For a programmer it looks very simple because all these steps are interlocked. For example:
A company must be registered, or else it may not buy and sell - not within the country, and certainly not across the border. To accomplish that, each company registers itself with the government via a Web form, and attaches scanned documents (incorporation papers, etc.) to the record. All done by computers. Only the cases of fraud are investigated by humans.
A company may employ only workers with Tax IDs. A Tax ID (or SSN) can be issued to a person only upon providing the name and the address. Each employee has to go to a Web site and register. A scanned birth certificate is needed only if there is no other proof of citizenship. All done by computers. Only the cases of fraud are investigated by humans.
The system works the same in the USA. There are no tax men who knock on the doors of every little business and go through the records. There are no INS (DHS) agents who routinely visit every house and ask for papers. The system is structured such that every participant in the economy is motivated to register himself, and these records are linked. A US citizen doesn't have to have an SSN; but then he will be cut off from the economy, as he cannot get a job, and cannot have a bank account, and cannot rent an apartment...
In practical terms, let's say that online papers are no good, and each citizen has to go to an office and spend 15 minutes there. How many offices one needs if the grace period is 1 year? 5 million / 260 days = 19,230 daily visits. If each office works 12 hours per day (which is easy to set up,) each employee handles 12 / 0.25 = 48 visitors per day. Let's say each office has four windows and four employees. Therefore you need 19,230 / 48 / 4 = 100 offices. This is a very small number; it's 2 offices per city, on average. Also consider that not every citizen needs the tax ID right away - children, for example.
This calculation shows that the real difficulties are not as high as one would intuitively perceive them.
a recipe for massive social benefits fraud, and massive employer tax credit fraud.
if you are accepting scanned documents off the internet, for individuals, how do you know that the proof of identity sent: is resident in scotland, belongs to the person who sent it, or even exists?
remember, any legal resident of the EEA can live and work in Scotland, that’s over 30 countries with over 500 mil people.
similarly for businesses, there would be approx 100-200k small businesses, many of which will not be incorporated. how do you validate that the business is owned by the person who sent the scan, operates in scotland, or even exists?
every social benefits fraudster and tax credit scammer in the world will be after scotland with this approach.
but, you know what, this is theory. i am pretty sure that scotland is going to vote yes, and we are going to have a live test that what you say can actually be done !