Swedish Tax Department
How government staff in Sweden cope with the new Value Added Tax system – VAT
For many people, the thought of completing a Value Added Tax return for HM Customs & Excise is likely to be only marginally less intimidating than The Times crossword. Nonetheless, the UK VAT law, as contained in the Value Added Tax Act 1983 (and amended by various subsequent finance acts) is now an accepted and necessary part of business life. But, however confusing and time-consuming UK VAT laws may be, they pale in comparison with Swedish VAT (or “MOMS” as the equivalent Swedish acronym works out) legislation.
Rules governing the payment of Swedish VAT are influenced by a number of factors, including profession, business turnover and a variety of exceptions. Currently, VAT is applied at three rates – 25% being the ordinary rate, 21% for food and a tourist rate of 12%. The tax is collected by Swedish local authorities – “Kommuns” – and embraces the full range of Social, Education and Health services that they provide. Coping with the challenge of providing accurate and up-to-date information about VAT legislation for the local business community has presented Swedish Kommuns with something of a headache. However, it is a problem that is being addressed with the help of expert systems. Swedish firm Dialog AB, based in Ronneby, has developed a VAT advisor system that is presently being used at over thirty kommuns around the country.
Dialog is one of Sweden’s largest IT businesses, employing over 2000 staff. Leif Lindell heads up the section responsible for developing the VAT system. He readily acknowledges that the starting point of the project was pure serendipity from one of the Company’s directors, who just happened to be an expert of VAT legislation and who recognised the potential value of expert systems technology: “It was a snapshot idea from someone who had the right experience. I had no detailed knowledge of VAT and one of our first steps was to meet with experts within the Federal Government.”
Development of the system began and Leif Lindell describes the process of analysing the problem area in order to create a decision structure that could be transferred into a computer.
“We used ‘Post-It’ notes to capture the elements, which were then clustered into ‘task’ groups. For example, information about VAT ruling influencing medical insurance had to be separated into those matters affected by professional status, turnover, or exceptions to the rules. Tasks were reduced into a series of sub-tasks which ultimately terminated in a decision to a hypothetical question.”
The technology used by Dialog is XpertRule®; a portable software product for building expert systems developed by UK firm XpertRule Software in Manchester. XpertRule combines knowledge acquisition features with an ability to represent knowledge graphically. It is possible to express decision-making logic as a set of decision examples and as a decision tree – the process used by Dialog to express the decision-making process required to answer questions about Swedish VAT legislation. Leif Lindell has worked closely with XpertRule distributor and expert systems specialist NovaCast, a Swedish company that is not only also based in Ronneby, but with uses the same office complex which houses some 50 other high technology businesses in this town in the South of the Country.
The close proximity of NovaCast has helped during the development of ‘MomsExperten’ as the package is now called. Although XpertRule allows the graphical representation of decision paths built within the system, users are presented with a simple-to-use series of screens, starting with a main menu and leading the user through a sequence of questions, ultimately leading to the answer to any particular query. Apart from holding discussions with VAT experts, Leif Lindell has used XpertRule’s rule induction facilities to ensure that the most important questions are asked first and that the decision tree follows a logical sequence. The addition of a “Windows” based version of XpertRule has further enhanced the system’s Graphical User Interface: “The initial system contained 135 decision trees and 350 attributes,” Leif Lindell explains. “Although a simplified system has been developed for kommuns since the advent of the Windows version of XpertRule, the system still uses very large decision trees. Graphical overviews are extremely helpful, making it easier to ‘cut’ and ‘paste’ changes. While we looked at a number of other products, including shell systems, this is a feature that we did not find anywhere else.”
Leif Lindell explains that there are very commercial motivations for Swedish local authorities to invest in expert systems: “Mis-application of rules governing VAT could result in substantial losses of revenue.” He describes how the system also helps to introduce efficiencies in the way that the VAT offices are run and deal with inquiries: “New staff use the system to provide answers. However, the system also trains staff in the way they should think as they deal with questions about VAT rulings.”
Leif Lindell emphasises that, although it might be assumed that staff would be cautious about expertise being ‘imported’, the expert system is not perceived as a threat. “It works with low-level rules and acts as a help system – supporting the learning process for new staff and confirming knowledge for others. The system provides a means of education and, after an initial period, staff mostly manage without need to use the system.” He adds: “Using an expert system to enable relatively untrained staff to deal with business queries also has the advantage of leaving experienced staff to deal with complex issues. It is not a system that can be used in every situation. There is a limit to its ability.”
Regular changes to VAT legislation are accommodated within the system. Dialog updates its MomsExperten product twice a year on average, depending on the number of legislative changes. Leif Lindell also maintains close links with contacts in the Federal Government in order to remain in touch with changing rules and to ensure prompt implementation of new versions of the software. XpertRule’s ability to provide a graphical overview of the decision rules has helped with the process of update and change.
Although Dialog now deals with a wide range of organizations, the Company has traditionally focused on supplying systems to local and central government. Leif Lindell believes that there are many opportunities for expert systems to play a part within local authorities: “Payroll systems, for example, involve large amounts of money, complicated and changing sets of rules and no acceptable scope for error.” The Company is continuing to explore areas of opportunity in the use of expert technologies, working in partnership with NovaCast.
Rudolf Sillén, Managing Director at NovaCast, also sees considerable scope for the development of expert systems, suggesting that strategic knowledge will increasingly be used to drive successful companies – benefiting from ‘Knowledge Centres’ built up by business experts (and simply assisted by IT professionals). He acknowledges that there continues to be sensitivity about the implementation of expert systems, with its connotation of the replacement of human expertise. However: “These systems provide more than just knowledge”, he suggests. “Their inclusion of silent knowledge means that they should be more accurately referred to as Competence Systems.” Training with expert systems can help to bring staff up to speed by following logical algorithms – subsequently delivering competence that can then be used to augment the capacity of an organization’s Competence System.
The success of MomsExperten in supporting the activities of Swedish VAT offices may not stretch expert systems technology to its limits. Indeed, Leif Lindell points out that the system tends to be used to deal with the large volume of simple questions and the training of new, inexperienced staff – helping to enhance the knowledge of staff and reduce the dependence on any form of artificial knowledge. It seems inevitable that, as the price of experienced staff escalates and the need for efficiency increases, so will the demand for systems capable of capitalising on organizations’ pools of knowledge and expertise.
This story appeared in more detail in EXPERT SYSTEMS magazine.