itemContentType=book#boxsection-d1e11973
[9] https://www.oecd.org/tax/forum-on-tax-administration/database/b.9.5-israel-using-rpa-technology-in-the-ita.pdf?_ga=2.60433262.258923893.1656439659-78363029.1655983192
[10] https://www.oecd.org/tax/forum-on-tax-administration/database/b.9.5-netherlands-factsheet-rpa.pdf?_ga=2.239216576.258923893.1656439659-78363029.1655983192
[11] https://finance.yahoo.com/news/irs-implements-robotic-process-automation-130000490.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAALa2b5gETpvBs26Dxl66WRSnHLH329kuYRvPptIE6CfivPLxrq-VrAPXs9X59NaBy1-DmWBHHFRMQgxCbU40R42vs83oUnIVu2f8onVdTAWSqqG2DSsH1nkzjBzXszP7aCe6mj-T-BqU6GSOmgiPIzUuBUTjGtsHIx5jIJvL1TGq

 

Disclaimer. Readers are informed that the views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group the author might be associated with, nor to the Executive Secretariat of CIAT. The author is also responsible for the precision and accuracy of data and sources.

Leave a Reply

Your email address will not be published.

CIAT Subscriptions

Browse through the site without restrictions. Consult and download the contents.

Subscribe to our electronic newsletters:

  • Blog
  • Academic offer (Only in spanish)
  • Newsletter
  • Publications
  • News alert

Activate subscription

CIAT Members

Representatives, Correspondent and Authorized staff (TA)