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Developments in tax e-filing:practical views from the coalface

Andy LymerBirmingham Business School, University of Birmingham,

Birmingham, UK

Ann HansfordUniversity of Exeter Business School, University of Exeter, Exeter, UK, and

Katy PilkingtonUniversity of Lancaster Business School, University of Lancaster, Lancaster, UK

Abstract

Purpose Electronic filing (e-filing) of personal tax returns has become a global trend in developed

countries. An increasing number of individual UK taxpayers are seeking help from tax advisers asambitious e-filing targets increase the interaction between taxpayers, tax agents and governmentdepartments. This article aims to review the attitudes to information and communications technology(ICT) adoption between these three groups.Design/methodology/approach This article has partly built on the work of Walsh and White,who use Moores Technology Adoption Life Cycle to examine e-filing adoption by taxpayers and taxpreparers in the USA. However, this article uses a mixed methodology that the authors argue is moresuitable for the wider issues found in the UK.Findings The results confirm that small/medium sized tax agent firms are more likely to betechnology enthusiasts/early adopters of e-filing for their individual clients. As their business policiesare more likely to be directly driven by technology enthusiasts, they have fewer issues with theincomplete e-filing system available at the early stages of its roll out and were more motivated by thevisible benefits available from adopting e-filing. Larger firms have been slower and appeared morereluctant to embrace e-filing of personal tax returns being concerned that engaging in HM Revenue

and Customs controlled systems and targets would compromise their internal systems, ICT integrityand control of complex tax cases.Practical implications This split in e-filing attitudes by tax agents supports Moores chasmargument for technology adoption processes, implying solutions for widening participation foundappropriate for other domains could be equally applicable in this domain. The article reflects on thesefindings and proposes practical solutions that build on prior research to assist the government inachieving the future ambitious targets for e-filing.Originality/value This paper reports the results of a national survey of tax advisers,supported by follow-up interviews, addressing the development of e-filing for personal taxationin the UK.

Keywords Electronic filing, E-filing, Tax agents, Technology adoption, Archives, Tax,United Kingdom

Paper type Research paper

1. IntroductionThe impetus to personal e-filing in the UK was part of the 1998 modernisinggovernment agenda. The UK Government set clear adoption and delivery targets forelectronic services by government departments and agencies. In 1999, Gordon Brown(as the then Chancellor of the Exchequer) confirmed that it would be possible to e-file

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0967-5426.htm

Journal of Applied Accounting

Research

Vol. 13 No. 3, 2012

pp. 212-225

r Emerald Group Publishing Limited

0967-5426

DOI 10.1108/09675421211281290

The authors acknowledge the funding for this work by the Tax Management Research Centre,University of Nottingham and the University of Central Lancashire.

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tax returns and it was part of the governments commitment to the use ofe-services. The internet-based online facility for individual self-assessment(SA) returns referred to as e-filing in this paper was introduced on 31 July 2000and tax advisers have been able to file online on behalf of personal clients since

August 2001.Prior to e-filing, the electronic lodgement service (ELS) (introduced in 1997) enabled

tax advisers to file SA returns electronically on behalf of clients. ELS was laterwithdrawn once confidence in the new internet-based services was established.

Studies in the USA have confirmed that the choice made by taxpayers as to e-file ornot is dependent on whether they use a tax preparer (tax adviser) and the attitudes toe-filing of their tax preparer in the development and adoption of e-filing (Thomas et al.,2004). Prior UK studies into SA also confirmed the pivotal role played by tax advisers(Hansford, 1997; Hansfordet al., 2005).

In the case of the UK, by 5 April 2010 74 per cent of individual SA tax returns for theprevious tax year were filed online[1] which confirms that there has been a steady andimpressive increase in the uptake of e-filing in the UK. The extent of online filing of SA

returns was initially very slow and fell well short of the original targets. By 5 April2009 66 per cent of SA returns were e-filed which represented a 23 per cent increase onthe number of returns filed by 5 April 2008 (see Hansford et al., 2005, 2006 for a widerdiscussion of early stage statistics of e-filing developments[2]).

