Digital Tax Administration: The Future is Here Today

Author :

Dr Richard Stern

Richard Stern is GBPG’s Lead Expert for Global Tax Governance. He has worked advising governments on taxation issues for over 25 years. He currently leads EY’s Tax Administration and Reform Services, a part of EY’s Global Tax Policy Group since October 2017 and Senior Consultant Asian Development Bank (DRM Hub). Before EY, Richard was Lead Tax Specialist for the World Bank Group’s Global Tax Team, as well as running the World Bank Group’s International tax and Tax Transparency Initiative from 2003-2017. Richard was an economist at the International Monetary Fund for 8 years, working monetary and fiscal issues. He has taught at the Tax and Law Faculty, at the Wirtschaftsuniversitaet Wien (Vienna University of Economics and Business) since 2013. Richard holds a Ph D in Economics from the University of California at Berkeley (1992), a MS in International Relations from Georgetown School of Foreign Service (1986), and a BA from Williams College (1983).

The future tax administration is digitized and uses new technologies which not only revolutionizes tax processes, enhancing speed and accuracy, but also can dramatically change the taxpayer experience and interface with the tax administration . Features can include data streaming replacing filing and a taxpayer service function which is always available among other innovations.

Digitalization has been at the core of the government modernization agenda for decades. The pace of change has accelerated rapidly  during the last 5 years due to the need to raise revenue more efficiently, the dramatically evolving role and demands on tax administrations, as well as the development and implementation of new technologies.

The coronavirus disease (COVID-19) pandemic and the ensuing economic crisis have created a unique, time-sensitive opportunity for governments to act on these initiatives with greater urgency. From mobilizing stimulus payments and other fiscal incentives for vulnerable populations, to strengthening domestic resource mobilization to stabilize finances and invest in sustainable development, tax administrations are compelled to accelerate digitalization and further explore innovative technology solutions to address unprecedented opportunities and challenges.

Over the years, tax authorities have sought to improve their efficiency and effectiveness in securing revenue and increasing tax transparency, as well as to provide better taxpayer service through streamlined process and user-friendly interfaces by harnessing innovative digital technology.

Digital transformation can provide a mechanism to dramatically improve compliance and reduce burdens. The tax administration of the future is already here in every region of the world, including in developing countries. Yet, all countries can benefit from digital transformation which enhances speed, accuracy, the ability to integrate data from numerous sources at once and in any format, and at the same time, vastly enrich taxpayer service capabilities and access.

But strategizing and planning for a digital transformation may be daunting, given that such an endeavor requires changes ranging from laws to processes and to fundamental concepts of how tax administration should work (including the critical role data plays as the driver of a digitized tax administration).

Each administration in the region differs in their digital transformation journey to date and their appetite. Although there are common overall objectives and standardized phases and endpoints, each transition is different due to a multitude of factors, including the baseline, availability of infrastructure to support a digital transformation, tax administration and taxpayer capacity.

We have developed  thought leadership and guidance which pulls together key issues countries are concerned about, including why digitize, what can the new system look like, what are the benefits and risks, how to measure impact, and includes a tool to get started—the digital tax administration roadmap.

Despite differences in starting points, paths and endpoints, there is a clear set of steps and issues in planning, designing, and executing a digital transformation journey, including:

  • strategic planning and visioning, bearing in mind the gap between goals and what is possible at the outset;
  • decisions on design and phasing (how far and how fast);
  • translating planning into implementation: the construction of a digital road map that contains all components of change management, including building capacity; and
  • implementation, review and assessment, and redesign.

The work is geared towards helping start and facilitate conversations among tax administrator decision makers and to provide a guide to the main areas that should be addressed to jump-start the process of strategizing, planning, and implementing a digital transformation of tax administration.