For much of history, transformation has been a subtle and constant process.
An object or act — recording information, for example — slowly evolves over centuries.
More recently, however, development has gone into overdrive.
“The next big move — a global push by governments to replace the filing of tax returns with real-time information exchange — is well on its way.“
Technology, new laws and increased transparency are thrusting change upon tax each day.
Those who work in tax will need to quicken their pace to keep up.
The expanding world of tax
Governments are always on the lookout for new ways to tax their subjects and businesses — both today and in ancient times.
The first tax collectors, dating to 5,000 BC in Mesopotamia, recorded tax payments and obligations on clay tablets called “burdens.”
British Prime Minister William Pitt the Younger introduced the world’s first direct income tax in 1798, while the US ratified a federal income tax in 1913.
Since then, taxation has developed at a dizzying pace.
France introduced the first value-added tax in 1954, and Finland inaugurated another world first — a carbon tax — in 1990.
The European Union further expanded the tax frontier in 2015, enforcing a region-wide tax on digital products.
The Egyptians began recording their history, etching it in hieroglyphics and hieratic script on papyrus with split nibbed reed pens using black ink.
1st millennium , BC — 1,000 AD
The Romans were the first to perfect the metal stylus, which was visually similar to a modern pen, inscribing letters on a wax, and later a slate tablet. Styluses were widely used in Europe until the late Middle Ages.
6th—19th century AD
Feather-handled quills were the primary writing instrument in the Western world in the period from the 7th century through to the Industrial Revolution. In Latin a “penna,” the source of the word “pen,” is a feather.
The evolution of tax returns
It all started with the Mesopotamians and their clay tax “burdens.”
The Egyptian pharaohs introduced the concept of tax audits around 4,000 BC.
By 500 BC, tax collectors received a technological boost with the debut of the abacus.
With the later introduction of paper, tax collectors could assemble and store tax records.
As the tax universe expanded, so, too, did the rule book.
The 1913 US Internal Revenue Code ran to 400 pages; its 2013 cousin weighed in at a whopping 16,000 pages, including regulations.
Fortunately for all, tax filings have moved online, with companies and individuals submitting them via the internet.
The next big move — a global push by governments to replace the filing of tax returns with real-time information exchange — is well on its way.
10th century AD — present
The earliest historical rec-ord of a dip or reservoir pen, where ink is stored in the instrument, dates to the 10th-century Maghreb, though the first fountain pen patent was secured in Paris in 1827 by Romanian inventor Petrache Poe-naru.
1938 — present
László Bíró, a Hungarian newspaper editor tired of smudged paper and inky fingers, filed a British patent for the first ballpoint pen in 1938.
1996 — present
The launch of the PalmPilot in the 1990s, and later the smartphone and digi-tal tablet, saw the begin-ning of the end of ink, and the rise of an interactive stylus that “communicates” with an item of digital equipment.
2013 — present
3-D printing pens let users draw images in the air, creating 3-D models.
We think of transparency in tax affairs as an invention of the modern world.
It is anything but.
Back in 1814, Norway posted everyone’s full income and tax records in a public place for all to see.
Sweden and Finland later followed suit.
More recently, there has been a global push for tax transparency led by the Organisation for Economic Co-operation and Development, designed to prevent base erosion and profit shifting (BEPS) through increased cooperation between global tax authorities and the introduction of country-by-country reporting for companies.
First used in what is now the Middle East, these heavy clay tablets were used as portable notepads. Tablets were wet, then indented in a “cunei form” style, with reed pens used to make wedged indents in the moist clay.
Papyrus, a thick, gummy paper made from the pith of the papyrus plant, was first used in ancient Egypt. The material was easily stored.
The Chinese are believed to be the first to invent paper. Over the next cen-turies the production of paper spread to other regions around the world. Paper was much cheaper to produce than parchment, which is made from animal skins.
In recent years, computer tablets have put millions of interactive applications, services and games, just a digital stylus — or fingertip — away.
Real-time information exchange
Governments are big fans of this trend and for good reason.
In 2015, the Chief Financial Secretary to the UK Treasury announced plans to eliminate the tax return within five years.
Rather than filing returns, each individual or institution in Britain would have their own digital tax account that would state how much they owe the state.
Tax authorities from Brazil to China to Singapore have invested heavily in technology to be able to collect tax data in real time.
It allows them to respond faster and more effectively to compliance risks, and promptly address taxpayers’ concerns.
But this development is tempered by concerns that hackers could break into state databases and tamper with financial records.
This article is included in Tax Insights issue 17 – Transformation and innovation (pdf)