Her Majestys Revenue and Customs (HMRC)[3] online services were the subject of agovernment review chaired by Lord Carter of Coles (Lord Carter of Coles, 2006). Thisreview called for significant growth in e-filing as a tool for all interactions betweenindividual and corporate taxpayers and the UK revenue authorities (HMRC). Thereviews recommendations were published on 22 March 2006 when Lord Carterconcluded that well-designed online services can bring benefits to taxpayers and thegovernment. The government welcomed his report, which was based on wide-rangingconsultation with stakeholders, and accepted the recommendations. One of the

recommendations to increase the uptake of e-filing of SA returns was to differentiatebetween the filing dates of paper returns and e-filed returns. The recommendation wasimplemented for the tax year 2007/2008. The deadline for filing paper SA returns wasshortened in that year to 31 October while the deadline for filing SA returns onlineremained at 31 January following the end of the relevant tax year.

In addition the Carter review introduced deadlines for the mandatory electronicfiling of corporate tax returns by April 2011 (updated subsequently to 2012) the reviewalso banned (later revised to significantly restricting) the use of computer-generatedsubstitute SA returns from April 2008. This study focuses on the experiences of e-filingSA tax returns to review HMRCs progress in this area towards Lord Carters goals,and as an illustration of the potential implications of wider e-filing developments.

The next section of the paper provides a review of the technology adoption

literature. In particular, it outlines the technology adoption life cycle (proposedand explored by Moore, 1995) as an appropriate model for e-filing adoption by taxagents in the UK. Following this review we discuss our research approach andillustrate how we have combined quantitative and qualitative data collection methodsin this study as the mixed-methods research approach we argue is appropriate for thisparticular subject.

Following this section we provide a summary of our results and a discussion of theirimplications for our analysis of e-filing adoption amongst tax agents in the UK beforeconcluding in the final section.

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The technology adoption life cycle proposes (see Figure 1) that a technology adoptionprocess progresses through these stages, not necessarily at an even pace or regularspeed, towards ever-wider numbers of adopters. It does not suggest all technologieswill achieve ubiquity of adoption, however, and illustrates how waves of adoption may

occur, or be halted, temporarily or indefinitely, by environmental and other factors thatcan allow advancing of adoption, or slow/stop adoption development.

This technology adoption life cycle model is used in this paper to analyse resultsfrom our quantitative and qualitative data collection activities. The next section detailshow this data collection was planned and implemented.

3. Research question and selection of research methodsThe research reported in this paper seeks to advance the understanding of e-filingdevelopment and its use in the administration of tax. Our focus is SA taxation in theUK during the early twenty-first century a time at which e-filing is becoming morewidely used, but is still some way from a desired goal of the UK Government as theubiquitous solution for all tax filings (Lord Carter of Coles, 2006). Our specific frame of

reference for this paper is the tax intermediary (agent), rather than the tax payer or thefiscal authority (HMRC), as we wish to explore the extent to which tax agents can playa pivotal role in influencing the e-filing adoption plans of the government. Therefore,our research question for this paper is:

Can tax agents be said to be acting in ways that will advance the roll out of e-filing for SA inthe UK?

Technologyenthusiasts

100

75

50

25

Adoption

percentage

Early

adopters

The chasmTime

Source: Walsh and White (2000). Copyright American Accounting Association

used with permission

Early majority orpragmatists

Late majority orconservatives

Laggards or

skeptics

Based on G.Moores Crossing the chasm

Cohort groups enteringthe e-file process

Figure The technology adopti

life cycle applied to e-fili

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In order to address this research question as fully as possible a single research methodwas considered insufficient and so a mixed method was employed as we argue thisreduces the potential bias inherent in a single method (Cresswell, 2003). Incircumstances such as are being considered in this paper a mixed method design is a

more appropriate approach as it is able to provide more comprehensive answers than asingle method design (Denzin and Lincoln, 2000; Neuman, 2003).

Questionnaire surveyA questionnaire survey was conducted in conjunction with the UK Chartered Instituteof Taxation (CIOT). Members involved with SA tax returns were circulated by e-mailand invited to complete an online survey. Members of CIOT receive many suchrequests for their views and so it was important to focus on a few key questions, andthese were limited to 13 questions. CIOT members were advised that it would take nomore than 10 minutes to complete and submit the questionnaire. The results fromthe 997 replies received were analysed using Kruskal-Wallis as it enables a comparisonto be made between the responses of different groups and for this study we wished

to identify differences between Big 4 respondents and small/medium-sized firmsrespondents. The Kruskal-Wallis test is similar to the Mann-Whitney U-test, in thatthe cases of the different samples are ranked together in one series. Mann-WhitneyU-test was used for two groups and Kruskal-Wallis able to test the scores for morethan two unrelated groups, as is the case in this study. The analysis shows themean rank for each group together with the level of significance, with po0.05being considered to represent a significant difference between the groups underconsideration.

