E-taxation – An Analysis of Factors influencing the adoption of the Taxxml for Corporate Tax Reporting
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Upload Data Form Location Server Side [Tax Authority] Client Side [Tax Filer] Software Interface World Wide Web Forms Application’s User Interface Software Provider IRS/Tax Authority Software Developer Report Preparation Synchronous Asynchronous Usability Relatively simple tax forms Complex tax forms Delivery Route TCP/IP [Over the Internet] Private Network [To a Virtual Private Network] Earlier, there was no standardized method of architecting software that allowed for the creation of a common data interchange mechanism for electronic tax reporting. Also, there was no inexpensive method for developing such software, as everything from the groundwork to the accouterments needed creation individually for different software. These costs were transferred over to the customers making the software pricey and often times incompatible with one another. Since these software applications were created to “get the job done” by any means necessary and that meant that as long as the software package conformed to the tax schematic it could be created in any programming language and could use any kind of data format to deliver the tax information the tax authority. Clearly this method was cumbersome because every software developer attempted to “re- invent the wheel” within the framework of the tools and resources available to them. With the variety of computer software platforms and architectures today, it is impossible for any tax authority to allow for eclectic methods of electronic tax information submission. Nowadays, the IRS releases a schematic regarding the acceptable data types and transport mechanisms and different software vendors 8 adapt their software to generate output that is compliant with the rules 9 . This is where the power of XML as a 8 An updated list of software vendors that are authorized by the IRS for providing electronic tax reporting services/software is available at the IRS website at http://www.irs.gov/efile/lists/0,,id=100422,00.html 9 The latest list of rules for the creation and transportation of forms is available at the IRS website for use by software developers at http://www.irs.gov/taxpros/providers/article/0,,id=101145,00.html device independent, platform independent data interchange language can be truly harnessed. B. SGML and Markup Technology Standard Generalized Markup Language, or SGML, is a system for organizing and tagging elements of a document. In SGML, the tags encapsulate the informational portions of a document rendering the data separate from the presentational information. A “tagged” document is created using rules outlined in a dictionary file regarding the definition and uses of the tags and the data within them. A “tagged” document can be interpreted using the dictionary file that was referenced at the time of document creation. A style sheet can be used to render the data using the presentational guidelines specified in the design template. The same data can be displayed in multiple ways by using different style sheets. The International Organization for Standards (ISO) created SGML in 1986. New languages in the SGML family are constantly being developed and HTML and XML are both parts of the SGML family. Currently, HTML forms lack complexity because HTML is basically a presentational markup language and not a data-interchange markup language. Therefore this method is only useful for businesses for filing comparatively simplistic and recurring tax forms such as Form 1098 (Mortgage Interest Statement) and Form 4136 (Credit for Federal Tax Paid on Fuels). The difference between a presentational markup language and a data- interchange markup language is that the tags in a presentational markup language such as HTML only declare the render/data display attributes of information contained within them in one specific way. A data-interchange markup language such as XML (based on the SGML family) uses its tags to define the meaning, significance, and used of the information enveloped by the tags. This difference is a big reason for the limitations presented by the use of the HTML alone in creating and transporting tax forms because the forms vary greatly in their elemental compositions (tax items) and interpretational methodologies (use of the data) 10 . One generic set of presentational rules is inadequate to the “interpretation” of complex tax forms because data display guidelines do not define the significance, use or meaning of the data. Following are two snippets of portions of financial statements from two years from an organization. The first is in the HTML format and the latter in the XML format. Financial Statements Income Statement 2002 Revenue $5,000,000 COGS $3,500,000 Gross Profit $1,500,000 2003 Revenue $4,500,000 COGS $4,000,000 Gross Profit $500,000 HTML based representation does not support the separation of data from its presentational information and the data is mixed in with its field’s name along with the presentational information. Consequently, computer applications are unable to process complex information presented in this format as numbers and words don’t have any connectivity (other than being on the same line) and the numbers don’t signify their purpose. <2002> 10 Tax items can have many sub-components and the same items may need to be interpreted differently the nature of the entire tax filing in totality. For instance, a certain kind of an expense might be considered a deduction based on the type of the company (non-profit, for-profit) and also the percentage of deduction (if applicable) might depend on the fulfillment of other criteria demonstrable in other portions of the filings. <2003> XML based representation is very definitive in declaring what each number denotes. There is no presentational information in the file containing the data as a separate style sheet can be applied to the data at the time of presentation. C. XML, XML Vocabularies and XML Schema/Name-space XML or Extensible Markup Language is a family of meta-languages. A meta-language, as the name suggests is “above and beyond” a regular language because it allows for the creation of new languages based on its own attributes, methods and guidelines. XML allows for the exchange of data between computers regardless of configurations, platforms or operating systems. It also allows for data to be transferred to computers from devices such as telephones, personal digital assistants, faxes, etc. This ability of communicating data seamlessly has led to the creation of many industry and application specific XML based languages. Since February 1998 when XML was recommended by the World Wide Web consortium (W3C), close to three hundred new XML languages have been created. Chemical Markup Language (used for transferring chemistry formulae and chemical information) and VoiceXML (used for voice based data input/output) are two examples of the many XML based languages being used today. Each week, roughly two to three new XML languages are created. XML, according to the World Wide Web consortium, “…is primarily intended to meet the requirements of large-scale Web content providers for industry-specific markup, vendor-neutral data exchange, media- independent publishing, one-on-one marketing, workflow management in collaborative authoring environments, and the processing of Web documents by intelligent clients… The Language is designed for the quickest possible client- side processing consistent with its primary purpose as an electronic publishing and data interchange format.” (W3C Press Release 11 ) To get the meaning, use and