On 16 December 2021 the OECD’s Forum on Tax Administration (FTA) published a report entitled: Supporting the Digitalisation of Developing Country Tax Administrations.
Digital technology is creating opportunities for more efficient ways for tax administrations to raise revenue and to reduce the administrative burden for taxpayers. The FTA report looks at the opportunities and challenges facing developing countries undertaking digitalisation, noting that for successful reform the administration must have a clear vision for digitalisation that is in line with political priorities. The digitalisation process must be supported by the senior staff within the tax administration so they can balance competing priorities and take difficult decisions.
Digitalisation of tax administration can increase revenue by expanding the tax base or ensuring more effective collection. Processes can be simplified by using more accessible digital channels to communicate with taxpayers, allowing more self-service and analysing data to focus resources more effectively.
Digitalisation can reduce the compliance burden for taxpayers by making it easier to comply with their tax obligations, helping them to integrate taxation processes into their routine business systems. Digitalisation of the tax administration can also help to promote wider digitalisation across government and across society, bringing new opportunities for economic growth.
Greater availability of reliable wireless internet, often through mobile phones, means that access to the internet is increasingly widespread in developing countries. There is growing use of mobile-based electronic payment services, giving opportunities for digital payments by taxpayers, including those who do not have a traditional bank account. Digitalisation has also received increased momentum as a result of the COVID-19 pandemic which has forced administrations and governments to increase their use of technology to interact with taxpayers and to deliver financial support.
The FTA report looks at the factors contributing to successful digitalisation projects and at the potential pitfalls. Successful projects begin with context analysis, looking at the opportunities and changes considering the unique circumstances in the country, such as compliance issues or levels of digital adoption. Based on the context analysis, the administration can draw up a digitalisation strategy outlining the overall vision and objectives for digitalisation and a timetable for implementation. Finally successful project delivery will need careful project preparation; flexible and professional project execution; and post-project follow-up of deliverables and benefits.
The report sets out targeted areas of digitalisation that can be brought together to form a digitalised tax administration. These include taxpayer registration and identity; integrated tax systems; taxpayer communication; taxpayer services; compliance and risk management; business administration systems within the tax administration; and analytics that can give an overview of opportunities and challenges arising.
For a developing country tax administration looking at digitalisation the next steps could include the development of a system for support to tax administration leaders on the potential strategic challenges they will face during the digitalisation process; the use of the new digital transformation maturity model which allows tax administrations to self-assess their current level of maturity; development of an inventory of digital innovations and relevant case studies, to share knowledge and help identify possible options; establishment of forums on key issues such as data management, digital identity and human resources; and exploration of possibilities for online learning on tax administration digitalisation topics.
