In recent years, innovation and investment in electronic platforms have been the pillars of Mexico's administration of tax policy. For instance, nowadays, Mexico is operating an electronic invoicing system which from January 1 2014 will be operated through the internet. This billing system has allowed the Mexican tax authorities to control the authenticity of tax invoices and, in theory, is a huge advance for administrative efficiency. In reality, this scheme has multiple upsides; however, it is important to be aware that is very expensive for taxpayers, particularly for medium and small companies.
On the other hand, tax authorities have tried to ensure purpose over form principles and criteria prevail in tax controversy, which means these extremely formalistic schemes are at odds with such an approach.
As part of its controversial 2014 tax reform package, the government is settling the bases for new electronic platforms. The most ambitious one consists of the obligation for corporations to submit their accounting records to an electronic platform controlled by the Mexican tax authorities. Detailed rules to start the operation of this initiative are still pending. Taking previous cases as a guide, it could be some time before this happens. This idea is based in two main strategies:
Simplification. Theoretically, this platform and others such as the e-billing scheme previously referred to, would provide the tax authorities solid tools to review taxpayer compliance; and
Efficiency in other tasks, for instance, tax refunds.
It is important to be aware that it is debatable whether the tax authorities have the prerogative to require taxpayers to share this confidential information through an electronic platform.
It is radically different to have assessment faculties to review and require taxpayers to produce information considered as necessary rather than pretending to have all the accounting information without any assessment faculty being part of the process. No doubt, this topic will be controversial in the future.
Other initiatives / digital services quality
The government via the National Digital Strategy Coordination and the Mexican Tax Authority (SAT), announced the first exercise in public innovation that the government opened in collaboration with entrepreneurs for the co-creation of better public digital services.
In this sense, the Mexican tax authorities accepted the challenge of participating in the announcement of CodeandoMéxico, the first exercise undertaken in public innovation, which will take place during Entrepreneur Week organised by the National Entrepreneur Institute of the secretary of economy of the government. The SAT will participate in this initiative to invite creative citizens to propose innovative solutions to improve the development of an application for mobile devices, websites or in their offices. Through this initiative the Mexican tax authorities are looking to develop solutions that make processes easier “in any place, moment and device”, and motivate voluntary compliance by the use of new technology.
Through this type of action, the government is promoting an open, modern and closer government to its citizens. The best proposals will receive incentives that permit the growth of entrepreneurs in the country. On other hand, in this action, the Mexican tax authority is following the instructions of the Presidency of the Republic to transform the way citizens relate with the government through the use of information and communication technologies.
The second step for getting this innovative circle closed would be to reduce form requirements for the purposes of tax compliance.
Gustavo Gómez (gustavo.gomez@mx.ey.com) is a tax partner and
Cristian Reyes (cristian.reyes@mx.ey.com) is a tax manager with EY in Mexico
