The UN Tax Committee has to make a decision on moving forward with work on digitalizing tax authorities and on whether to form a subcommittee to provide guidance to developing countries in digitalisation and improvements to tax administration.

By using information technology, tax authorities can increase efficiency and add value by simplifying procedures and matching taxpayer information with third-party data. The use of advanced analytics to identify underreporting can also increase collection.

The work could begin with the provision of guidance on developing a road map for digitalization and on the areas of priority for digitalization. Guidance could be given on which taxes and processes should be digitalised to maximise the benefit, drawing on examples of best practice from developed and developing countries.

Technical support

Help could be given with identifying what systems are appropriate for a country and if they are compatible with existing systems. Assistance with capacity development could include improving the skills of tax authority staff and options for the maintenance of the systems and equipment.

By reviewing the data available to them the tax authorities can clarify what data they are holding, the quality of the data, how the data is held, how it is used and if it is sufficient for the purpose identified. Links may be required to other databases within the government, for example data on beneficial ownership of companies from company registries, or personal data from National Registration Authorities. There must be effective data governance to ensure that the data is secure, consistent and usable.

Digitalization of processes

Countries could be assisted by guidance on looking at the processes involved in tax administration, assessing the level of digitalisation and deciding on the tools required to continue the digital transformation.

Many tax administrations have taken steps to introduce or further develop e-filing during the pandemic. Simplifying this e-filing process is one way in which taxpayer compliance can be improved. Digitalisation can also help to expand the tax base by assisting with identification and registration of new taxpayers.

During the pandemic tax administrations have switched to remote working and there has therefore been an increase in off-site audits and checks. The audit process can be improved by simplifying the procedures and matching filing information with sets of third-party data. Tax administrations can use advanced analytics to identify underreporting and increase tax collection.

Improving tax transparency

The digitalization process can increase transparency and promote trust in the tax system. The data produced can enable any researchers or other members of the public to analyse tax data without needing to access confidential personal information.

Formation of a Subcommittee

The UN Committee may decide to appoint a Subcommittee on Digitalization and Improvement of Tax Administration, to look at issues around digitalization of tax administrations and related matters. Guidance could be formulated in relation to the main issues. A priority would be to develop a road map for digitalization of revenue authorities to guide developing countries.