InterviewsTo add further depth to our quantitative data a series of 14 interviews witha cross-section of e-filers and other experienced tax agent professionals was

undertaken. Interviews were conducted using a semi-structured approach toensure high continuity between the interviews while allowing for specific andunique contributions to be captured from participants with a range of experiences with both current, and previous, e-filing approaches operated byHMRC.

A combination of note taking and transcription of recorded interviews allowed forrelevant data to be extracted from collected data for review and analysis.

4. Results and discussionThe findings of this study are set out below in four main sections. Initiallythe different overall attitudes are established from the analysis of thequestionnaire survey of 997 respondents. This analysis produced a broad,

two-way split in our data set distinguishing the technology enthusiasts/earlyadopters from the pragmatists/conservatives. Factors relating to the enthusiasticadopters/early adopters are reviewed in Section 4.2 and those relating to thepragmatists/conservatives in the following Section 4.3 and future developmentsare reviewed in Section 4.4. We conclude by considering the drivers to achievegreater adoption of e-filing in Section 4.5. In reporting the findings the outlineframework drawn from the questionnaire survey is reviewed first and thenthe deeper issues evident from the interview comments are used to develop thediscussion further.

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4.1 Overview of the different attitudes of users4.1.1 Overview of questionnaire survey. Respondents to the questionnaire were asked toidentify the description of the firm they worked for and whether they e-filed SAreturns. Table I sets out the Kruskal-Wallis analysis of the relationship between

the type of firm and the percentage of returns that were e-filed, in order to address thequestion do smaller firms e-file more?

Withpo0.001, this indicates a high level of significance. The lower the mean rankindicates fewer numbers of SA returns are e-filed which means the Big 4 aredramatically out of line with a mean rank of 170.17 compared to 541.65 for tax adviserswithin small firms at the other extreme.

A further question asked whether respondents used online agent authorisation andonline payments. The analysis showed the Big 4 respondents were less likely to useonline authorisation; 69 per cent did not use it as compared to the average of 44 percent. For online payments it was a little closer with 62 per cent of the Big 4 not usingthem as compared to an average of 50 per cent.

These differences in attitude between the Big 4 and the small- and medium-sized

firms to using e-filing and online services were investigated further during theinterviews.

4.1.2 Overview of interviews. The interviewees were selected on the basis of firmsize; small/medium-sized firm and Big 4. Interviews were conducted with three of theBig 4 firms and a further 11 interviews were conducted with practitioners from small/medium-sized firms. The small firms consisted of sole practitioners andrepresentatives of local firms with up to five offices. The medium-sized firmscomprised of practitioners with national firms. For the purposes of this analysis the 14interviewees can be summarised in Table II.

Number Mean rank

Small firms 349 541.65National/regional 99 508.81Sole practitioners 335 506.52Privately filed 31 476.31Med international 34 457.29Tax consultancy 69 391.83Other 16 330.72Legal practitioners 15 328.37Industry/commerce 22 290.61Big 4 15 170.17

TableKruskal-Wallis analyof variance of the leve

of e-filing for differetypes of tax advise

Firm sizeTechnology

enthusiasts/early adoptersMajority adopters/pragmatists/conservatives/

laggards

Small 6Medium 5Big 4 3

Table Summaryinterviewe

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4.2 Technology enthusiasts/early adopters small/medium-sized firmsThis section focuses on the small/medium-sized firms (technology enthusiasts/earlyadopters) and what can be learnt from their attitudes and willingness to adapt toe-filing. It was not possible in our study, given the limited number of interviews

undertaken, to distinguish in a meaningful way between Moores (1995) categories oftechnology enthusiasts and early adopters as such our analysis treats these groupstogether for our analysis. Characteristics from both categories where evidenced in theinterviewees of this group of small/medium-sized firms. In particular, the intervieweewas not always in the same role within the organisation (manager/senior/consultant).For example, one small firm interviewee described himself as an ICT convert andanother as an e-filing enthusiast. This section focuses on the groups experiences ofe-filing, software used, functionality of HMRC systems and how e-filing fits with otherICT experiences.

