There’s a war being waged in digital transformation. The restructuring of established business practices in a world where innovation and technology are advancing at unprecedented rates is catching those unprepared for the advances on their heels.
A recent study from the research firm Gartner that warns: “The biggest threat to innovation is internal politics and an organisational culture which doesn’t accept failure and/or doesn’t accept ideas from outside, and/or cannot change”.
That conflict isn’t just out there in the business world though. The war is being waged throughout governments and civil service. The £450m budget granted to Government Digital Service (GDS) in last years budget certainly raised a few eyebrows. Particularly so once it became clear that HMRC had elected not to use their Verify system as a replacement to Government Gateway, but instead develop their own platform.
Ann Kempster, a senior government contractor working with GDS, offered the following insights into the digital transformation of UK government in a blog post:
“I thought that we’d won the fight between the old and the new after the creation of GDS. For a while we did. But then the civil service did what the civil service does and closed ranks. Digital in central government is suffering in 2016….. I’m seeing a lack of appetite in departments for real, meaningful transformation. I’m seeing a lack of effective leadership right from the very top of the civil service…. We’re ruled by a cadre of senior civil servants and politicians who don’t understand technology, still think it’s a gimmick and are more concerned with building empires than delivering good services to the people of the United Kingdom”
Against that backdrop – a couple of information-age game-changers are currently hitting the businesses we advise in Guernsey squarely in the face.
Common Reporting Standard
I’m sure this needs no introduction to those likely to be reading this. A major CRS implementation project is currently swallowing up my daylight hours. At its heart, CRS is a monumental shift towards collusion and cooperation by worldwide tax authorities on a scale the world has never seen before. It ushers in a new era of transparency in the affairs of individuals and entities between those responsible for making sure they pay their fair share. It’ll give those authorities never before felt reach into names and numbers that pierce the secrecy veils that protected those seeking to avoid in the past. It’s the fundamental jab that sets up the left hook to follow in this digital 2 punch combination.
Worldwide Disclosure Service
Guernsey business is integrally linked with the UK. You don’t work in tax affairs without coming across clients that come wanting help to straighten their affairs out, but its not just evaders this affects, it also impacts those with legitimate reasons for structuring that perhaps have uncorrected errors in past filings. The Worldwide Disclosure Services is simply a portal for setting the record straight. It was a pretty low key arrival when HMRC released it, but that itself is telling. It may seem like the latest in a line of voluntary ‘come clean’ initiatives to taxpayers who have failed to properly declare, but this is different. It’s not a sporting hand outreached. It’s a impending notice that the knockout punch is coming and it doesn’t matter if your guard is up or not. It’s an offer to go down, lose the fight and the purse, but save yourself the pain. There are no sweetheart deals on offer this time – not even guaranteed immunity from prosecution. It’s just a last chance to square things up before the new tools (CRS and the various beneficial ownership registers) get put to use. It comes armed with new civil penalties to those who don’t take the offer that will be used to load the gloves if you don’t take the offer. With the Lichtenstein Disclosure Facility (LDF) closed its now the only offer on the table. The 30% minimum penalty is considerably higher than the 10-20% that LDF allowed. The potential impact already has a lot of people anxiously reviewing what they’ve done.
With technologies like blockchain likely to also revolutionise the way transaction integrity is maintained in future and remove reasonable doubt about what happened and when, the world is likely to get very small for those who wish to hide their affairs in it.
So the burning question then…. will the old guard win out and business carry on as usual, beating down the reforms? I’d point you to my article Reinvent or fade away for my personal opinions on this. Before Uber, taxi seemed a technology safe industry. Before Airbnb, hotels did too. Why should governments, civil servants or Guernsey based finance business be any different?
In the Now Economy, there is an ever increasing propensity to share and work with. Protectionism isn’t your competitive advantage anymore and being integrated and inclusive is de rigeour. Tax authorities see that advantage very clearly and won’t be held back by Whitehall gents clubs or local equivalents. Now Taxation, as I like to call it, has arrived and it will change the game.
For us though, while other businesses are going big – global data projects, worldwide insights and Microsoft partnerships – we’re going small and bespoke. Seeing through projects and designing bespoke solution applications that are focused only on the best possible compliance with the Guernsey legal and regulatory regime and how it interacts with the rest of the world. We’re not providing solutions to end consumers on a worldwide basis, we’re providing practical solutions to businesses in Guernsey. Our CRS implementation framework and information configuration for example is geared to provide the most comprehensive and robust framework for getting the inputs right according to the CRS itself and the Guernsey specific factors that matter to clients (e.g. connectivity with the UK IGA for 2016).
We’re as happy to be an important well thought out cog in a huge machine as Guernsey itself should be.