Global Digital Tax Compliance Becoming a Reality

Scott McFarlane at Avalara Crush 2017
Avalara Crush 2017
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With more cross-border business transactions happening around the world, the reality of global digital tax compliance comes into focus. Could it happen in our lifetime?

According to Scott McFarlane, CEO of tax compliance automation software maker Avalara, it’s already happening, and tax professionals and advisors need to take notice. Such was the tone of his keynote address here at CRUSH Austin, Avalara’s second annual national tax compliance automation conference.

“Entire countries are going digital. When you make a purchase, you have to get permission from the government in some countries. Digitizing tax compliance is starting to happen around the world, it’s a train coming down the track,” said McFarlane. “On top of everything, you now have Amazon collecting sales tax in every state. This is a harbinger of things to come.”

Tax compliance is, as McFarlane referred to it, something our own country was founded on ... or rather, the after effects of a dispute over sales tax. Still, a few hundred years later, we haven’t figured it all out, but the promise of technology’s role has become clearer than ever.

Some figures tax professionals in attendance here were told to take note of were the $18 trillion in cross-border sales around the world; the one in three businesses in the United States staing they will start selling cross border; and the 17 major countries that are making moves to change the way they tax.

By now, all tax professionals have become strikingly aware of how connected their clients, and the world, has become, and McFarlane sees a convergence happening between how global business functions and the pivotal role technology will play (his company, of course, not withstanding).

“The promise of the Internet is dependent on the ability to comply. States and countries are now more avid about collecting their due,” he said. “The Avalara vision is to be a part of every transaction in the world. Things like exemption certificates are becoming a bigger deal in tax and we want to make the compliance process easier and simpler ... We want to be the first company to digitize exemptions,” McFarlane added, noting that many businesses are still storing these compliance forms in shoeboxes and file cabinets.

So again, could we ultimately see a world where the government – all governments – are able to know necessary compliance information at the time of transaction, taking out all necessary local, state, and federal taxes? McFarlane affirms it is already happening. What do you say?

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