4.2.1 Experiences of e-filing. Technology enthusiasts were identified in our study asthose who demonstrated a positive attitude to e-filing. Despite a poor experience ofe-filing in the previous year to our period of review, this group of interviewees

persevered with e-filing. A medium firm manager described his firm as enthusiastice-filers. A tax manager of a small firm set herself up as the e-filing champion andanother interviewee described himself as the person driving it (e-filing) forward.All the small/medium firm interviewees reported an improvement in their experienceof e-filing from the previous year. The current year had been relatively straight-forward and there were no significant problems. One interviewee reported 98 per centof 800 clients successfully filed without issue. One interviewee described theexperience of the previous year as a nightmare involving 7 a.m. starts to file whenthe system was less busy and as one interview described it (e-filing) as the only wayforward.

Rejection levels in previous years had been a problem. Question 4 set out eightpossible reasons and required respondents to tick up to three reasons for rejection,

from their experiences. There were 1,350 yes responses from the 997 respondents,and so interviewees were asked to comment on their experiences of returnsbeing rejected. Failure to successfully file returns was attributed to inexperience orhuman error or staff not being sufficiently savvy with some acknowledgement ofthe presence of limited teething problems arising from a lack of understanding of thesystem. There were comments such as the main reason for rejection is inexperience ofour staff in filling in returns they would probably do the same mistake on a paperform as on the e-file form and a medium-sized firm interviewee commented that75% of rejections were due to a learning curve.

Several interviewees noted there had been problems around gaining authorisationsto provide information to agents (form 64-8 that required signed acknowledgementby the client of approval of an agent assignment before HMRC would accept agent

representation for that client) but were happy to point out that these issues appearto have largely been resolved by the time the interviews were conducted. Theinterviewees attitudes to previously high rejection rates and authorisationdemonstrate that this group of technological enthusiasts were happy to workthrough difficulties and accept the technology in its incomplete state one of the keycharacteristics of technology adopters in these categories according to Moores (1995)analysis.

A positive cost saving in identifying the problems on a rejected return washighlighted by one interviewee since e-filing assisted in identifying errors which, had

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a manual return been submitted, would have been costly to rectify at a later date.Two interviewees specifically commented on the instant acknowledgement ofacceptance and a third interviewee commented e-filing has made things quicker.This group could therefore perceive that there is a higher value in terms of

potential future cost savings rather than acknowledging that cost savings werecurrently being achieved.

4.2.2 Software differences. The analysis of the questionnaire results showed therewas no significant difference between the percentage of e-filed tax returns that wererejected and whether third party or HMRC software was used. However, there werehighly significant differences between the reason for rejections and the type ofsoftware used. Respondents to the questionnaire were asked closed questions toidentify the reasons for rejection and these included: tax return too complex, client typenot handled, attachment not previously allowed, third-party error, failure of delivery,computational error, other FBI error, HMRC software rejection and agent authorisation.Mann Whitney U-tests showed that the differences between third-party and HMRCsoftware were all significant at the 5 per cent level, except for the attachment reason.

This shows that third-party software users were consistently more likely to identifythe reason for rejection.

The small/medium firm interviewees were perhaps not surprisingly quick tosupport the use of tax software, in general. There were comments, however, that thesereasons for rejection had to be reduced significantly as the proposed solution(of resorting to paper filing instead of continuing online) would not be viable oncea shift to e-filing had occurred. For example, interviewee comments included: [therewould be] additional cost of preparing manual returns for repayment clients, who canleast afford them and there will be the inevitable increase in errors from handwritingand transposition. The requirement to fill in manually would be a headache at a timewhen they have least resource to complete paper versions.

For the technological enthusiasts there was a confidence that issues that arose

would be addressed: [y

] in any case it will be sorted out by my software provider,which provides evidence that these interviewees believed there to be adequateinfrastructures in place to address ongoing problems.

