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Message from the

Executive Director

April 2017

Hello to all CTF members—

April is a busy month for our many members involved in tax compliance. The changes that technology has brought to this part of the business are profound. I think it is fair to assume that these changes, which improve efficiency, accuracy, and quality in the tax return process, are viewed favourably. Few would wish a return to the days of laboriously preparing manual returns. In any event, the push toward full digitization of the process seems unstoppable.

Innovation in tax compliance is not limited to the private sector. On March 31, 2017, the OECD released a new report, Technology Tools To Tackle Tax Evasion and Tax Fraud, that explains how tax administrations worldwide have deployed technology to prevent, identify, and tackle tax evasion and tax fraud. Here in Canada, technology has transformed compliance efforts within the CRA, which now uses data analytics (including predictive analytics and text analytics) and business intelligence in risk-based efforts to improve the alignment of audit resources and to encourage taxpayers’ compliance. Tax returns contain vast amounts of data that can be used in these efforts, and financial institutions now share information with the tax authorities, as do foreign governments—all part of a trend toward greater global transparency, best exemplified by the OECD’s Common Reporting Standard. Even social media have come to play a role in this general campaign for tax compliance.

Within the practice of tax, it seems likely that the impact of technology—at once disruptive and productive—will next be felt in services long viewed as entirely reliant on human insight and effort. The consulting side of the business, in particular, which requires deep technical skills, planning capabilities, and professional judgment, once seemed safe from the incursions of technology. But change is clearly coming here, too.

New products in the field of legal technology use artificial-intelligence tools, such as machine learning and natural-language processing, for research, analysis, statutory interpretation, and document review. Some of these products are focused on taxation. In Canada, Blue J Legal’s leading product, Tax Foresight, predicts—on the basis of facts provided by users and of prior judicial decisions—how courts will rule on certain tax classification issues. Large markets, such as the United States and the European Union, have many more new products competing in a variety of legal areas, including matrimonial law, human rights, and commercial litigation.

The pattern of change introduced by these new technologies will be similar to the pattern seen in tax compliance: applications that are alleged to be faster, cheaper, and more accurate will replace the traditional agents of the lower-level work. Such change will greatly affect traditional business models and the training and career paths of future professionals. However, the overall impact should be positive; tax advisers will have better tools for reducing risk, improving efficiency, and sharing knowledge, and they will have more time to focus on client relationships and on interpreting and applying tax law. Many advisers are already attuned to this opportunity. Another effect of these developments will be the increasing demand for tax professionals who have technology skills—including an understanding of how to manage the flow of clients’ data to tax authorities, and the implications of that flow of information. It will be interesting to observe the evolution in education and training as the lines between technology and tax practice become blurred.

On the subject of tax research tools, I mentioned in a previous message that the Foundation is working on the next generation of TaxFind. This effort has included hosting sessions over the last few months with members across the country, in order to better understand users’ experience with the current version of TaxFind and their expectations for the future.

Intriguingly, this feedback has included a clear challenge to the Foundation to incorporate elements of artificial intelligence and machine learning that users have found useful in other contexts. For example, we were asked if it would be possible to weight articles according to the frequency with which they have been read, downloaded, or printed by previous TaxFind users, so that the highest-quality material or most popular articles will filter to the top of search results. We were also asked if we could adapt TaxFind so that it would proactively suggest additional articles for a user (a technique employed by many popular sites, such as Netflix). All of these suggestions have been welcome, pushing us to build a tool that will be more valuable than ever to our members.

See you in May.

Heather L. Evans,
Executive Director and CEO

5/23/2017 6:42:12 AM