IIntuit Canada: Foundations of Being Digital
Submitted by Intuit Canada 2010–07–12 11:35:39 EDT
Theme(s): Digital Infrastructure, Growing the ICT Industry, Innovation Using Digital Technologies
Background: Foundations of Being Digital
Through the Digital Economy Consultation, the Government of Canada has identified — and participants have affirmed — the vital matters of high speed broadband, mobile and smart phone economics and penetration. Also of importance is the issue of openness in terms of access to the Internet itself and to the public records held by government, much of the latter being in digital form. The consultation has elicited thoughtful submissions about the importance of securing both data and the networks on which they are exchanged in order to meet the reasonable expectations of Canadians to have meaningful safeguards on their personally identifiable information as the country becomes increasingly digital and networked.
In terms of security and privacy, we would underscore that perimeter security of ICT systems is necessary but not sufficient in a digital economy. Authenticated digital signatures through a public key infrastructure or other forms of multi–factor authentication are a key enabler for secure and trustworthy communications and transactions in the digital economy. We await the consultation's recommendations on this matter as well as the forthcoming Guideline on Managing Public Key Infrastructures from the Treasury Board of Canada Secretariat. We trust that both will provide consistent strategic and policy advice to public agencies and others who develop and rely on such infrastructure.
This submission seeks to take advantage of the nature of the consultation by recognizing the work of other participants in making the case for why and how those issues are important to a public policy framework and investment strategy that will support a vibrant and robust digital economy while preserving and promoting the values of Canadians in an increasingly digital society.
Digital Innovations: The Era of Participation in the New Economy
Our reading of the consultation paper suggests that the Government of Canada's working definition of the digital economy parallels in its essential characteristics the new economy as defined by the Information Technology and Innovation Foundation (ITIF): "The New Economy is a global, entrepreneurial, and knowledge–based economy in which the keys to success lie the extent to which knowledge, technology, and innovation are embodied in products and services." 1
As other submissions have detailed, being a digital country requires nimble and robust digital infrastructures, including but not limited to widely available, high–speed, high–capacity networks that can improve some processes at the margins and transform others at the core — provided an appropriate public policy framework is in place to guide the actions of public, private and the civil (not–for–profit) sectors. In summary form, being digital is defined by availability, access, security, privacy and — importantly — participation.
This submission assumes that policy–makers have already recognized (and been convinced by other participants) of the centrality of the first four elements of being digital. Standing on the shoulders of this 'new' conventional wisdom, this submission concerns itself with participation — both on the demand side (citizens, residents and businesses) and the supply side (government, business and the not–for–profit sector).
The growth of a competitive, sustainable digital economy assumes the active participation of all sectors — sometimes acting alone, sometimes together around common core functions, and sometimes in loosely knitted networked relationships at the edges to add value and enhance the user experience.
The need for and benefits of both demand and supply side participation will be illustrated in this submission within the context of an important — if somewhat arcane — attribute of a well–ordered society: the relationship between taxpayers and their government.
Demand Side Participation: Citizens, Residents and Small Businesses
Canadians and Canadian businesses are better positioned to take on the world in a digital economy and compete effectively when they have less to worry about at home. That is, they can focus on external opportunities when they are better able to use their own data (separately and in combination with other data sets) together with powerful digital tools to more effectively manage their business and personal affairs while meeting their reporting and compliance requirements.
Indeed, over one million Canadian small businesses use Intuit financial software to do just that, as do millions more Canadians to manage their personal finances and prepare their individual income tax returns. Importantly, both small businesses and individual Canadians are able to (a) choose among commercially available tax software that best fit their needs, and (b) use that software to manage day–to–day operations and meet their tax filing obligations.
We believe that is only the beginning. Statistics Canada reported in May 2010 that fully 80% of Canadians 16 or older are using the Internet, up from 73% in 2007. Moreover, beyond the national average, Statistics Canada identifies provinces and cities where Internet penetration is as high as 85% and 89% respectively.2
Canadians also demonstrate mature online practices. A 2008 comScore Study showed two thirds (67.1%) of Canadians use online banking, compared to less than half (44.4%) of Americans.3
The still nascent transformative potential of the Internet in the lives of consumers is most recently seen in a global Digital Influence Index conducted by Fleishman Hillard and Harris Interactive.