4.2.3 Functionality of HMRC software. The analysis of the questionnaire questionconcerning the functionality of HMRC software was inconclusive as respondents to thequestionnaire had a diverse range of issues. The interviews were, however, able toprovide more details. Problems with software were attributed to software integrationand not HMRC per se. Good infrastructure support existed from both third-partysoftware providers and HMRC. One interviewee commented on the relaxed attitudeof HMRC with respect to the reinstatement of agent authorisation forms which haddisappeared from the system and so this demonstrates that problems in the previoustax year had been addressed. Tax advisers sometimes were not able to e-file a clients

return as they were often on the last minute, [and so] it is easier to do a paper return.In some quarters there is still the perception that for those clients whose integrity issuspect it is better to deliver the tax return manually on 31 January and so are lost ina deluge of processing.

Overall our interviewees commented positively on the functionality of HMRCsystems. For them they have not presented any real problems and they were eager toreiterate the positive aspects of e-filing such as speed of confirmation of receipt andinstant repayments. Therefore supporting the theory that technology enthusiasts/earlyadopters will perceive a higher value that the use of technology provides.

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4.2.4 Other ICT experience. Many of the interviewees maintained their increased useof other online services was on the back of a good SA e-filing experience which wasreflected in the quantitative analysis. The relationship between the percentage ofreturns e-filed and other online filing was highly significant at 0.000 level for PAYE,

CT, VAT returns, VAT registrations and 64-8. This provides clear evidence that oncefirms get the online habit they are prepared to extend this positive experience toother areas.

Despite various concerns expressed in preparations for e-filing roll out, security inrespect of the technology itself was not considered to be an issue by any of theinterviewees who viewed the potential loss of data by HMRC to be no riskier than inrespect of paper returns. This was therefore not a key factor influencing this groupsdecision to e-file.

4.3 Majority adopters/pragmatistsThis section focuses on the factors arising from interviews with practitioners fromthree of the Big 4 firms. The views expressed reflect the employees experiences andnot the firms view. However, the responses support the analysis of the questionnairesurvey in that the Big 4 interviewees reported that their firms were not e-filing and thatat the time of the interviews they had received no information regarding the moveto e-filing. The responses support the description of the Big 4 firms as majorityadopters and in some aspects as conservative/laggards.

The interviewees confirmed that their firms did not e-file SA returns and thereforecan certainly not be classed as pioneers of e-filing. One interviewee commented:

It is in one respect strange that the Big 4 are not leading the way. Perversely e-filing may nowbe perceived as something for small firms to be involved with and not the Big firms.

The Big 4 interviewees were asked why in their view their firms had not adoptede-filing of SA returns. Their responses included the view that the organisational

structure resulted in the offices having their hands tied with regard to the adoption ofe-filing and that the impetus would have to come from on high.

Having worked previously in a small firm, one interviewee commented that e-filingsaved the time of more highly skilled people in small firms. In his current firm thepeople making the decision about e-filing would not be involved in the day-to-dayoperation of tax compliance and its not their time it would save, which could go someway to explain the reluctance.

The Big 4 interviewees were concerned that, in their view, there is no higher value tobe obtained for large firms to move to e-filing. For their firms, the manual system isrelatively cheap and incremental e-filing costs are not something that can be billed tothe client. The savings in having administrative staff dealing with the posting andchasing of returns would not be significant enough to cover the transition costs of

voluntarily moving to an e-filing solution. There would also be additional costsof training, the redrafting of all engagement letters, and related proceduralamendments to current firm practices. In addition, changes to existing bespokesoftware would be required and there would be slower transfer times for large pdf files.

Unlike the small/medium-sized firms, the Big 4 interviewees believed that e-filingwould happen in their firms only if they were forced to do so and there is a generalbelief that the threat to make e-filing compulsory is a hollow threat that HMRC willnever introduce. This is perhaps a counterintuitive stance to take consideringmandates that have been issued for CT, PAYE and VAT filing to move online.

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A major barrier for the interviewees was the inherent risks in e-filing arising fromthe change in their working practices.

A concern that was raised by one interviewee was that there would be an internalsecurity issue since e-filing would only permit one access password to the gateway.

This would enable staff to view liabilities and payments data for all clients linked tothat office and Clients would not expect this wide a view, and it could be inconsistentwith a firms duty of confidentiality.

