Tax returns are a dying breed, but are we heading for a digital democracy?

Tax switch puts the boot on the other foot. Images Money

In five years’ time, the tax return will be no more. In its place will be an online system which gives companies and individuals direct access to their tax account so they can see and pay everything in real time. It was one of the under-the-radar measures in George Osborne’s last budget before the election but the hope for advocates of online government is that this marks a significant step towards a genuine digital democracy.

Whatever your political or social colours, the movement of government online is a change that seems to be desperately needed. We in the UK are seeing the decay of political participation – the Scottish referendum being a stand-out exception – as well as a weakening of the link between the governed and the governing.

For some there is breathless anticipation of direct democracy. Utopian idealists imagine each of us able to contribute in real time to political decisions, with a mini-referendum on every issue. For others it is another distraction that gets in the way of real political reform. The parliamentary speaker, John Bercow, has stated the need for parliament to understand and engage online. To that end he sponsored a commission on digital democracy that reported at the start of 2015. Among the many recommendations was a call to have online voting enabled by the next general election expected in 2020.

Dead simple

Now the chancellor has joined in. His plan to have everyone provide their tax information online and pay through the year rather than in the usual mad rush before the filing deadlines fits the digital democracy bill for simplifying people’s lives. The idea is that this will make things easier for us as we see what tax we have to pay and HMRC and other agencies will do most of the heavy lifting, for example automatically populating the account for those who pay tax through PAYE. And, with taxes wrapped up, I guess we only have the last of life’s unavoidables to go.

Computer says: ‘Oh No’ Kit, CC BY-NC

But before we get ahead of ourselves, in the short term there should be some care taken about forcing people online with their tax affairs. Unfortunately the record of success in the UK for large IT projects is not good. The most recent example is the abandonment of the Basic Payment Scheme by the Department for Environment Food & Rural Affairs (DEFRA).

This was the online portal to process EU subsidy payments to farmers, but it was unable to properly map farm boundaries and this meant frustration for many farmers as they could not complete the process to claim their subsidy payments. The department has had to allow farmers to file using paper again, with the cost of the unused online system coming in at £154m.

The list of delayed, overrun or cancelled projects is depressingly long, from Universal Credit, through the NHS’s Choose and Book, back to the Common Agricultural Policy implementation system.

This isn’t a swipe at the public sector and the various departments that have been involved. Most of these projects have been outsourced and so the private contractors carry a lot of the blame here. But it does highlight that the risks to the individual are being underplayed, as HMRC are unlikely to be generous with mistakes and errors that occur.

Lighting the way

But what if this is really the gateway to a digital democracy future for Britain? The Digital Government Service has completed their Transformation process which attempted to put 25 services online. As of March, 15 are live and available to all, including registering to vote and booking a prison visit, five are still being tested and five have yet to be developed.

But actual digital democracy means being involved in decisions, not just being a customer. The most prominent example of this is participatory budgeting, which has been tried around the world and is starting to creep into some local authorities. Having a digital route to influence policy in real-time would be a real digital democracy.

In any case, Osborne’s announcement might have the effect of building on Britain’s move towards a digital democracy, but it is decidedly not part of an evangelical mission. In the longer term, this move is less to do with the flow of democracy from the individual to government, but rather it is about increasing the control and oversight that the state has on its citizens’ tax affairs. The best news for whoever is the next chancellor, assuming Ed Balls would follow through on a Tory promise, is that the system (if working) would smooth out the tax receipts for the exchequer.

Osborne gives himself a better look at tax revenues. HM Treasury, CC BY-NC-ND

This is the equivalent of headlights on a dark and stormy night, reducing forecasting uncertainty for the government when it comes to tax receipts and potentially making more precise any decisions on how much borrowing any future government would have to undertake to keep the show on the road.

Given that 85% of self-assessed tax returns are already completed online, Osborne’s budget commitment could be said to be an extension of what has already occurred. However as the Treasury background note on the changes says:

HMRC will make smarter use of the data it holds, linking it up in ways that weren’t previously possible …

The extension of state control online into the financial affairs of the individual is one form of digital democracy, but probably not the positive and empowering version that is usually written about. Advocates cheering the progress they hope it represents will have to hope the cost of this control is offset by the simplicity and freedom offered by an online tax account.