When I read George Orwell’s book, 1984, in the eighties of the last century, it was a lovely and at the same time ghostly experience. At the time the book was forbidden and you were not allowed to possess it and also not read it. A large group of us met in an apartment, in which I had never been in my life and we took turns in reading it aloud. We drank tea and ate pickled gherkins, because there was nothing else. A group reading is something wonderful, because afterwards one can have a lively discussion. But the story of this book is frightening and it sent a shiver down my spine. The idea that I could live in a society which observes me at every step and knows everything about me and corrects me, if I do not feel as the state envisages, was simply awful.
After we had read the book, in the last century we agreed that in the near future this scenario is rather improbable, because the state does not have the technical resources to observe its citizens so closely. That was a feeling of relief, but the fundamental discomfort remained.
Today I deal most of the time with taxes and I see the developments around the world. Fraud is enormous. There are states, which collect only 60% of the revenue, which they should receive. How is the state to fulfil all its tasks? Finance the streets, schools, hospitals and security? What the states do perforce around the world, is combat fraud and tax evasion.
The list of measures for doing this is almost endless, depending on the creativity and the ingenuity of the individual tax authorities. I like collecting them and I am astonished time and again at how quickly an idea, which has taken root in one state, can spread like a bushfire globally. Many of these measures result in incredible administrative costs and swallow up more money in their realisation than they bring into the exchequer. A textbook example seems to FATCA. It is a US law on the exchange of information. Basically, it is a duty of information, which the banks have to the US authorities, if they manage funds of US customers. When one reads how much money this administrative measure costs worldwide and how much it brings the USA, the question arises whether cost and income are proportionate.
This question arises with many such measures, because they create enormous costs, which is loaded on companies and gnaws away at their margins. I have no sympathy for fraud, because it is unfair towards all honest people, but the result should not be that the honest are made to pay for the dishonest.
For a long time I doubted whether fraud can be really efficiently curbed. With the arrival of electronic invoices, data transmittal in real time and unlimited possibilities for data analysis, I am convinced that we are approaching the age of complete observation (and therefore of the significant reduction of tax fraud). Perthaps in 2030? I don’t think that fraud can be completely eliminated. Fraud is also a question of creativity (even if criminal) and, as long as we humans are creative, there will also be fraud. But with modern technology, fraud can also be curbed.
And how do I see this? In future there will be nothing that the tax administration does not know about every one of us and that not as a statistic recorded at a specific date, but as a dynamic data flow, which will supply information in real time. The tax administration will be aware of all my outlays and income. I assume that cash will be abolished and that all payments will be made electronically, that a “FATCA” will inform the tax administration about all my outlays and income. But the tax administration will also know where I am, because in certain locations I will have to pay charges and they will be automatically deducted, when I set foot e.g. on London Bridge, the main station, the airport and similar places. My health data will also be known and my conduct taken into account either by a reduction of the health insurance premium or by a tax. It will look as follows: if for example I am overweight (that will also be automatically recorded daily), but I still move too little (the steps and the pulse rate are recorded throughout the day), and then have a slightly elevated cholesterol level and still want to take the risk of ordering a pizza for lunch, the tax rate on this pizza will not be the current 7.7%, but 55%, to bring me to reason. The tax on the salad will remain 7.7%. The same will happen in all other aspects of our life. We will be transparent.
Will we still have spaces, where we can move freely? In 2030, probably still. In 2070, they will be extremely tiny and the pressure to conform will be huge, just as one can see in China today. But perhaps the future generation will consider this to be a matter of course and accept it fully. Finally, we will reduce the tax, because fraud has been successfully combated.
Image source: fotoART by Thommy Weiss / pixelio.de