E-filing would require delegation of the actual filing and would depend on trustbetween the manager who has signing off responsibility and junior staff and wouldrequire an additional step between the actually signing off and the filing. Inherent risksin the e-filing process were clearly an issue and further confirmed the characteristic ofmajority adopters who wish to be presented with a risk-free complete solution beforeadopting new technology.

The interviews collectively suggest that the Big 4 firms clearly are not setting out tobe pioneers in the move to e-filing. However, a possible explanation of this may be to dowith the mix of complexity of their SA client base simpler affairs typically being

found in medium and smaller firms more suited to the initial stages of e-filingcapabilities. However, it appears clear that excuses for lack of engagement are moredeep-seated than this perhaps going to firm philosophy of engagement with HMRCinnovation, and deeper issues of internal process changes required to systems that areperceived as efficient as they currently operate.

4.4 Future developmentsThe technology enthusiasts were already geared up to ICT and have been for sometime. One interviewee commented that his firm was now totally dependent upon thecomputer to survive and another that they would not accept a client who refusedto permit e-filing of their returns. Small firm interviewees see a future of moredeadlines, obsession with regulation, less maneuverability. They expressed

frustration when HMRC cannot respond at the same rate as they now can witha fully automated ICT system. The use of electronic forms and pdf and e-mailcommunication instead of letters were suggested areas for improvement in the easeof use.

One interviewee from a Big 4 firm envisaged that there could be a de-skilling ofsome staff resulting in a bigger divide between the adviser role and the inputers.

Junior staff would be used more cost effectively but there was a real danger of greaterignorance developing which would make it difficult for staff to progress to the adviserrole. Another interviewee from a medium-sized firm suggested that e-filing hadchanged the focus of skills offered by different members of the department and was notnecessarily a dumbing down of the skill level and that e-filing could increase the useof retired staff or those working from home.

There was no evidence in the interviewees experience of peer group pressure toe-file. The financial incentives offered by e-filing PAYE were the only pressure byclients to adopt e-filing. The decision to e-file has been seen as more internal fromeither other partners or from a software company rather than external pressures fromoutside the firm. One interviewee commented, for example, that the clients were notbothered. In contrast one interviewee commented that they use e-filing as animportant and positive selling point and cited the speed of repayments as the mainimpetus for e-filing. The view was expressed that it was going to be compulsoryanyway so they needed to sort this out before they were forced to do so.

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In the case of the pragmatists of the Big 4 firms there was an acknowledgement thatif one or two of the other 4 where to move to online then his firm would probablyfollow which suggests that large firms are prepared to adopt a wait and seeapproach, when risk is reduced or eliminated and perhaps will be more susceptible to

peer pressure than smaller firms are (in this regard at least).

4.5 Drivers to achieve greater adoption of e-filingThe technological enthusiasts are quickly adapting to e-filing resulting in theimpressive increase in e-filed SA tax returns in the year to 31 January 2010. Attentionneeds to be focused on moving the majority adopters/pragmatists to the moreenthusiastic group.

In achieving a greater adoption of e-filing the interviewees from the large firmsbelieve that their departments have always had strong ICT cultures and so given thecorrect circumstances could adapt easily. The main changes in the structure of theirdepartments would come from a move towards advisory work and away fromcompliance work. The new recruits to the firm, one interviewee commented, now have

a greater variety of work and a wider range of skills in relation to ICT, which will easethe learning curve to convert to greater e-filing when this move occurs.

There has been a move towards greater electronic resources (e.g. library andreference resources) and away from a physical library that may further enhance thegeneral ICT orientation of larger firms. One interviewee commented that the culture isto share the results of your research with other members of the firm. E resources meanthat you are more likely to look up the problem yourself rather than automaticallygoing straight to the specialist. Staff therefore will have a broader base of knowledge particularly noticeable with the new recruits. One interviewee commented thatnew recruits are coming in with better research skills that is half the battle in tax andanother summed it up well in that this was a generational and cultural issue.

Collectively, these trends clearly visible even amongst the pragmatists are likely

to suggest e-filing of some form has become a permanent feature of the UKs taxadministration environment and e-filing of SA, and other returns will continue to growtowards ubiquity for more tax filings, fulfilling the proposals of the Lord Carter ofColes (2006) review.