The June 2010 edition of the index reports that roughly a quarter of respondents from Canada (24%), the United States (22%), and the United Kingdom (26%) believe the Internet will be more influential in two years than it is now. In China, 85% of respondents believe the statement to be true. There are likely political, economic, historic and cultural explanations for this wide difference among country respondents. It may also be a variation on a well–established axiom about the Internet itself — we tend to vastly overstate its impact over the short term but vastly underestimate its impact over the long term.4
In reporting global averages, the Digital Influence Index quantified the role of the Internet in helping people to make decisions about personal finances. Four in five (80%) respondents say online resources allowed them to compare options and make better decisions. Approximately three quarters said the Internet helped them with personal finances in acting faster (75%), acting with more confidence (70%) and saving money (73%). More than half of respondents (60%) say they have used the Internet to find professional assistance or an expert service to help with their personal finances.5
The index also reports that, in looking for help with their personal finances, respondents were more likely to use a company–sponsored website (42%) than a government–sponsored website (17%) by more than a two to one margin.6 Almost two thirds (63%) of Canadian respondents reported using the Internet for research.7 Canadians (44%) were second only to Germans (48%) in expressing trust in government online. The Canadian trust level is markedly higher than the response in the United States (24%) or even the United Kingdom (38%).8
At first glance, the higher level of trust in online government among Canadians appears to be at odds with the global preference for company–based financial websites over government websites. That's not necessarily so. If seen through the eyes of consumer choice, the numbers point to the desirability on the demand side for public–private partnerships in this area.
As discussed below, the commercial tax preparation software industry has been active in Canada for almost 25 years — investing in Canadian talent and the creation of intellectual property in order to provide Canadians with a robust, but easy–to–use set of tools for them to manage their relationships with tax authorities at the federal and provincial levels.
In fact, the industry has automated the tax code by reducing it to computer code and creating software agents that, like their human predecessors, confronted the code's complexity and made it simple for individuals to prepare and file tax returns.
In many respects, agents acting on behalf of taxpayers — be they certified tax accountants, storefront tax preparers or software — forever changed the relationship between taxpayers and tax authorities. The rise of "digital agents" in which the complexity of the tax code and the related technical news, notices, rulings, circulars, bulletins, memoranda, policy papers, regulations, and legislation were codified and made easier to understand in and through software was a transformational moment at the earliest stages of the digital economy. Much has been learned through a quarter century of experience in dealing with Canadian taxpayers — and there is much more to do in meeting their evolving needs and anticipating their expectations.
Importantly, the industry is, without investment of any taxpayer funds, providing the 'last mile' in the electronic filing environment. Electronic filing plays a pivotal role in encouraging wide–scale participation in the compliance regime which, in turn, promotes and protects the integrity of Canada's voluntary income tax system.
The federal government's electronic filing program, NetFile, reduces processing costs for the Canada Revenue Agency, creating a strong financial incentive for encouraging widespread adoption. High compliance levels are also central to preserving the legitimacy of the country's voluntary tax system. The stakes are higher than they may appear at first glance. The legitimacy of Canada's tax system stands or falls on the level of voluntary compliance and promoting e–file adoption is a key strategy in making compliance easier with a view of keeping those numbers up. People who may never own a personal computer — probably because they don't really need one — already have a mobile phone. There is enough computational power in the current generation of smart phones to support any number of mobile applications, including ones for the filing of at least a simple tax return.9
Like online services and software delivered through a desktop or laptop PC, convenient, connected, powerful mobile tools can play a vital role in helping ensure continuing high rates of voluntary compliance. The wide–spread and growing adoption of smart phones and the thousands of mobile apps they support point to the very real prospect of mobile apps that enhance business and consumer choice in meeting tax filing and payment obligations — on a device of their choice, in a manner of their choice, and at a time and place of their choosing.
On that point, it is worth noting that the fortunes of successful businesses are widely attributed to the adage, satisfied customers are return customers. The private sector has also learned the perils of having dissatisfied customers, including the risk that they become disgruntled ex–customers who talk about their bad experiences with others. There is no exact parallel in the public sector because its customers — or more properly, its citizens or residents — do not have choice in doing business with government. But it is reasonable to expect that the residents' level of satisfaction is directly proportionate to their level of compliance. A satisfied resident is much more like likely to comply with reporting, permitting, filing, payment and other regulatory requirements. Dissatisfied or disgruntled residents or businesses will find it much easier to become scofflaws. The level of actual compliance notwithstanding, disgruntled citizens share at least one attribute with disgruntled customers — the tendency to complain loudly and bitterly about transactions gone bad.