significance of the data contained within XML documents there needs to be a dictionary file that is used to encode/decode the information present in the XML documents. One XML language differs from another in that the dictionary it uses is different. Theological Markup Language, or ThML, uses a different dictionary than Mathematical Markup Language, or MathML, because it needs to define different types of data in different ways for different uses. XML dictionaries are also known as XML vocabularies because they differentiate one XML language from another. Every XML based language has its own unique vocabulary. DTDs or Document Type Definitions were the XML dictionaries of the past and these days XML Schemas, with wider scope, are used in their place. XML Schemas are very explicit and detailed set of instructions regarding the attribute types used in an XML document. This collection of clear definitions ensures that there is no difference in the meaning of the data contained in an XML document between the time of its creation and its subsequent interpretation. A process called “validation” is executed after an XML document is created to ensure that the document conforms to the XML schema that it uses. An XML namespace is a unique collection of XML element names that is referenced by a Uniform Resource Identifier. This is a repository of the details regarding the tags used in XML documents as elements and attributes. Since an XML document can have element types and attributes that have the same name but come from different sources, there needs 11 http://www.w3.org/Press/1998/XML10-REC to be a way of differentiating between them for their proper usage. An example of this is that an XML document might contain an attribute named “Employee” that it references in the first instance from a book publisher and in another instance from an airline pilot. Clearly the two different “types” of employees will have very different attributes and here namespaces can be used to differentiate the attributes of one from another. This one further extension of XML vocabularies because by specifying the exact dictionary to use minor differences within a particular vocabulary can be utilized. This applies in the realm of corporate tax reporting in that a company that owes taxes in many states can prepare its XML based tax returns using the authorized tax schema while at the same time implement marginal differences between tax procedures in the different states via specific namespaces. Also, an XML document might contain an attribute name “Employee_Specialization” twice with the first use referring to the term from a hospital vocabulary and the second from a law firm vocabulary. This ability of uniquely identifying the dictionary to be used enables unlimited flexibility in an XML document. This relates to corporate tax reporting by way of the fact that a company might include a certain item in its returns as a deduction however the percentage of that amount that the company may write off might differ based upon the charter of that company (non-profit vs. for-profit). Namespaces allow for the accurate handling of the data in that scenario by the return creator referencing the location of the relevant tax XML vocabulary. D. TaxXML Extensible Markup Language is very significant in the realm of tax reporting in general and corporate tax reporting in specific. This is because it allows for a standardized data distribution framework for the dissemination of tax information from a company to the government or vice-versa. TaxXML is the XML vocabulary that is related to tax reporting. It is presently in a developmental stage but given the encompassing nature of such a standard, a modular approach is being taken regarding its preparation. The tax schemas for the different tax forms are being developed one-by-one so as to enable the thorough trialing and testing of each form individually. The schema for generating and handling the IRS forms 1120, 1120S and 941 have already been created. When the first schemas were being created, Form 1120 was selected because it is the primary corporate tax reporting form and it represents about 85% of all the tax elements at IRS. If the TaxXML based electronic version of this form work successfully then other forms that utilize common elements and attributes can derive those from the schema of Form 1120. Only common elements that withstand testing within Form 1120 are being incorporated into the new forms that are being developed. Form 1120 was also used as one of the first candidates because there are many common elements between this form and Form 1040 (for Personal Income Tax reporting). The success of deploying 1120 on the TaxXML system will enable the creation of TaxXML based documents for personal income tax reporting as well. The schemas for forms 1041, 1065, 990 are presently under development as they share quite a few common elements with the Form 1120. According to the XML think-tank XML Cover Pages 12 , “Tax XML is an initiative to research and analyze personal and business tax reporting & compliance information, represented in XML, to facilitate interoperability in a way that is open, flexible and international in scope. The products of Tax XML will include a vocabulary of terms, a repository of artifacts including XML templates, documents exchanged for tax compliance, best practices, guidelines and recommendations for practical implementation. It will focus on developing a common vocabulary that will allow participants to unambiguously identify the tax related information exchanged within a particular business context.” The government as well as industry and academic research groups are following the development of TaxXML because the creation of a standardized electronic tax-reporting medium can impact the financial management of businesses in a big way. The governmental research and development group that is working on the creation of the TaxXML standard is called Tax Information Group for ECommerce Requirements Standardization or TIGERS. TIGERS is a sub-group within the Government Subcommittee that develops tax standards known as the Tax Information Interchange or “Task Group 2”. TIGERS is a part of the American National Standards Institute ASC X- 12 (Accredited Standards Committee, X12-Government Subcommittee). It has been synthesized to discuss the state and future of business practices and corporate standards in relation to tax data formatting and exchange. Most of the major technical formats and standards for electronic tax reporting are developed and maintained by TIGERS. The XML based Tax vocabulary that TIGERS is developing will be one that will be used by all federal, state and local authorities for electronic tax governance. This vocabulary will standardize and systematize all electronic taxation related technologies. As per XML Cover Pages 13 , 12 Source: xml.coverpages.org [2001] 13 Source: xml.coverpages.org [2001] “A current [2001-11] TIGERS effort is to examine the possible use of eXtensible Markup Language (XML) in tax administration and its standardization. One of the emphases of TIGERS is to review opportunities for consistency in state and federal filing processes. Individual tax authorities should use available guidelines, formats and codes for each tax application they are putting in place, and seek TIGERS guidance in implementation, strictly limiting ‘customization’. This will benefit all trading partners and reduce their cost.” From a corporate tax reporting standpoint, different parties that have an incentive in the development of the TaxXML standard at TIGERS are: Download 164.01 Kb. Do'stlaringiz bilan baham: 
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