5. ConclusionsThis paper set out to review the extent to which tax agents could be said to be acting inways that enhanced the roll out of e-filing of SA returns in the UK during the criticalinitial years of this process.

The analysis of the questionnaire results highlighted the counterintuitive findingthat the large, Big 4 firms who pride themselves in leading the way on ICT (andeverything else) are pragmatists/conservatives and not technological enthusiasts or

early adopters (Moore, 1995) when it comes to SA e-filing.Our evidence, however, suggests that e-filing has been strongly embraced by

small- and medium-sized firms. They have demonstrated features of technologicalenthusiasts and early adopters; an enjoyment of experimenting with new processes,continuing with e-filing even if not fully assessing the immediate cost benefits,accepting incomplete solutions in the belief that e-filing is the way forward and thatthey need to keep abreast of developments with suitable effort committed to this taskto ensure this occurs amid the many other things they are required to maintain timelyknowledge of in the rapidly changing environment in which they, as tax agents,

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operate. Big 4 firms demonstrate the characteristics of majority adopters/pragmatistswith concerns about risks to their bespoke ICT systems, not being prepared to acceptincomplete solutions and adopting a wait and see approach.

As such, our evidence suggests that a distinct two way split has resulted at the

time of our study between those agents clearly acting in such a way as to enhancethe roll out process HMRC was seeking to encourage, and those who were active intheir non-engagement despite the various efforts of the tax authority to engage them.

Taxpayers and their advisers require practical solutions to ensure the governmentcan achieve the ambitious targets for e-filing returns in the coming years. Thisresearch has shown that e-filing is a system that has more immediate benefits fortaxpayers with less complicated tax affairs, who are dealt with by small- and medium-sized firms of tax advisers, generally. Big 4 firms have bespoke ICT systems and thereneeds to be a move away from the one size fits all approach adopted by HMRCinitially to see wider likely adoption by Big 4 firms.

Understanding who makes the ICT decisions, and why, is important to HMRCsagenda for wider adoption of e-filing. Smaller firms tend to share adviser and

compliance roles, whereas these are typically more segregated in larger firms. Differentstrategies for encouraging adoption are therefore likely to be required.

There also remain gains to be achieved with further improvements to thefunctionality of HMRC systems, for both advisers and HMRC staff. This is particularlythe case for widening the range and complexity of e-filing suitable client situations toensure e-filing can be used for as many clients as possible.

There are very positive benefits that could be gained from the piggy-backing onother successful ICT adoption strategies, e.g. PAYE financial incentives meant clientsexpected tax advisers to file electronically and so get the bribe of 250 (reducing to 75over a five-year period) as part payment of the advisers fees. The clients of smaller firmsas technological enthusiasts will be more aware of this than those of the Big 4. However, todate HMRC has ruled out further financial incentives to either agents or taxpayers for SA

e-filing (despite powers written into the Finance Act 2000 to allow them to do so if they sowish, a small 10 deduction being offered for e-filing of the 1999/2000 SA tax return andthis being used to incentivise ePAYE use HMRC, 2001), arguing instead more recentlythat the case for use is compelling in its own right (e.g. quicker repayments, more timelyconfirmation of submission being received, etc., HMRC, 2001) and that taxpayers money isnot therefore well used to incentivise this activity further. It therefore remains to be seenwhether a mandated e-filing route (as has been applied for the recent complete e-filingswitch shortly to be in place for VAT filing) will be required to achieve significant furtherinroads into the numbers of SA tax returns that continue to be filed on paper.

Notes

1. See latest statistics at: www.hmrc.gov.uk/about/online-filing-figs.htm

2. For similar studies and discussion of tax e-filing growth rates in other countries see: USA ETAAC, 2009; Schaupp and Carter, 2010; Malaysia Lai and Choong, 2010; India Ojhaet al., 2009 and Taiwan Hung et al., 2006; Fu et al., 2006, amongst others.

3. HMRC is the UK Government department responsible for collection of UK taxes andadministration of the UK tax system see www.hmrc.gov.uk

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Further reading

Moore, G. and Benbassat, I. (1991), Development of an instrument to measure perceptions of

adoption of an information technology innovations, Information Systems Research, Vol. 1No. 3, pp. 199-222.

Corresponding authorAndy Lymer can be contacted at: a.lymer@bham.ac.uk

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