Supply Side Participation: Government and Industry Together
Returning to the definition of the new economy cited above, technology–enabled, knowledge–informed and innovation–embedded products and services are offered by government, by industry, by the non–profit civil sector and — most interesting — through collaborations of two or more of these sectors working together or, at least, making their respective offerings mutually aware such that they are able to add value and enhance the user experience. These range from the conventional conceptions of integration across previously discrete systems in the classic, old school Information and Communications Technology (ICT) disciplines to contemporary Web 2.0 activities commonly called mash–ups. There are opportunities for innovation at all points along that continuum.
Dr. Rob Atkinson, president of the Information Technology and Innovation Foundation, calls those points on the continuum the ingredients of "turbo government." Atkinson says they have the "potential to dramatically boost the uptake of digital government services, cut costs for both government and users, and make the experience of dealing with government less frustrating." Such intermediaries "can play two key roles: in building and operating function–based portals, and creating digital integration tools." 10
Nobel laureate economist Joseph Stiglitz provides important context here in a thoughtful analysis of the appropriate (and most beneficial) roles for government in an open economy. To borrow a transportation analogy, he helpfully provides sign posts to keep vehicles in their respective lanes on the road to a digital economy. There may be times they rub paint but there is no reason for them to end up on a collision course.
Stiglitz sees government at a tipping point as it transitions to a digital economy. "On one hand, the public good nature of production in a digital economy, along with the presence of network externalities, may suggest a larger public role than in a bricks–and–mortar economy. On the other hand, an information–based economy may also improve the quality and reduce the cost of obtaining information, which by itself makes private markets work better than before. Furthermore, government failure may be even more pronounced in the context of rapidly moving information–laden markets than in traditional bricks–and–mortar markets." 11
To expand the transportation analogy, there are, of course, rules of the road and an enforcement function under which the police and courts hold drivers to account for what they do and do not do. Similarly, in the area of public service delivery, "All parties to the 'doing of the public's business' are held to account for what they do — and what they do not do. Ultimate accountability for the availability and reliability (and cost effectiveness) rests with government leaders. They, in turn, hold partners and collaborators responsible for execution. Public service raises the bar on everyone who accepts taxpayer funds to do the work, or for which public policies or other incentives are established to serve as motivators — the public employee, the private business or community organization." 12
That last observation comes from the Center for Digital Government, an organization the body of work of which has been helpful to us in understanding where government is going in a digital, networked world. We have been proud to be associated with the Center on the common cause of informing 21st century government. As we near the conclusion of the submission, we offer some of the Center's analysis in response to three specific areas addressed in the consultation paper: government modernization, cloud computing and the role of competition in growing Canada's ICT Industry. Each will be discussed in turn.
A) Modernization and Open Government
The consultation paper makes repeated references to the need for government to be a "model user of digital technologies" and leading by example.13 To those ends, it observes, "Open access is consistent with many national strategies and holds great economic potential for Canadians to add value to machine–readable data, while ensuring that privacy rights are protected. In many cases, data are already available but are difficult to locate. Consistent methods of access will be reinforced." 14
In a white paper called "The Sawyer Principles: Digital Government Service Delivery and the Lost Art of Whitewashing a Fence," the Center for Digital Government contended that, "once the data elements, business processes, and business rules of a governmental process or form have been defined, documented and published, anyone can do the work of government through a customer agent, commercial service or software product." 15 The resulting data interoperability is a core characteristic of the digital economy in which government is an active player, rather than only observer or referee. Ready access to public data held by government is a key tenet of the modern open government movement as championed by no less a figure than Sir Tim Berners–Lee, the creator of the World Wide Web. The point also needs to be made that this public data needs to be made available in digital form. Some transitionary digital document formats made information portable but served to inadvertently keep the data out of reach of digital technologies that could interrogate them and combine them with other data to create new discoveries, insights, analysis and economic value. If the data are not available in a native, digital format, they are essentially put in a straight jacket where they can only be viewed but not used. Digital technologies are showing us what happens when the public record is actually public and in a form where it can be used for better decision–making, ensuring public accountability of public agencies and enterprises and a range of economic activities (including mash–ups and mobile apps) that would have seemed unimaginable a few short years ago.
