Utilizing Big Data Analytics to Strengthen Tax Risk Management - China's Explorations and Practices
With the continent losing billions in revenue leakage annually, leveraging analytics and innovation will be instrumental in funding growth and governance priorities.
Cape Town, South Africa - Rao Lixin, Deputy Commissioner of China's State Taxation Administration, delivered an insightful presentation on China's use of big data analytics to enhance tax administration, writes Winston Mwale.
Speaking at the annual African Tax Administration Forum (ATAF) meetings on Wednesday in Cape Town, Rao Lixin outlined how China has leveraged technology and data to transform its tax system.
The presentation, titled "Utilizing Big Data Analytics to Strengthen Tax Risk Management - China's Explorations and Practices", provided a blueprint for how tax authorities in Africa can harness the power of data to optimize revenue collection, improve compliance, and combat illicit financial flows.
Rao Lixin explained how China has transitioned from a manual, paper-based tax system to an automated, data-driven model.
By integrating databases across agencies and employing advanced analytics, China has gained granular insights into taxpayer behaviour to pinpoint risks.
This has enabled segmented and targeted enforcement, with leniency towards compliant taxpayers and stringent audits of suspected fraudsters.
Key innovations covered included the Tax-Paying Credit Rating and Risk Level Assessment system, which uses algorithms to assign ratings and risk scores to individual and corporate taxpayers.
By combining data points on compliance history, declarations, industry benchmarks and more, tax authorities can direct their limited resources more efficiently.
The presentation also highlighted how embedding data analytics into day-to-day tax processes can foster self-enforcement.
For instance, the Direct Connection system shares select tax authority data and risk models with taxpayers to help them self-diagnose issues before filing returns.
This builds compliance into regular business activities, reducing costs and leakage across the system.
As Rao Lixin stressed, the future of tax administration will be defined by seamlessly fusing advanced technology with tax expertise.
China's model demonstrates the immense potential of digital transformation to overcome enforcement hurdles and spur development.
Delegates at the ATAF meetings responded enthusiastically, recognizing the ability of data-driven systems to strengthen African tax compliance and capacity.
With the continent losing billions in revenue leakage annually, leveraging analytics and innovation will be instrumental in funding growth and governance priorities.