Business Tech
Tax automation can
boost economy
Tax integration and automation are the digital catalysts of GDP growth, writes GEORGE KARAGEORGIADES, co-founder of PaySpace.
Pundits often say that digital technology can grow GDP and raise living standards. There is merit to these claims. A 2022 paper published by Chinese researchers in the Frontiers in Public Health journal found a strong correlation between GDP growth and countries with small digital divides. World Bank research shows that digital economies comprise almost a fifth of global GDP and grow 2.5 times faster than other GDP contributors.
Digital economies nurture and accelerate efficiency and innovation, two major growth engines. Digital economies also provide superior business intelligence, and enable enterprises to become more flexible and resilient. Notably, digital economies attract the best talent. Under-developed digital economies tend to lose the best talent. They also fail to realise the GDP growth associated with digital economies.
Yet, digital economies are not black boxes that magically create growth. They depend on several systems to deliver results. The API economy is one of the foundational systems.
API stands for ‘application programming interface, ‘ which is another way to say ‘computer translator. ‘ Different computer systems rarely speak the same language. When you order a lift on a ride-hailing app, that service does not share the same computers as your bank. Instead, APIs mediate between the app and the bank. This mediation happens whenever you book a ride or make an e-commerce purchase. It occurs when you access a digital map, check social media feeds, and access information across integrated business systems. APIs enable the digital economy’s stakeholders to communicate effortlessly and securely.
George Karageorgiades, co-founder of PaySpace.
The API economy is the nervous system of every digital economy. Without APIs, integrating services is difficult, slow, and very risky, not to mention inefficient and expensive. Those integrations are also prone to include manual processes and human intervention, leading to many errors. In contrast, APIs are transparent, auditable, and automated.
A thriving digital economy needs APIs. Yet, there is often resistance against the idea. The primary opponents are companies with legacy systems. Rather than build a new economy, they hope to keep the old one in arrested development so they are not forced to upgrade. But this is equivalent to preferring horse carts over delivery trucks. It’s a losing game where the holdouts eventually become uncompetitive, and the greater economy gets stuck.
When economies do more to protect the incumbents who refuse to modernise, they hobble the ability to grow GDP.
Still, change is risky. While the holdouts might cause damage, they have reasons to fear digital disruptions. Those fearing change must see examples of how that change can deliver results. An excellent place to start is tax.
Taxation processes benefit enormously from APIs. They can automate tax filings and audits. APIs replace the strain of spending much time on error-prone manual reconciliations. And committing tax fraud is much more challenging in an API economy, especially once you use API data to inform artificial intelligence and advanced analytics.
By using APIs, tax authorities make it convenient for businesses and software vendors to integrate and automate tax processes. This approach aligns with the South African Revenue Service’s vision to build a smart modern tax authority with unquestionable integrity, trusted and admired by Government, the public, and our international peers.
Creating digital economies isn’t easy; there are risks. It’s important to demonstrate a cohesive and supportive understanding of how we reach our economy’s digital goals. An API-driven tax system can set that benchmark. It’s already happening in countries such as the UK. Brazil and Argentina are leaders in API-driven tax automation. China has introduced real-time customs taxation through APIs. Other African countries, notably Kenya and Nigeria, are implementing real-time tax systems through APIs.
South Africa will also be on that list once we embrace the benefits of APIs. Other strategies will only delay the development of a robust digital economy. There are ways to embrace APIs and build automated taxation while helping the laggards catch up. We’re fortunate that SARS is a world leader in tax innovation. Hopefully soon, SA’s highly-respected tax authority will ignite the spark that helps create our GDP-growing digital future.