The Canadian tax code constitutes one of the more elaborate and well–documented sets of data elements, business processes and business rules.
Tax preparation assistance eventually came out of office buildings and strip malls and entered the home through the introduction of the personal computer. Tax rules were automated and the tax software industry was born. Nearly a quarter century later, it has attracted considerable investment in Canada and produced products and their related intellectual property that have helped Canadians realize early and continuing benefits of being digital.
B) Cloud Computing
The consultation paper makes no fewer than five references to the prospects of cloud computing, including "There are many other opportunities for governments to adopt ICT in the context of making government more efficient and effective. Cloud computing solutions could further improve government operations and public service delivery."16
It is worth noting that the products and services of the tax software industry are available through the cloud, and these commercially available cloud services interface with government ICT infrastructure to complete a significant number of transactions at lower costs.
As the Center for Digital Government described it, cloud computing is playing an important role in a national renovation project in the public sector ICT community. The cloud is an important source of on–demand infrastructure that increases computing capacity and provides a platform for increased collaboration across organizational, jurisdictional and even across sectors of the economy while enabling public agencies to remain in control of the data it holds and its operations.
"Cloud computing is the foundational infrastructure layer that makes all sorts of higher–level things such as Web 2.0. Infrastructure can be used to support a common platform–as–a–service on which any number of applications can be built, shared and connected with each other for unprecedented collaboration and data sharing."
"Platform–as–a–service providers can host over 50,000 applications in multi–tenant environments, including public service SaaS in the areas of human services, economic development and constituent relationships through case management, permitting and code enforcement applications. Moreover, the intellectual property belongs to the respective public agencies, which means that they can configure it, share it and collaborate with it as they see fit." 17
It its most recent white paper on the rise of the digital economy and how the public sector should prepare for it, Life After… Regaining Your Balance, Surviving the Reset, and (Re)Building a Government that Works, the Center for Digital Government anticipates an economic, social and technological environment in which cross–sector collaboration is not only possible but both necessary and desirable.
"The old conventional wisdom of automating government services was to document a process in its current state, re–imagine the process in its desired state, apply some formal (or often informal) method of re–engineering and implement technology to move from 'as is' toward 'to be.' At best, this approach improves a process across multiple departments or the organization as a whole; at worst it optimizes a process within a single business unit or function, sometimes at the expense of other business units."
"The new conventional wisdom extends streamlining efforts to the virtual enterprise — an approach that includes a collection of stakeholders who are involved in the process regardless of organizational boundaries — and includes seamless integration of third–party provision of software, infrastructure and Web services. Organizational boundaries and silos of service are as troublesome as old departmental boundaries. Additionally, considering a larger pool of stakeholders allows entities to re–distribute responsibilities to the party that is most effective in handling them. In this evolution, streamlining improves transparency, reduces handoffs and helps consumers of public services more easily navigate the complexities of government." 18
C) Competition and Growing ICT Industry
The consultation paper states its preference for engaging the digital economy by "maximizing reliance on market forces." To those ends, "it is business that must lead the charge and execute the game plan." 19 Quoting the 2008 Competition policy review panel, the paper also repeats the observation that "Being open to competition serves Canada’s national interest." 20
The tax preparation software industry in Canada is the result of being open to that competition. Individual companies compete to be the taxpayers' first choice as their software agent in preparing and filing tax returns. They are able to do that in no small part because of what NetFile does and does not do. It does handle the filing of large volumes of tax returns. It does not do the math in preparing tax returns. In so doing, the Government of Canada is a market maker in so far it provides the software industry with a consumer need to meet and an interface to handle the actual filing once tax returns are completed by taxpayers and their agents (accountant, storefront or software) and checked for correctness. At the same time, electronic filing helps to "streamline operations, improve services and cut costs" for the Government of Canada. Maintaining that operational distinction between what the government does and what the software industry does exemplifies the consultation's stated intention to "protect consumers and businesses in the online marketplace and to make Canada a favoured location for work and business investments."21 In such an environment, both public and private sectors are able to play to strength.
