This lesson explores one of the most significant innovations in modern tax administration: the use of third-party data to pre-populate tax returns. It examines how this approach improves accuracy, reduces compliance burdens, and enables more sophisticated risk assessment.

• Concept of Pre-Filled Returns: Pre-filling involves the administration “pre-populating” a taxpayer’s return or online account with information from third parties (e.g., employers reporting wages, banks reporting interest). The taxpayer reviews the pre-filled information and either files it as-is or makes adjustments .

• Widespread Adoption: Close to 90% of tax administrations now pre-fill personal income tax (PIT) returns, a figure that has been stable since 2021 . This widespread adoption reflects the maturity and perceived benefits of the approach.

• Scope of Pre-Filling: The extent of pre-population is generally determined by the range of electronic data sources available. In many jurisdictions, PIT returns are now pre-filled not only with income information but also with deductible expenses such as donations, school fees, and insurance premiums .

• The Role of Third-Party Data: Pre-filling relies on a robust legal framework for extensive and timely third-party reporting. The more data that can be obtained electronically, the more complete the pre-filled return can be. This approach minimizes or prevents errors in returns .

• Towards Completely Pre-Filled Returns: In a growing number of jurisdictions, the concept has advanced to “totally pre-filling” PIT returns. The taxpayer then either agrees to the return (with deemed agreement after a certain time) or provides further information to adjust it .

• Leveraging Technology: As pre-filling becomes more comprehensive, the complexities of legal frameworks can be a barrier. To overcome this, some tax administrations are exploring the use of machine-readable legislation and algorithms to automate tax calculations .