Moreover, the tax preparation software industry has established a "substantial presence in Canada" without receiving or requesting any of the "approximately $2.5 billion per year of ICT goods and services" purchased by the Government of Canada.22 For its part, continuing industry investments is contingent on having the confidence that it will not face the threat of disintermediation by the government destroying the market it made for tax preparation services by developing a direct service for Canadians and Canadian small business that does that math.
Absent such threats, the software industry will continue to innovate in ways that help Canadians win in the digital economy. This summer's phased implementation of a harmonized sales tax (HST) provides a case in point. The challenge for government is to administer the HST and make necessary changes to enterprise systems to reflect the new approach. The challenge for commercial software is to ease the transition for their customers and help ensure they have the tools to comply with the new regime.
Changes to tax legislation, rules and processes impose additional burdens on government operations, creating significant challenges to public sector ICT organizations that are often already over subscribed with modernization efforts and large–scale enterprise applications. The incentives are different for tax preparation software companies. The ability to adapt quickly and accurately, and capture those changes in software in ways that makes it easy for a tax filer to understand is a key differentiator among tax software companies. That dynamic exemplifies the promise of the digital economy.
1 Robert D. Atkinson and Scott Andes, The 2008 State New Economy Index: Benchmarking Economic Transformation in the States, Washington, DC, The Information Technology and Innovation Foundation (ITIF): 3.
2 Mark lype, "Internet usage rising; 80% of Canadians online," National Post, May 10, 2010.
3 Carmen Chai, When it comes to bills, we prefer a paper trail, The Montreal Gazette, June 30, 2010.
4 Fleishman Hillard/Harris Interactive, Understanding the role of the Internet in the lives of consumers, Digital Influences Index, June 2010, p. 22.
5 IBID, p. 14.
6 IBID, p. 15.
7 IBID, p. 12.
8 IBID, p. 17.
9 Adapted from Free File Chronicles, Center for Digital Government, 2009.
10 Robert D. Atkinson, "Turbo–Charging E–Government," Public CIO Magazine, June 2006.
11 Joseph E. Stiglitz, Peter R. Orszag and Jonathan M. Orszag, The Role of Government in a Digital State, A Report Commissioned by the Computer and Communications Industry Association, October 2000: pp. 4, 36.
12 Paul W. Taylor and Richard J. H. Varn, Sawyer Principles: Digital Government Service Delivery and the Lost Art of Whitewashing a Fence, Center for Digital Government, 2005.
13 Industry Canada, Improving Canada's Digital Advantage, Strategies for Sustainable Prosperity, Consultation Paper on a Digital Economy Strategy for Canada, Government of Canada, May 2010, p. 9. (Available as a download at
The Sawyer Principles — A Strategy Paper with Insight From the Center for Digital Government — Digital Government Service Delivery and the Lost Art of Whitewashing a Fence)
14 IBID, p. 14.
15 Sawyer Principles, Op Cite.
16 Consultation Paper, Op Cite, p. 16.
17 Paul W. Taylor, Renovation Nation: Improving Government Service Delivery in Smart and Sustainable Ways, Center for Digital Government, 2009, p. 12. (Available as a download at
LIFE AFTER… Regaining Your Balance, Surviving the Reset, and Re(Building) a Government that Works)
18 Paul W. Taylor, John Miri, and Liza Lowery Massey, Life After… Regaining Your Balance, Surviving the Reset, and (Re)Building a Government that Works, Center for Digital Government, 2010. (Available as a download at
LIFE AFTER… Regaining Your Balance, Surviving the Reset, and Re(Building) a Government that Works)
19 Consultation Paper, Op Cite, p. 17.
20 IBID., Quoted in consultation paper at p. 9.
21 IBID., p. 11.
22 IBID., p. 22. About Intuit Canada Intuit Canada Limited is a leading provider of business, financial and tax management solutions for small– and mid–sized businesses, consumers and accounting professionals. Intuit Canada Limited has employees working all across Canada with major offices in Edmonton and Toronto. Intuit Canada Limited is a subsidiary of Intuit Inc. Visit www.intuit.ca For more information about this submission, please contact Jim Ruda, Senior Policy Advisor, Intuit at Jim_Ruda@intuit.com.
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